ANIL PLAYS THE GAME AGAIN...!!!!!!

Anil Ambani decided to merge RNRL with Reliance Power today....The ratio as I thought was 1 Reliance power for every 4 RNRL. The merger deal is valued at $11 billion. This merger values RNRL at Rs.7157 cr.

Reliance Power will dilute around 40.8 crore Sharea a 17.00 %. This merger will be negative for Reliance Power shareholders, while very good for RNRL, Rpower pays for a shell co with no real asset to invest into....whereas RNRL shareholders will now have a real assets to invest. Anil Ambani holds 42.39 % in Rel.Power & Rel Infra Holdes - 42.39 %. The combine market cap will be Rs.50,000 crs. 

RNRL shareholders including the promoters will get shares of RELIANCE POWER worth Rs.7157 cr, out of these,promoter would get shares worth over Rs.3600 cr. Here are some details of this both company -

RELIANCE POWER

Equity Sh (nos. in Cr) - 239.68 ;  Equity Cap (Rs. In Cr) -2396.80 ; Market Cap (Rs. In Cr) -41979.95 ; Net Sales - FY10  - 0.00 ; Net Profit - FY10  -683.89 ; Other Income - FY10  -843.38 ; Earning Per Share - 2.85 ; P/E Ratio  - 61.46 ; Face Value -10.00 ; TOTAL ASSET -  FY09  - 15111.64 ; Market Price -175.15 ;26- week H/L avg price - 152.58 ; 2 - week H/L avg price - 170.46 ; Promoter Share holding % - 84.78 ; Public Share holding % -15.22 ; No. share holders - 3595703 ; EV - 175.15/sh ; Book Value - 57.55/sh ; EV/EBITDA - 162.44 ; Long term Debt - 0.00

RNRL

Equity Sh (nos. in Cr) -163.31; Equity Cap (Rs. In Cr) - 816.56 ;Market Cap (Rs. In Cr) -10394.94 ; Net Sales - FY10 (Rs.In Cr) -298.39 ; Net Profit - FY10 (Rs.In.Cr) -90.75 ; Other Income - FY10 (Rs.In.Cr) -167.63 ; Earning Per Share (In Rs) -0.56 ; P/E Ratio (In Times) -113.66 ; Face Value - 5.00 ; TOTAL ASSET - FY09 (Rs.In Cr) -3323.44 ; Market Price -63.65; 26- week H/L avg price - 62.60 ; 2 - week H/L avg price - 64.61 ; Promoter Share holding % - 54.84 ; Public Share holding % - 45.16 ; No. share holders - 2534917 ; EV - 72.97/sh ; Book Value - 11.02/sh ; EV/EBITDA - 71.45 ; Long term Debt- Rs.1522.05 cr - Rs.9.32/sh

THE YUAN DE - PEGGING STORY........

                    Almost for 2 year’s Chinese government with the help of People’s Republic Bank Of China – the Chinese central bank had managed to keep the value of their currency Yuan pegged to the value of US dollar. One $ was worth around 6.82 Yuan.

                    China is an export driven economy. Their main export market is the US. So when an Chinese company exports goods to US it gets paid in US$. These $ are converted to Yuan, it means $ are sold and Yuan is bought. Over a period of times, as exports keeps going up, more $ are sold and more Yuan are bought. This of course increases demand for Yuan & it starts to appreciate or increase in value against $. And an appreciation in currency is detrimental to exporter.

                    This means, suppose say a Chinese exporter exports goods worth $100000. When he converts them at 1$=6.82 Yuan he gets 682000 Yuan ($100000x6.82) in return. Now say the Yuan appreciates and 1$=6.6 Yuan, then the exporter will get 660000 ($100000x6.6). Thus he will not make the same amount of 682000. If he wants to make the same money he will have to raise prices. It’s well known that Chinese compete on price & not quality, the exporter may not be in position to raise prices. This is were the government comes in by ensuring that the value of the Yuan stays constant around 6.82 to $, so that the exporter does not have to deal with any fluctuation in currency.

                    Government of china in order to maintain Yuan at 6.82 to $ starts selling Yuan & buys $. Because when lots of $ come into china to buy Yuan, pushes up the demand of Yuan & Central Bank of China starts selling Yuan & buys $. This ensures that there are enough Yuan in market & its value dos not appreciate.

