Subscribe to CARE ipo

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Credit Analysis & Research (CARE Ratings) is coming out with its initial public offering between 7-11 Dec.
It will raise Rs. 540 Crore at the upper end of price band. It is 25.26% of post issue share capital.

CARE is a leading, full service credit rating company in India. It offers a wide range of rating and grading services across a diverse range of instruments and industries. It also provides general and customized industry research reports.

CARE Ratings has relationship with 4644 clients. As of September 30, 2012 the company has 519 employees supporting analysis and business development activity.

The company has international presence through joint venture in Maldives. Now the company wants to increase its footprint in other countries including Nepal and Mauritius. The company is exploring opportunities to provide risk management solution and training in risk management practices to banks and financial institutions. In November 2011, CARE ratings acquired a 75.1% stake in Kalypto, a firm providing risk management software solutions.

 

 

 

CARE rating has been consistently delivering superior margins in last few years. The company has delivered 72.6% PBT margin in FY12, significantly higher than ICRA (38%) and CRISIL (39.6%), although this margin will reduce going forward due to increasing share of SME rating (low profitability) and competition in rating market. As per management strategy of diversifying if there is KPO kind acquisition comes through, it will create margin pressure in short term. CARE ratings has been delivering superior ROEs ~ 41.7% in last four years and expects to sustain strong ROEs in medium term by operating leverage and improving efficiency.

A key risk here is that the Rating business is highly corrected with credit demand in the economy , so deterioration in macroeconomic indicators such as GDP growth, credit growth, interest rates and macro environment will impact demand of credit and issuance of debt in economy, which in turn will adversely impact rating business.

It is the fastest growing rating agency, along with huge long term growth opportunity mainly driven by higher private sector infrastructure spending, favorable development in bond market. Superior margins & return ratios are key value drivers for CARE Ratings. CARE Ratings issue is quoted 21 times its expected fy13 earnings. Rating business are currently traded at 30-35x in the market, leaving strong headroom for upside at the time of  listing.
So i suggest a subscription under retail quota for maximum amount of 2 lacs.
According to my estimates the listing can happen between 950-1050 band, leaving a potential upside of 30%+ on issue price.

 

Update: Care listed at Rs. 940 and touched an intraday high of 985 on 26 Dec 2012.

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Facebook; Wall Street is Tough

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The social networking giant Facebook (NASDAQ:FB) finally lost 50% of the market value since is its May 17 IPO. This all came with a slew of bad news starting not so upbeat Q2 results (32% growth is not acceptable for company trading at 60 kinda PE), then came the news about  83 million FB account being fake or duplicates, the number is huge but considering it has over 955 million active users overall, the impact is within understandable range. Later one hotshot Tech blogger sent shock waves to the investor community when he estimated that 90 percent of the Facebook advertising clicks he receives were from spam-bots, if its true its serious. Then company has faced 3 top tier executive departures since its mega IPO, another cause for concern.

 

 

 

 

 

 

 

 

 

 

 

 

As one famous blogger puts it; One of the cardinal rules of investing is to do it with your head and not your heart. I for one have always been been critical about how FB is milking the euphoric sentiments of people and pricing the issue at those astronomical valuation. As general perception always says retail investors are “Dumb Money” which is true to some extent but this time lots of Institutional investors, Traders, Hedge funds are also caught off guard. It looks like nobody got there act right as the erosion of 50% of wealth in less than 3 months is a slap in the face of many institution who came out with Buy calls putting valuation tag of more than $150 bn.

Now institution are seen dumping the stock as they cant hold on any longer considering the pace at which their value is getting eroded and the recent names includes Fidelity investments, Turner Investment Partners, and Oppenheimer Funds Inc. to name a few.

People who are bullish on Facebook make all sorts of cases, strongest one of them is by saying compare the CPC (cost per click) of FB and Google and the much higher CPC on FB is due to the fact of much larger user base but here is the catch, people join Social networking because they want to connect with friends. As one blogger says “I never once clicked a single ad, because unlike when I search Google, I am not using facebook to look for objects to purchase (which I often do on Google, hence advertising on Google makes sense).
So monetization of Facebook is tough in part due to the very nature of Facebook.
Another interesting observation is Facebook is by large number used by the 14-24 age group, which doesn’t have purchasing power thus less likely to spend much. People who are working, barely use Facebook, i realized this when i was doing my Internship, I did check Facebook almost everyday,  but my time with Facebook was hardly 10 percent of what it used to be. Hence people who use it a lot, have no money to splash and people who come with money use it basically to keep in contact with people, not to buy things.

In the near future there is no redemption for stock price as Facebook’s first tier of restrictions on insider share sales expires Aug 16, when about 271 million shares will be available for trading. Another 243 million shares would become available for trading between mid-October and mid-November.

