Notes on Indian equities, sectors and economy

Archive for the ‘Blow My Trumpet’ Category

This blog will often carry views at variance with the rest of the Indian market. And when we are proved right, well, a bit of self-patting is its well deserved, isn’t it?

Blackstone throwing in the towel at Gokaldas

Posted by fairval on December 9, 2014

Earlier this month, Blackstone again sold some of its holding at Gokaldas Exports with a big haircut. According to a media article: Private equity giant Blackstone has sold 4.5 per cent stake in Gokaldas Exports for Rs 10.48 crore ($1.7 million), having lost around 75 per cent or three fourth of the original investment in the process. It had sold a chunk a few months ago as well, again at a big loss.

This investment hasn’t worked for Blackstone from day one. 9 out of 10 analysts in the market would have said it won’t work. This blog said the same in a post in Aug’2007 (wow! its an old blog now) —  Blackstone gambles on Gokaldas

Sometimes the majority is right. Blackstone thought it knew better, but not this time.


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July inflation below 10% as predicted

Posted by fairval on August 17, 2010

This blog had written in a post ‘Inflation is now moderating. WPI will fall below 10% in July‘ a month ago, that inflation would fall below 10% for July (the data came yesterday). 

WPI for July is 9.97% as per data that came out yesterday. Our forecast was 9.7%. A table from that July post..

  Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10E
Govt WPI 9.9 9.9 9.6 11.14 10.6  
WPI-Wisdomsmith 10.5 11.7 11.7 11.3 11.5 9.7

Note this line from a newsreport —

Data released on Monday showed that the wholesale price index-based inflation rose to 9.97% in July, below 10.55% for June and a Reuters forecast of 10.39% for the month. The lower-than-anticipated figures will provide some relief to the embattled government.

So full time practising economists had an ‘average’ forecast of well above 10%.

Also note this line —

However, headline inflation for May has been revised upwards to 11.14% as compared to the provisional figure of 10.16%.

Now see the May column in the table above. See how the revised data has come closer to our data..

My point is simply this — ET’s Commodity Index (with some modifications) is a very good proxy for wholesale inflation. Our WPI numbers are derived from ETCI. And you have it real time (a day’s delay), unlike WPI which comes a month late. WPI did deviate a lot from it a few months ago, but when it did, the government data was wrong (or more likely manipulated).

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Some Nifty indices may have errors

Posted by fairval on July 22, 2010

Nifty Junior has errors - See last column

I think Nifty Junior has errors.

  • See last column. On  30 day basis, the reported index is up 4.8%. But only 12 scrips have risen less than 4.8%. The rest have risen more. I have not gone and checked weights, but there are several large cos which have risen a lot, like HPCL, Bharat Forge etc. And there arent too many big names in the 12 which have risen less than 4.8%
  • A more clear error. See Crompton Greaves (the line in yellow). NSE says 52 week high is Rs 458.75, and so it says Crompton is down 4% over 365 days. NSE has missed out the bonus issue. According to http://www.etintelligence.com, 52 week high is Rs 284.80 (also an all time high), which i think is the correct number. Crompton is actually up about 70% on a yoy basis. My guess is, the error must also be seeping in the index calculation.

If true, that’s a serious matter. There is money riding on some of the NSE indices.  Nifty itself looks better, could not see an obvious issue.

PS: The table above is culled out from data on Nifty site, which resides on this link http://nseindia.com/content/equities/jrniftysparks.htm#. Its a dynamic link.

Posted in Blow My Trumpet, Markets | 1 Comment »

Indian Inflation – Reflecting Fairval’s prediction

Posted by fairval on January 15, 2010

Whilesale inflation came out at 7.31% for Dec’09. This is what we had written in early Oct in a post on inflation (https://fairval.wordpress.com/2009/10/01/the-true-inflation-situation-in-india/)  –

Wholesale inflation never fell to zero (that is, if you believe WPI-F is more accurate than WPI-O)

Wholesale inflation has already crossed 6% (as of Sep). We believe it may get up to 8-10% by Mar10. This is because fuel prices may inch up, while food grain inflation may persist due to poor monsoon.
In other words, we think analysts and economists are missing the true inflation picture. Most of them are saying – inflation will go up to 6% by Mar 10. We think it is already there, and could well end up at 8-10% by March.

When we wrote inflation should cross 8% by March, official WPI data was 0.96%.

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November WPI – A BMT moment

Posted by fairval on December 14, 2009

Wholesale inflation in India has come out at 4.78% for November, and analysts it appears are somewhat surprised. For this, this is what Sonal of Nomura writes —

“India’s WPI inflation rose more than expected by 4.78% y-o-y in November from 1.34% in October (Consensus: 4.20%), led by higher manufactured product prices. We believe that core inflation is starting to rise”

Note, inflation was 1.34% in Oct’09. So it is quite a sharp jump. However, we would still say reported data is below actuals. We had written in our 1 Oct 09 post – that WPI was actually a lot higher, perhaps close to 6%. So, as per this blog, this number is still below expectations, and not above.

So the BMT or Blow My Trumpet point is this – We had indicated the possibility of inflation jumping suddenly on Oct 1. It has come to pass. Actual inflation is still higher, we would expect it to cross 6% for Dec.

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BMT Series – Gokaldas and Blackstone

Posted by fairval on October 10, 2008

(BMT stands for – Blow My Trumpet)

Business Standard today has this nice article on how PE players are all showing losses now. Amongst examples it cites are – Blackstone’s investment in Gokaldas. Blackstone had acquired 67% in Gokaldas at Rs 275 per share last year. The share price now is Rs 106. Blackstone’s $149mn investment is now $50mn.

Now I am doing some BMT . Here are some excerts from a 27 Aug 2007 post —

While Gokaldas has a lot to commend itself, there is one issue with this deal – it is a textile company. More than that, it is in the unbranded export space. Unbranded textile exports, or unbranded exports of any kind for that matter, aren’t an area where Indian investors have found great returns.
Gokaldas itself is proof enough that generic exports are a bad space. Right from the day it was listed, Gokaldas has underperformed the market. Gokaldas listed in April 2005. While it did trade at premium in the immediate aftermath of listing, it has rarely crossed the closing price since the first few days. If you had invested Rs 100 in Gokaldas the first day it was listed in Apr’05, you would now have Rs 80 or so (ignoring dividends). On the other hand, if you had put the same Rs 100 in the Sensex, you would have Rs 225 now. And this, when global and the US economy have seen the best expansion in 25 years.
The moral of the story is this – in cost plus businesses, it is very difficult to create sustainable market value. This is particularly so if the market place is fragmented, like in the sectors stated above. While in say oil, or metals, global scarcity happens every now and then and drives supernormal profits, even that does not happen in businesses like textiles.
Blackstone thus wants to do what no Indian management has demonstrated so far. One positive is that it has not overpaid (compared to current market price). Market speculation is that it is perhaps going to sell this company forward, and may have a buyer or two already in mind.

So, Blackstone didnt clearly have a magic wand to turn the fortunes of Gokaldas. Nothing really has improved in the performance of the company either.

Posted in Blow My Trumpet, PE/VC | 1 Comment »