STOCK EXCHANGE & AMBANI's

In 1982, Reliance Industries came up against a rights issue regarding partly convertible debentures. It was rumored that the company was making all efforts to ensure that their stock prices did not slide an inch. Sensing an opportunity, a bear cartel which was a group of stock brokers from Calcutta started to short sell Reliance shares, its being said that nearly 11 lakhs shares of Reliance were shorted on March 18, 1982 and stock went down from Rs.131 to Rs.121 in minutes. To counter this, a group of stock brokers till recently referred to as "Friends of Reliance" started to buy the short sold shares of Reliance Industries on the Bombay Stock Exchange. Ambani through his known brokers indirectly bought more than 8,00,000 shares from that 11,00,000 shares sold by bear cartel. 

The Bear Cartel was acting on the belief that the Bulls would be short of cash to complete the transactions and would be ready for settlement under the "Badla" trading system operative in the Bombay Stock Exchange. The bulls kept on buying and a price of Reliance went to Rs. 152 per share & was maintained till the day of settlement. On April 30, 1982, the day of settlement, the Bear Cartel was taken aback when the Bulls demanded a physical delivery of shares only. To complete the transaction, the much needed cash was provided to the stock brokers who had bought shares of Reliance, by none other than Dhirubhai Ambani. In the case of non-settlement, the Bulls demanded an "Undha Badla" (a penalty sum) of Rs. 25 - Rs. 35 per share. With this, the demand increased and the shares of Reliance shot above Rs. 180 in minutes. The settlement caused an enormous uproar in the market and Dhirubhai Ambani was the unquestioned king of the stock markets. He proved to his detractors just how dangerous it was to play with Reliance.

To find a solution to this situation, the Bombay Stock Exchange was closed for three business days. Authorities from the Bombay Stock Exchange (BSE) intervened in the matter and brought down the "Undha Badla" rate to Rs. 2.00/share with a stipulation that the Bear Cartel had to deliver the shares within the next few days. The Bear Cartel bought shares of Reliance from the market at higher price levels and it was also learnt that Dhirubhai Ambani himself supplied those shares to the Bear Cartel and earned a healthy profit out of "The Bear Cartel's adventure". After this incident, many questions were raised by his detractors and the press. Not many people were able to understand as to how a yarn trader till a few years ago was able to get in such a huge amount of cash flow during a crisis period. The answer to this was provided by the then finance minister, Pranab Mukherjee in the parliament. He informed the house that a Non-Resident Indian had invested up to Rs. 22 Crore in Reliance during 1982-83. These investments were routed through many companies like Crocodile, Lota and Fiasco. These companies were primarily registered in Isle of Man. The interesting factor was that all the promoters or owners of these companies had a common surname Shah. An investigation by the Reserve Bank of India in the incident did not find any unethical or illegal acts or transactions committed by Reliance or its promoters.

A few points discussed on Limited Liability Partnership

1. Liability of partners can go up to the extent of Capital contributed by him.
2. There are few legal/procedural requirements in LLP in comparison of The Companies Act.
3. Board meetings are not required in case of LLPs.
4. Under LLP, the profit distribution is flexible, i.e. A partner can be given any %age of profit irrespective of the capital contributed by him.
5. LLP CAN NOT be formed for a charitable purpose.
6. Any body corporate or Foreign company can be a partner in LLP.
7. An LLP/Foreign LLP can also be a partner in LLP.
8. A partnership firm CAN NOT be a partner in LLP.
9. In LLP, individual partners are not mandatory. Any two companies or two LLPs can also form an LLP.
10. At least 2 designated partners require DPIN. Its not mandatory for all partners to obtain DPIN, like in case of a company where it is mandatory for all directors to obtain DPIN.
11. DPIN is required for the designated partner even if he is having a DIN also.
12. Minimum 2 persons are required to form an LLP, but there is no restriction on the maximum number of persons.
13. In case, an individual and a company are the partners in LLP, then it shall be required for the company to nominate a designated partner other then the individual.
14. One designated partner is required to be Resident of India, and the conditions given in LLP Act for residential status have to be checked on the DATE OF APPOINTMENT only. Later on if these conditions are not fulfilled, even then that person can remain as designated partner.
15. Vacancy of any designated partner has to be filled within 30 days. If this vacancy is not filled in 30 days, then all the partners of LLP shall be treated as designated partners.
16. Incorporation document – Declaration in Incorporation document has to be given by an advocate/CA/CS/ICWA AND ONE SUBSCRIBER ALSO.
17. LLP has to be incorporated by the Registrar within 14 days, provided the documents are complete. Period can not be extended.
18. In case of a LLP, if any application of change in registered office is filed with the department, shall take effect from the DATE OF FILING OF FORM only. Means, it can not be changed with retrospective effect.
19. It has to be noticed that all invoices, documents etc of LLP has to bear the name of LLP, Address, and REGISTRATION NUMBER of LLP.
20. Unlike in partnership firms, the partner in LLP shall be treated as agent of LLP only, and not of other partners.
21. Accounts of LLP can be made either on CASH BASIS OR MERCANTILE BASIS. Hybrid system is not allowed.
22. Statement of Account and Solvency has to be filed within 6 months from the end of the financial year, whereas Annual return has to be filed within 60 days only.
23. Audit of LLP is mandatory by virtue of the LLP Act itself.
24. Loan by the partner is allowed in LLP.
25. Partner of LLP can do business with the LLP itself and can earn profits from LLP.
26. ALL OFFENCES UNDER LLP ACT SHALL BE TREATED AS CRIMINAL OFFENCES UNDER INDIAN PENAL CODE.

