Reblog: Reliance Nippon Life IPO review


Reliance Nippon Life Asset Management Ltd. (RNL) (erstwhile known as Reliance Capital Asset Management Ltd.) is one of the largest asset management companies in India, managing total AUM of Rs. 3,625.50 billion as of June 30, 2017. RNL is involved in managing (i) mutual funds (including ETFs); (ii) managed accounts, including portfolio management services, alternative investment funds (“AIFs”) and pension funds; and (iii) offshore funds and advisory mandates. It is ranked the third largest asset management company, in terms of mutual fund quarterly average AUM (“QAAUM”) with a market share of 11.4%, as of June 30, 2017, according to ICRA. RNL started mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund, managed QAAUM of Rs. 2,229.64 billion and 7.01 million investor folios, as of June 30, 2017. It managed 55 open-ended mutual fund schemes including 16 ETFs and 174 closed-ended schemes for Reliance Mutual Fund as of June 30, 2017. RNL has a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (“IFAs”), as of June 30, 2017.

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stockarchitect October 25, 2017

Chittorgarh.com / Dilip Davda / IPO / Reliance / Reliance Capital / Reliance Nippon / Review /

Reblog: How To Be A Grown Up Trader


I do not think traders start making money until they mature and understand the big picture. I have been on this journey myself and went through the wild excitement of the internet bubble, day trading and the experience of making a few hundred dollars in a few minutes the first time and the delusion of the get rich quit trading scheme and the expectations of doubling or tripling an account within a year. The game of trading has large amounts of money flowing through the markets that we want to capture for our accounts and can give rise to emotions that make us act immature through the delusion of ignorance, ego, and greed. We can easily become unrealistic and go down the wrong road, it is crucial for success that we stay on the right road.

1. Quit believing all the riches of people promising that you will be rich if you just sign up for their newsletter, seminar, or join their premium service. Look for realistic resources to learn from. The more hype the more the probability of a service being a scam.

2. Quit thinking you are going to double or triple your account in less than a year, even if you do that just means in almost all situations you are taking on too much risk. If you can achieve a 20%-25% annual return then you are among the best traders in the world, these are close to the annual returns of legends like George Soros, Warren Buffet, and Paul Tudor Jones.

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stockarchitect October 23, 2017

newtraderu.com / Steve Burns / trader / Trading Psychology /

Reblog: 25 Powerful Trading Lessons From Jesse Livermore


jesse livermore

Born in 1877, Jesse Livermore is possibly the most famous trader in history.

He started trading at the age of 14 from bucket shops. His tape reading skill was so good that these bucket shops eventually didn’t want to do business with him.

At his peak in 1929, he was worth $100 million. Ultimately, he lost his entire fortune when he broke his trading rules.

The same trading rules which made him millions, caused him to lose everything when he lost control of himself.

Still, there are valuable lessons to be learned from Jesse Livermore’s trading experience.

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stockarchitect October 18, 2017

Investing / Jesse Livermore / Lessons / trader / Trading / TradingwithRayner /

Reblog: Do NOT Look For a Trading Strategy That Suits Your Personality


What Feels Comfortable and Natural Usually Doesn’t Work

“Why do almost all speculator lose money? They lose because successful speculation requires that we consistently do that which is psychologically uncomfortable and unnatural” – Richard Weissman

“There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win, you have to act like the minority. If you bring normal habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose” – William Eckhardt

Most of what we naturally do and think do not work in trading. Here are a couple of examples:

  • We are naturally inclined to cut our winners short and let our winners run

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stockarchitect October 16, 2017

lonestocktrader / Psychology / strategy / trader / Trading / Trading Psychology / Trading Strategy /

Reblog: GIC IPO review


General Insurance Corporation of India Ltd. (GIC) is the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017, and is accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during Fiscal 2017, according to CRISIL Research. GIC is also an international reinsurer that underwrote business from 161 countries as at June 30, 2017. According to CRISIL Research. Corporation ranked as the 12th largest global reinsurer in 2016 and the 3rd largest Asian reinsurer in 2015, in terms of gross premiums accepted. It provides reinsurance across many key business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance. Through more than 44 years of experience in, and commitment to, providing reinsurance products and services, GIC believe that it has become a trusted brand to its insurance and reinsurance customers in India and overseas.