So in simple terms, There is more selling to come.

 

I will talk Financial in next part.

Thanks

Welcome the new Bull Market

The strength in Indian equity markets in last month or so has been phenomenal, we have broken past all resistance and now atleast on technicals we are looking as strong as in most bullish phases in recent times. FII’s has been the rainmaker with more than $5bn flowing into Indian markets.

 

Nifty was in the Downward channel for past few months but recently broke out from that range making a higher high which can be clearly seen by the chart below

As we can see above 5180 on Nifty it has given a breakout and with last week giving a minor pullback Nifty has broke the months long bearish pattern, now with technicals improving market sentiment, now institutional money will try and focus on fundamentals to justify this runup and with expected rate cut by RBI as a response to decreasing food price inflation and faltering GDP growth this rally can have more legs upward.
Now all eyes from D-street will be on Budget and any positive announcements can fual the rally further to all time highs in next three month.
sector specific, high beta like Banking & financials, Reality, Autos and Metals are expected to do well, with some support from IT.
FMCG and Pharma will under perform as they always do in upsurging markets.

It is expected that in FY13 India will have GDP of over $2-trillion and that too on high internal consumption, this will improve sentiments and more foreign money is expected to chase Indian market.
It is still a very good time to build a long term equity portfolio for those who have not invested yet or missed out on the previous rally as we are only in initial stages of a Bull market, as a consensus India is expected to do very well in next 3~5 years and Equity markets will reward handsomely to those who will be invested during this period.

Now for traders there is only one advice, Trading is the game for more sharper people and for those with high risk taking capacity.
it should not be tried by everyone, else you’ll only be burning money.
And those who do trade keep in mind this line and you all will do good.

“The Trend is your Friend Till It Bends….. But Those Who Worried About The Bend will Never Earn Till The End.”

2012 a glimmer of hope for the markets

At the outset, let me wish you all a very Happy New Year.
After ending the 2011 on disastrous note with Benchmark Indices Nifty going down by 37.5% in Dollar terms and eroding close to 20 lakh crore of Investor wealth in single calendar year, things are not looking any better either while we make step in to new year.
Interest rates are high,Fiscal deficit will overshoot its target and might go upto 6% of GDP, Investor sentiment is at all time low that’s why we are not seeing any fresh buying emerging even after such a massive fall in markets.
Sensex is trading at 12 PE on earning projection for FY13, which is historically on the lower side of the range, and adding to woes of Central Bank rupee has depreciated by 16% this year which makes life hell for RBI, which is solely fighting inflation with monitory policy.
On the other hand Global environment is also looking gloomy, with Euro zone ‘s debt crisis will continue to haunt global markets and decline of Euro to an all time low against dollar will compel investors to park there money in Commodities and precious metals like Gold and Silver. So no respite for equity markets as the first half is looking very tough for the markets in 2012.
On the domestic front Government has led down on every front, markets have been zotted by massive unearthing of 2G scam and corporate biggies spending their time in prison to huge inflationary pressure on the food articles and adding to woes the Govt. inability to take any policy decision for economic reform, the way govt. took the issue of FDI in retail was like inviting somebody for lunch and when they accept the invitation you say i was just joking.
Technically speaking we are in middle of nowhere, markets have been trading in bearish territories for so long and i don’t see markets getting out from the clutches of bears.
i am not posting any charts as there is nothing new emerging in terms of chart pattern, what markets are likely to do in the next one year will be more determined by the action taken by Govt. and RBI.
Any start of rate cutting initiative by RBI will boost market confidence and i believe it might happen from this month onwards.
I am ready to hang my neck out and say we are very near to bottom and probable range for SENSEX for 2012 might be 14000 to 20000 as i see a recovery staged in second half of 2012.
but

Before you get the goodies, you have to under go pain first.

Positional Traders get ready for some action

 

 

 

 

 

This is a monthly chart of Nifty from 2005 onwards and the Fibonacci Retracement  levels are presenting very clear picture in front of us.
If Nifty is able to hold onto 4750 levels on the closing basis on monthly chart than the chances of start of another bull market when global environment become conducive,  are very bright.
But in case we break the 4750 than we are looking at 4300 which is also a long term support for the market, below this level pull up your pants and run because Nifty is going to dogs in this case.
On the upside we can safely assume that the worst is over whenever we start trading above 5400.
In between Its a market for both Traders and Investors who want to bet on long term growth story of India, as i feel there are lots of  largecaps with huge amount of cash on the balance-sheet are just waiting for the opportunity to grow inorganically, one prime example is Reliance Industries.
Traders should stick to there systems and use proper Position sizing and Money management rules by following stop-loss on trades and look for smaller profits rather than playing for that big move.
I have been busy myself, but hope i will be more active than in the past.
Thanks for Visiting and sharing.