For the first time since October 2008 the benchmark Sensex of the Bombay Stock Exchange has closed beyond the 12,000. This achievement is not a sign of the fact that the country has came out of the worst economic storm in fifty years but its an indication that we’re at least getting there. Dalal Street can finally afford to give out a smile; restless traders can afford to wipe the sweat of their brow because the buyers are finally starting to return.
By no means should the last statement be interpreted as something which would lead someone to believe that a new bull market has been born .No, India is yet to reach that cornerstone just like the rest of the world.
By all indications it has become clearer that if a new global bull market has to start it has to first lay root in the BRIC countries.
The hectic activity on the Indian stock markets has resembled the highs and lows of a heart monitor. Many a time sellers have resorted to profit booking which has driven down the Sensex,a few months ago this was the predominant trend.
What we are now seeing is that when the sellers are making their move so are the buyers. The latter were reluctant a few months ago because everytime they tried to rally they were beaten down by the bears who were intent on profit booking alone.
Now that the impact of the recession has reduced just a little bit because governments have been pro active in making funding available, things are beginning to change.
The buyers are beginning to return and are slowly beginning to accept market risk. They’re willing to shell out their money towards investments. If over a period of time this trend continues then we can say that a bull market has indeed been born.
The Bombay Stock Exchange and the National Stock Exchange have both seen the return of FII’s.Moreover,the most encouraging fact about the recent spike in the Sensex has been due to the participation of the big Mutual Fund houses.
The very same institutions that pressed the ‘sell’ trigger a few months ago leading to a massive drop in the Sensex and the nifty.
What could spoil the party is the perception that this is only a ‘fake rally’. A phrase often used by bearish traders; it indicates that the situation is just as worse as before or getting even worse and this rally is just a sentimental one or a ‘rebound’. If indeed it’s true then it would be a sad event. The chances of this spike being a ‘fake rally’ are low but its possibility cannot be ruled out entirely.
It is now up to companies themselves to create an easy demand situation in the market. Now that the markets have cooled off they can concentrate on making sure that they break the last line of defense of a recessionary economy by making it easier for the consumer to get back to spending his money.

IPL LOSER DECCAN CHARGER ACTUALLY TURNED PROFITABLE LAST YEAR

The company has spun an EPS of Rs 30.9 for the period from 10 April 2008 to 22 January 2009.
Last year's Indian Premier League underdog was not exactly an underdog as far as the financials are concerned. Deccan Chargers Sporting Ventures, the firm behind the Deccan Chargers cricket team of Hyderabad at IPL, has turned in profits in the first year of formation. The firm, which is a subsidiary of publicly listed media firm Deccan Chronicle Holdings, has been recently put up for sale. KPMG is advising the parent on the sale. Around 20% stake in Deccan Chargers is held by Group M, the media arm of the ad conglomerate WPP.
According to a financial report( of VCCircle) of Deccan Chargers, , the cricketing company has spun an earnings per share of Rs 30.9 on shares having par value of Rs 10 each for the period from 10 April 2008 to 22 January 2009. That is not a bad thing since the team ended up at the bottom of the table in the debut edition of domestic 20:20 cricket tournament last year.
According to the financial report, the firm earned a total income of Rs 56.6 crore for the reporting period of which Rs 24 crore came as 'income from franchisee rights' while sponsorship fees brought in Rs 15.8 crore. Income from ads and ticket sales brought in another Rs 16.4 crore and there was other income worth Rs 40 lakh.
As against this, players' cost was pegged at Rs 22.7 crore. Operating and other expenses totalled Rs 13.39 crore and depreciation was at Rs 17.12 crore. The firm clocked PBT of Rs 3.15 crore and carried forward Rs 2.05 crore as PAT to the balance sheet.
Details for other teams of IPL is not in the public domain.
However, what is to be looked at is how the firm has funded the fee the firm would have paid to BCCI for the franchisee rights. The books show unsecured loans worth Rs 385.23 crore as amount payable to BCCI towards franchisee rights acquired last year. The franchisee rights were acquired by Deccan Chargers Sporting Ventures for Rs 428.04 crore.
DECCAN CHARGERS P&L:Income from Franchisee rights- Rs.24 cr.
Sponsership Fees- Rs.15.8 cr.
Income from ads & ticket sales- Rs.16.4 cr.
Other Incomes- Rs.0.4 cr.
TOTAL INCOME- Rs.56.6 cr.
Players Cost- Rs.22.7 cr.
Operating & Other Expenses- Rs.13.3 cr.
Depreciation- Rs.17.1 cr.
Preliminary Expenses w/off - Rs.0.2 cr.
TOTAL EXPENDITURE- Rs.53.4 cr.
PROFIT BEFORE TAX- Rs.3.1 cr.
PROVISION FOR TAX- Rs.1.1 cr.
PROFIT AFTER TAX- Rs.2 cr.
EARNING PER SHARE- Rs.30.9

FIXED INCOME INVESTING - BY BENJAMIN GRAHAM

I came across an interesting article on "fixed income value investing". A larger part of this text has been taken from Benjamin Graham's popular books - Security Analysis and The Intelligent Investor.

Two paragraphs I particularly liked :

1. "It's our argument that a sufficiently low price can turn a security of temperance quality into a sound investment opportunity - provided that the buyer is informed and experienced, and that he practices adequate diversification."

2. On the topic of diversification, Graham makes an interesting connection between investing and insurance. He notes that any individual security purchase may not prove profitable, even if the margin of safety is present at the time of purchase.

Graham says, "The margin guarantees only, that he has a better chance for profit than for loss - and not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses. That is the simple basis of the insurance under-writing business."