GIC has diversified its business geographically to grow underwriting business and profitability as well as to maintain a balanced portfolio of risks. Its gross premiums on a restated consolidated basis from international business in Fiscal 2017, Fiscal 2016 and Fiscal 2015 were Rs.10300.45 cr. Rs. 8339.69 cr. and Rs. 6609.45 cr. respectively, and gross premiums have grown at a CAGR of 24.84% from Fiscal 2015 to Fiscal 2017. In Fiscal 2017, Fiscal 2016 and Fiscal 2015, its gross premiums for risks outside of India were 30.53%, 45.00% and 43.28%, respectively, of its total gross premiums. GIC’s gross premiums on a consolidated restated basis from international business for the three months ended June 30, 2017 were Rs. 3004.97 cr. and its gross premiums for risks outside of India were 17.34% of total gross premiums. It has developed its overseas business through home office in Mumbai, branch offices in London, Dubai and Kuala Lumpur, a representative office in Moscow, a subsidiary in the United Kingdom that is a member of Lloyd’s of London and a subsidiary in South Africa.

In Fiscal 2017, GIC led 74.79% of the reinsurance treaties in which it participates in the Indian non-life market. It also administers three domestic reinsurance pools and one African-Asian reinsurance pool that allow it to manage reinsurance economics and strengthen relationships with customers. GIC maintains a diversified investment portfolio to generate investment returns to support liabilities for the reinsurance it underwrites and to create shareholder value. GIC has an Indian investment portfolio, which includes fixed income debt securities including Government securities, equity securities including exchange traded funds, and other investments, but does not include fixed term deposits for its business written outside of India at its branches. As at June 30, 2017 and March 31, 2017, GIC’s Indian investment assets on a standalone restated basis had a carrying value of Rs. 41929.85 cr. and Rs. 39126.27 cr. respectively, and a fair value of Rs. 73902.56 cr. and Rs. 69162.58 cr. respectively. Corporation’s investment income from its Indian investment assets on a restated standalone basis in Fiscal 2017, Fiscal 2016 and Fiscal 2015 was Rs. 4515.61 cr. , Rs. 4174.99 cr. and Rs. 4176.06 cr. respectively, and has grown at a CAGR of 3.99% from Fiscal 2015 to Fiscal 2017. Our yields (without unrealized gains) from Indian investment assets on a standalone restated basis in Fiscal 2017, Fiscal 2016 and Fiscal 2015 were 12.35%, 12.91% and 14.08%, respectively. In the three months ended June 30, 2017, its investment income and yields (without unrealized gains) from Indian investment assets on a restated standalone basis was Rs. 1046.79 cr. and 10.33%, respectively. In addition to its Indian investment assets, GIC holds fixed term deposits at banks outside of India for its overseas business (written outside of India at its branches) from which it earned Rs. 99.76 cr. in interest income in Fiscal 2017. GIC follows robust and comprehensive risk management framework.

Further, as at June 30, 2017 and March 31, 2017, 2016 and 2015, it had a restated consolidated net worth (including fair value change account) of Rs. 52116.00 cr. Rs. 49550.85 cr. Rs. 40870.26 cr. and Rs. 43384.29 cr. respectively. GIC’s total assets on a restated consolidated basis as at June 30, 2017 and March 31, 2017, 2016 and 2015 amounted to Rs. 108320.69 cr. Rs. 97079.44 cr. Rs. 76102.75 cr. and Rs. 74916.43 cr. respectively.

