ICICI Bank FPO

on June 18th ICICI Bank aims to raise at least Rs 10,000 crore from investors, while DLF is raising between Rs 8,750 cr.
Very few countries have the financial strength to allow for a mega offer, and India is currently going to witness 2 mega offers back to back. So it is a very good news.

Looking at the previous issue, I think ICICI would price its issue at around 900/- (the stock was traded at 900/- today) which makes it very competitive. However it should be giving about a 5% discount (855/-) and/or an option to retail investors of partial upfront payment of application money.
Since it is a FPO (further public offer) investors should not expect much listing gains, but these 2 offers combined would make some investing sense.

There is no concept of annualized average returns in stock markets… its all a function of your alpha and beta.

UPDATE

ICICI Bank issue will be open from 19-22 June.
The Price band is an aggressive 885-950/- (plus there is a 50/- discount for retail) making it (835 – 900/-). Retail investors have to pay only 250/- per share at the time of their application 🙂
There is also an green shoe offer to protect your investments.

15th July: those who have applied to partially paid ICICI shares need to pay an additional 250/- bu 26th July.

Air Deccan

“The market can stay irrational longer than you can stay solvent.”
– John Maynard Keynes

A rational Market lives on predictive pricing, the future incomes are discounted the moment it becomes public news. This makes it a heaven for the investors and a nightmare for the traders (as the fluctuations would be rational). However to the joy of most traders Indian Stock Market is anything but Rational.

eg:
Today AirDeccan is trading at 131.7 and this is inspite of the fact that Vijay Mallaya has announced an open offer that between 25th July to 13th Aug he shall buy 20% of Airdeccan Stocks at 155/- per share.
So for a rational investor this is 155-132 = 23/- per share or 17.5% returns in 6 weeks or 150% annualized assured returns.

Hence I would recommend all the rational investors to go bullish on this stock.

DLF

DLF is going for IPO at a price band of 500-550/-

Reasons why not to invest.
1) It is a mega issue… I will be surprised if it gets fully subscribed (in all categories) leave alone over subscribed.
2) with a EPS of Rs 12.80 it will have a PE of 47.7x… too high for an industry that is facing recession.
3) With high interest rates and construction more than the requirements (yes a lot of the developed property is now waiting for occupants) i do not see a short term bright future for any company associated with real estate.
4) With Delhi and NCR almost fully saturated, DLF plans to move outside to other regions… a risk which can backfire.

My strategy… wait for the listing… if the stock lists at 450/- buy some and if it goes to less than 400 go bullish on it.

Vishal Retail Ltd

This company is going for an IPO at a price band of 230 – 270 in a lot size of 25 share. I strongly recommend the readers to apply to this IPO.
1) Retail sector is in a boom period. It is going to be the next best thing.
2) Vishal targets value retailing… which unlike other listed retail companies makes it unique, more competitive and better positioned to face the MNC onslaught.
3) The company is very aggressive. It has 50 stores across 18 states and has plans for 80 more stores to make it a truly pan-india brand. It started as a ready-made garment retailer, but has diversified itself to a full fledged retail network.
4) I never recommend investing in a company whose products you would not like to buy. And for the bargain hunters Vishal is just the right place.

Valuations:
1) With a EPS of 20, the share should be alloted at an PE of about 13.3 which makes it 3 times more attractive to other retail chains like Trent, Pantaloom and shopper’s stop, which trade at a PE of 40+.
2) The sales of the company is 1130.7 (and doubling each year) which makes it bigger than Trent and Shopper’s Stop.

I feel a combination of aggressiveness and a boom would make a good investment opportunity.