                    Now China has suddenly decided to de-peg its currency as US feels that China is a currency manipulator, US feels that china has held the value of Yuan against the $ constant & this is what has kept their export machinery chugging along. They feel this has led to situation where Americans citizens continue to buy cheap Chinese goods instead of home grown ones.If Chinese government had not involved itself with the foreign exchange market & let it work independently then the flow of $ into china would have ensured that the Yuan would have appreciated against $.

                    Suppose if 1 $ = 6 Yuan, means exporter exporting goods worth $100000 would make 600000 Yuan. Under the pegged regime he would have earned 682000 Yuan. Now, to earn that much, he has to sell goods for $113666.7 (682000/6). This means he has to increase its price to 13.67%. This in turn would make Americans buy American goods instead of low priced Chinese goods. Nobel Prize winning economist Pual Krugman had earlier proposed to impose a 25 % surcharge on Chinese imports to US. He felt that this will make Chinese goods expensive & will result into Americans buying more US goods. Basically the allegation against china on being currency manipulator have been growing in US, and US the biggest market for china do not want US to take any strict steps that would hurt its exports. So it wants to de-peg it currency against US$.

                    Currently if something worth $1000 it will be worth 6820 Yuan in china if it is imported, if 1$ = 6 Yuan, then it would be worth 6000 Yuan which is lower. So some experts believe that this will make Chinese buy more imported goods & that in turn will help the exports across the globe. China will take time to change its spending habits. Currently china’s saving rate is 54 %.

                    And off course in order to maintain the peg, the Chinese Central Bank bought $ & sold Yuan that explains Foreign Exchange Reserve of $ 2.4 trillion. And all this money found its way back primarily into US & other western economies, helping them to finance their fiscal deficits. Now if these Chinese really let the Yuan float even partially, its rate of accumulation of Forex reserve might slow down. This means lesser $ to help finance the fiscal deficit in the US.

SAMRUDDHI CEMENTS LISTS AT Rs.579.75

NAME - NSE - SAMRUDDHI ; BSE- 533209.

Share Price - Rs.488 ;

Market Cap - Rs.12,770.15 cr ;

Total Debts - Rs.2100 cr ;

52 Week High - Rs.590 ; Low- Rs.477.15 ;

P/E - 00.00 ; EPS - 00.00 ;

Book Value - Rs.175.15 ; Industry P/E - 8.95 ;

Fv - Rs.5.00 ; Dividend - 35 % ;

Total Shares Issued - 26,16,83,571 shares ;

Promoter's Holding - 16,99,99,988 shares ; Promoter's holding in % - 65%

SAMRUDDHI CEMENTS LTD today made its debut at Rs.588 on BSE after its demerger with GRASIM IND

Listing Samruddhi Cement on the bourses is a part of the restructuring process of the cement business of the Aditya Birla group.

The company has listed with 26.16 crore equity shares of face value of Rs 5 each.

Shares of Samruddhi Cement touched a high of Rs 600 and a low of Rs 478.15 on the Bombay Stock Exchange.

On the National Stock Exchange, the scrip listed at Rs 579.75. It touched a high of Rs 590 and low of Rs.477.15.

The company made its listing on the bourses after Aditya Birla Group flagship firm Grasim Industries, last year, approved the demerger of Samruddhi Cement with itself.

As part of the arrangement, the company will be merged with UltraTech Cement on 10 July 2010.

Accordingly, 4 shares of UltraTech would be issued for every 7 shares of Samruddhi.

Each Grasim shareholder had received one equity share of Rs 5 of Samruddhi Cement for every one share held in Grasim, as a part of the scheme.

The merged entity will have an annual capacity to produce 48.8 million grey cement with 22 plants. It will also have 11. 7 million cubic metres of ready mix concrete across 68 plants along with captive thermal power plants of 504 mega watts.

After the completion of the merger, Grasim would hold 60. 3% of UltraTech's expanded equity capital and 39.7 % would be held directly by other shareholders of UltraTech and Samruddhi.

It is to be noted that the Fair Value of Samruddhi Cements is 55 % Ultratech Cements price.

My previous post on this event click - GRASIM IND SAMRUDDHI DEMERGER

Cabinet Deferres the decision on Rupee Symbol

The rupee's entry into the elite club of currencies with their own symbols will take longer with the government on 24th deferring a decision on the issue. The Cabinet was to finalise the symbol on 24th June 2010, but the matter was deferred after Finance Minister Pranab Mukherjee asked for more time to go through the short-listed signs, sources said.