It had a solvency ratio of 1.83, 2.41, 3.80 and 3.32, calculated on a restated standalone basis as at June 30, 2017 and as at March 31, 2017, 2016 and 2015, respectively, against the minimum statutory requirement of 1.50. GIC has paid successive annual dividends in the past five fiscal years (including a proposed dividend in Fiscal 2017) to the Government of India as it’s shareholder, and corporation’s dividends during last five fiscal years were an aggregate of Rs. 3320.05 crore. Reinsurance premiums in India are projected by CRISIL Research to increase at a CAGR of 11-14% over the next five years to reach Rs. 70000 crore by Fiscal 2022. As a trusted brand in the Indian market with 44 years of experience, GIC believes that it is well placed to take advantage of this industry growth.

To meet its capital augmentation plan, working capital and listing purpose, GIC is coming out with a maiden IPO of 124700000 equity share of Rs. 5 each via book-building route with a price band of Rs. 855 – Rs. 912 per share to mobilize Rs. 10661.90 crore to Rs. 11372.60 crore (based on lower and upper price bands). Minimum application is to be made for 16 shares and in multiples thereon, thereafter. GIC is offering Rs. 45 per share cash discount to retail and eligible employees. The issue opens for subscription on 11.10.17 and will close on 13.10.17. The issue consists of fresh equity issue of 17200000 equity shares and an offer for sale of 107500000 equity shares of Rs. 5 each. The Offer includes an Employee Reservation Portion for Eligible Employees aggregating up to Rs. 116,800,000. Post allotment; shares will be listed on BSE and NSE. BRLMs to this issue are Citigroup Global Markets India Pvt. Ltd., Axis Capital Ltd., Deutsche Equities India Pvt. Ltd. HSBC Securities & Capital Markets (India) Pvt. Ltd., Kotak Mahindra Capital Co. Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue.

Despite the mega issue, it is not going to have anchor bidding. Issue constitutes 14.22% of fully diluted post issue paid up capital of the corporation. Corporation has raised equity at par from 1972 to 1975 and has also issued bonus shares in the ratio of 1 for 1 in December 1982, 1 for 2 in January 1986, 2 for 3 in July 1990, 1 for 1 in February 1994 and 1 for 1 in June 2005. Post Issue Corporation’s current paid up equity capital of Rs. 430 crore will stand enhanced to Rs. 438.60 crore.

On consolidated basis, GIC has posted an average EPS of Rs. 34.81 and average RoNW of 16.61% for last three fiscals. The issue is priced at a P/BV of 3.89 and at a P/E of around 31.19. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is around P/E of 32. Thus the issue appears fully priced. It has no listed peer to compare with.

On BRLM’s front, 5 merchant bankers associated with the offer have handled 45 public offers in the past three years, out of which 12 offers closed below the offer price on listing date.

Conclusion: GIC IPO is the first mover in Re-insurance segment, hence going forward, it will create fancy, but considering the fate of recent insurance sector IPO’s performance post listing and the mega size of this fully priced offer with wider chances of allotment, immediate rewards are unlikely. Hence cash surplus investors may consider a moderate investment for long term.

The original review appears on chittorgarh.com and is penned by Dilip Davda. It is available here.

stockarchitect October 11, 2017

Chittorgarh.com / Dilip Davda / General Insurance / GIC / IPO /

Reblog: IPO Review – Indian Energy Exchange Ltd.


Indian Energy Exchange Ltd. (IEX) is the largest exchange for the trading of a range of electricity products in India, in terms of traded contract volumes in the financial year 2017 according to the Central Electricity Regulatory Commission (the “CERC”). Electricity products traded over its electronic trading platform comprise (i) electricity contracts in blocks of 15 minutes in the day-ahead-market (the “DAM”), (ii) electricity contracts for fixed terms in the future, such as intra-day contracts, day ahead contingency contracts and contracts up to 11 days ahead, known as the term-ahead-market (the “TAM”) and (iii) renewable energy certificates (“RECs”). IEX has commenced the trading of energy saving certificates (“ESCerts”) on Exchange on September 26, 2017. It is one of two exchanges in India that offer an electronic platform for the trading of electricity products and have a substantial majority market share among the power exchanges in India. The DAM constitutes the substantial majority of the energy contracts that are traded on IEX. In the financial years 2016 and 2017, it commanded a 99.6% and 99.4% market share, respectively, of electricity contracts in the DAM, in terms of volume, according to the CERC. According to the CERC, in the financial years 2016 and 2017, 93.7% and 94.8% of the traded contract volumes of electricity contracts in the DAM, TAM and RECs combined, were conducted over it.