                   The issue was on the agenda of the Cabinet, which met under the chairmanship of Prime Minister Manmohan Singh here, but was deferred, sources said.

The government has shortlisted five designs for the rupee from among the symbols suggested to the Ministry of Finance by the public.
In the Budget this year, Finance Minister Pranab Mukherjee had said that "in the ensuing year, we intend to formalise a symbol for the Indian rupee, which reflects and captures the Indian ethos and culture."
With this, the rupee will join the select club of currencies, such as the US dollar, British pound sterling, euro and Japanese yen that have a clear distinguishing identity, he had said.
Last year, the Finance Ministry had invited design suggestions from the public for the Indian currency.
"The government of India proposes to have a symbol for the Indian rupee to be selected through public competition," the Finance Ministry had said.
The symbol, the ministry had said, should represent the historical and cultural ethos of the country as widely accepted across the country and should be applicable to the standard keyboard.

My favourite one is number- 4

ONE SHOULD ALWAYS BUY GOLD

               Before the great depression, most of the world used gold as a currency. Of course, that did mean every time someone purchased something they paid for it in gold. Governments maintained a certain amount of gold in their vaults & paper currency was issued against the value of that gold. (In INDIA, the minimum reserve worth Rs.200 cr should be maintained at any point of time, out of these reserves Gold reserves should be worth Rs.115 cr @ Rs. 94/10 grams & a Forex reserve of Rs 85 cr at the current market price. If actual reserves are more than the minimum reserve RBI may prints new currency notes & issues them to deficit banks in form of loans against gold, foreign exchange, promissory notes & treasury notes) So every time you pay paper money you effectively using gold. This system was the “Gold Standard”. Citizens also had the freedom to exchange these currency notes for gold, as and when they deemed fit.

               The government ensured that no more notes are printed. The reason was simple if they had to print more money they needed more gold in their vaults because every paper currency note out there was essentially gold. And if citizens got the slightest hint that the government is printing currency, they would all land up at the bank to exchange their paper currency for gold. So even if the government was tempted to print money they would think twice before doing it.

               Now, during the time of the great depression, growth was a problem, unemployment was at its peak. Firms were shutting down. One way to create growth was the government printing notes & giving them to people in various ways to spend. Once the citizen got some money in their hands, they would go out and spend it. This ensures that they buy goods & services. And one man’s spending is another man’s income and so the cycle would continue and this would create some growth. And that’s what the government did; they moved out of Gold Standard and went into FIAT Currency i.e. a currency that does not have anything backing it but basically the fiat of government. This gave them the freeway to print any amount of money they want to.

               In fact, in the year 1933, the US government confiscated all the gold that its citizens had through Executive Order 6102 signed by the then President Mr. Franklin D Roosevelt, forbidding the hoarding of gold coins, gold bullion & gold certificates by US citizens. They were of course compensated for their gold at the rate of $20.67 per troy ounce (1 troy ounce=31.1grams). So because of this, the government across the world had the freedom to print currency whenever the economy was in trouble. And as per the basics of economics, an increase in supply leads to a decrease in purchasing power. That’s why economists who follow the Austrian school of economics, say that all paper currencies over a period of time go back to their intrinsic value i.e. zero.

               So that is why whenever there is a hint of a major financial crisis, people figure out that almost any solution that the governments might come up with will ultimately end up printing more & more money (which the US is doing to solve its financial problem and Europe cant due to its structure). This means decreasing purchasing power. The smart money in this situation always moves to gold. As it is now, people end up treating gold as nothing but what it was always used as i.e. CURRENCY. One should always have at least 25 % of its portfolio in Gold in order to hedge inflation.

Always buy gold in parts of SIP Systematic Investment Plans, or go into Gold ETFs...

Some of the GOLD ETFs are -

GOLD BeES (I prefer this as it is the first-ever launched, more experienced and of huge gold deposits)

Kotak Gold ETF

Reliance Gold ETF

Religare Gold ETF

SBI Gold ETF

UTI Gold ETF 

READ MY POST ON US PRINTING MORE NOTES

GOLD PRICES PERFORMANCE

Gold Price Performance

Silver Price Performance