The Indian power market, in terms of electricity generated, consisted of 89.7% of long-term and medium terms electricity contracts (contracts for periods of one year or over) and 10.3% of short-term electricity market (contracts for periods of under one year) for the financial year 2017, according to the CERC. The short-term electricity market includes contracts through licensed traders, direct bilateral contracts, deviation settlement mechanism (“DSM”) and contracts traded over power exchanges. The share of electricity contracts traded over power exchanges has grown from 23.8% to 34.5% of the short-term market between the financial year 2013 and the financial year 2017, according to the CERC. Further, according to CRIS, the short-term electricity market in India is expected to grow to 21.1% of electricity generated in India by the financial year 2022, of which 43.0% is expected to be traded over power exchanges.

Trading in the DAM and TAM product categories through IEX provides participants with a means to meet their power requirements and manage, among other things, availability and price of electricity. It primarily brings together sellers of power, such as independent power producers, captive power plants, distribution companies and Government owned power generation companies, and buyers of power, such as distribution companies and industrial, commercial and institutional power consumers, and provides them with a transparent, neutral and automated platform for trading of electricity. Trading on IEX is done by its members on their own behalf and on behalf of their clients, who are together known as participants on Exchange. Trades with respect to electricity contracts traded in the DAM and TAM are physically settled, meaning that settlement is made through the physical delivery of electricity itself. IEX does not own or trade electricity products for on its own account.

As of August 31, 2017, IEX had over 5,900 participants registered on its Exchange of which over 3,200 participants were active. Over 4,300 registered participants were eligible to trade electricity contracts and over 4,000 registered participants were eligible to trade RECs, as of August 31, 2017. Its participants registered to trade electricity contracts are located across 29 states and five union territories in India and include 50 distribution companies, over 400 electricity generators, and over 3,900 open access consumers. As on the same date, IEX included over 1,000 renewable energy generators and over 2,900 industry and corporate customers. In the financial year 2017, participants traded and cleared 4.62 million RECs on Exchange. Only 3.6% of power generation capacity is traded on this exchange against 30 to 70% trades on global power exchanges.

For providing exit route and listing gains, IEX is coming out with a maiden IPO by way of offer for sale of 6065009 equity shares of Rs. 10 each via book building route with a price band of Rs. 1645-1650 to mobilize Rs. 997.69 to Rs. 1000.73 crore (based on lower and upper price bands). The issue opens for subscription on 09.10.17 and will close on 11.10.17.Minimum application is to be made for 9 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this offer are Axis Capital Ltd., Kotak Mahindra Capital Co. Ltd., and IIFL Holdings Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 20% of the post issue paid-up capital of the company. This being a secondary offer, the company’s paid-up capital remains same at Rs. 30.33 crore post IPO. Its entire equity is issued at par so far. The average cost of selling shareholders ranges from Rs. 10 to Rs. 709.23.

On the performance front, IEX has posted total revenue/net profits of Rs. 173.99 cr. / Rs. 91.95 cr. (FY14), Rs. 176.38 cr. / Rs. 90.02 cr. (FY15), Rs. 200.14 cr. / Rs. 100.34 cr. (FY16) and Rs. 237.42 cr. / Rs. 113.57 cr. (FY17). For Q1 of the current fiscal, it has reported a net profit of Rs. 30.63 cr. on total revenue of Rs. 61.66 cr. It has posted an average EPS of Rs.34.84 and average RoNW of 39.25 for last three fiscals. The issue is priced at a P/BV of 16 plus. If we annualize latest earnings and attribute it on post issue equity then asking price is at a P/E of 40 plus. It has no listed peers to compare with. Though pricing of the IPO raises concern, its track record and bright prospects leave some room for new investors. IEX’s revenue posted CAGR of 14.5% for last five fiscals. It’s PAT margins are near 49% for all these years.

On BRLM’s front, three merchant bankers associated with the offer have handled 44 public issues in the past three years out of which 12 issues closed below the issue price as on listing date.

Conclusion: Higher spending for power infra augurs well for this company. IEX will enjoy the first mover advantage and generate more fancy post listings. Investors may consider an investment for short to long term. (Subscribe).

The original review appeared on Chittorgarh.com and is penned by Dilip Davda. It is available here.

stockarchitect October 9, 2017

Chittorgarh.com / Dilip Davda / IEX / Indian Energy Exchange / IPO / Review /

Reblog: Mas Financial IPO review


Mas Financial Services Ltd. (MFSL) is a Gujarat-headquartered NBFC with more than two decades of business operations and as of June 30, 2017, it operated across six States and the NCT of Delhi. Its business and financing products are primarily focused on middle and low income customer segments, and include five principal categories: (i) micro-enterprise loans; (ii) SME loans; (iii) two-wheeler loans; (iv) Commercial Vehicle loans (which include new and used commercial vehicle loans, used car loans and tractor loans); and (v) housing loans. MFSL’s shareholders include development finance institutions including FMO and DEG and private equity investors including Sarva Capital.

As of March 31, 2017 and June 30, 2017, company’s AUM was Rs. 3332.57 cr. and Rs. 3451.74 cr. respectively. Company’s AUM increased at a CAGR of 33.37% from Rs. 1053.19 cr. as of March 31, 2013 to Rs. 3332.57 cr. as of March 31, 2017. As of June 30, 2017 it had more than 500,000 active loan accounts, across more than 3165 Customer Locations in six States and the NCT of Delhi, served through our 121 branches. As of 30.06.17 it has assigned 34.1% AIMs to banks/FIs. Company’s average cost of borrowing is 9.05% and is having NIM of around 7%. Company is pursuing and maintaining stable growth and quality of portfolio by expanding product offerings to anchor its belief that growth with quality will enhance the stakeholder’s value. Company meets its funding requirements from banks like HDFC Bank, Axis Bank, Union Bank, SIDBI, Union Bank, Central Bank of India etc.

To part finance augmenting its capital base to meet future capital requirements, MFSL is coming out with a maiden IPO of Rs. 460.04 crore via book building route with a price band of Rs.456 – Rs. 459. The issue consists of fresh equity issue (approx 5076252 shares) worth Rs. 233 crore and offer for sale for Rs. 227.04 crore (approx 4946405 shares). The issue opens on 06.10.17 and will close on 10.10.17. Minimum application is to be made for 32 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue is solely lead managed by Motilal Oswal Investment Advisors Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. It has reserved xx shares for eligible employees and is offering a discount of Rs.45 per share. Having raised initial equity at par from incorporation till March 2008, it raised further equity in the price range of Rs. 124.93 to Rs. 1200 per share between July 2012 and September 2017. It has also issued bonus shares in the ratio of 1 for 2 in December 2006, 1 for 2 in August 2007, 1 for 19 in December 2011, 3 for 5 in January 2014, 3 for 2 in November 2016. DEG held 4,998 CCDs that have been converted to 2,470,175 Equity Shares in the Board meeting held on September 21, 2017. FMO held 21,735,545 Series A CCPS that have been converted into 1,739,865 Equity Shares and Sarva Capital held 21,735,545 Series B CCPS that have been converted into 1,280,723 Equity Shares and 400 Series C CCPS held by nine shareholders has been converted into 87,716 Equity Shares, all in the Board meeting held on September 12, 2017. Post issue, its current paid up equity capital of Rs. 49.57 crore will stand enhanced to Rs. 54.67 crore. The average cost of acquisition of equity shares by promoters ranges from Rs. 1.06 to Rs. 2.38.

On the performance front, MFSL has (on a consolidated basis) posted revenue/net profits of Rs. 184.92 cr. / Rs. 33.09 cr. (FY14),Rs. 238.20 cr. / Rs. 40.80 cr. (FY15), Rs. 304.20 cr. / Rs. 51.45 cr. (FY16) and Rs. 364.70 cr. / Rs. 69.33 cr. (FY17). For Q1 of current fiscal, it has reported a net profit of Rs. 23.70 cr. on revenue of Rs.104.33 cr. For last five years, it has posted CAGR of 26.3% and 25.9% in revenues and net profits respectively. For last three fiscals, it has posted an average EPS of Rs. 13.13 and average RoNW of 23.75% on paid-up equity capital of Rs. 42.96 cr. (as on 31.03.17). Non-annualized EPS and RoNW are Rs. 4.75 and 6.03% on an equity base of Rs. Rs. 43.99 cr. (as on 30.06.17). The company has converted its entire preference share into equity share as on 12.09.2017 and as on 21.09.17 it’s paid-up equity capital stood at Rs. 49.57 crores. The issue is priced at a P/BV of 7.43. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 26 plus. Thus, the issue appears fully priced.

On BRLM’s front, merchant banker associated with this offer has handled 10 public issues in the past three years out of which 3 issues closed below the issue price on the listing date.

Conclusion: Moderate investment may be considered for long-term in this fully priced issue.

The original review is penned by Dilip Davda, appears on Chittorgarh.com and is available here.

stockarchitect October 6, 2017

Chittorgarh.com / Dilip Davda / IPO / MAS Financial Services / Review /

Repost: How not to fail in stock markets – 11 lessons from Rakesh Jhunjhunwala


Rakesh Jhunjhunwala is widely referred to as the Indian Warren Buffett. The investment maestro is very popular for picking up stocks that could turn into multibaggers, based on his own study of fundamentals and research models. Rakesh Jhunjhunwala is a Chartered Accountant by qualification and a trader by profession.

With the stock markets on fire of late, many investors who could not invest before the bull run began must be wondering if they have missed the rally, for the benchmark indices Sensex and Nifty have already returned about 20% each so far this year. But worry they must not, for, here we take a look at 11 key lessons on the stock market from the big bull investor himself, which may help investors to stop failing in the stock markets, cut losses, and turn profits.

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stockarchitect September 27, 2017

Investment / Lessons / Rakesh Jhunjhunwala / Trading / Warren Buffet /

Reblog: 9 books about financial markets you really should read


Earlier this week I wrote (again) about the importance of understanding financial market history. This prompted a few people to ask for some of my favourite books on the topic. Here goes:

“Devil Take the Hindmost: A History of Financial Speculation”

If I had to pick just one book to read on the topic, this would be the one. Edward Chancellor weaves history, psychology, and economics beautifully in what is also one of the better-named finance books I’ve come across.

“The Panic of 1907: Lessons Learned From the Market’s Perfect Storm”

The story behind the banking crisis most people probably aren’t familiar with. This book shows how primitive the financial markets were before banking regulations and the Fed came around.

“The Great Depression: A Diary”

This first-person account of what life was like during the Great Depression is not only a lesson in financial market history but also how difficult that period in history was for those living through it. I can’t recommend this one enough.

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stockarchitect September 25, 2017

Books / Bull Market / Crash / Depression / Investment / Learning / Market / Stocks /

Reblog: Prataap Snacks IPO review


Prataap Snacks Ltd. (PSL) an Indore based company is one of the top six Indian snack food companies in terms of revenues in 2016, and among the fastest growing companies in the Indian organized snack market between 2010 and 2016. Based on the FS Report, the snacks market in India is estimated at approximately Rs. 55000 crore out of which organized snack market is estimated at Rs. 22000 crore and grew at a CAGR of 14% between 2012 and 2016. With increasing competition and cost pressure, there has been a gradual shift from an unorganized to organized sector across the various product segments. PSL is present in three major savory snack food categories in India and all its products are sold under the “Yellow Diamond” brand. As of July 31, 2017, PSL had 40 flavors of Chips and extruded snacks and 23 varieties of Namkeen in the market. It is set to launch special snacks for health-conscious consumers and also sweet bites in the near future.

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stockarchitect September 23, 2017

Dilip Davda / IPO / Prataap Snacks / Review /

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