Monthly Newsletter July 2019

Dear Partner,

We recently updated our monthly newsletter. Do find our views on the Budget and what impact it
can have on the market.

1) Budget Announcement – Public Stake in Listed Companies to go up to 35% i.e. Promoters

have to Sell their stake.

This is not the First time something like this is happening, this happened in June 2010 as well where
SEBI gave 3 years of time to Increase minimum public stake from 10% to 25%.

According to our calculation based on Capitaline Database, if this event happens then in the next 3-4
years about 3.9 Lakh Crore worth of Fresh Equity would hit the market just due to this event & the
top 20 Companies are about 2.5 lakh Crores out of this 3.9 Lakh Crore.

Mar Prom. Residual stake to be

Name CapRs.Cr. Hold.% sold (Cr.)
1 TCS 841528.56 72.05 59327.76
2 Wipro 171313.68 73.85 15161.26
3 Avenue Super. 89431.31 81.2 14487.87
4 Bandhan Bank 66729.86 82.26 11517.57
5 HDFC Life Insur. 98675.39 76.14 10992.44
6 IDBI Bank 29127.15 97.46 9454.67
7 Coal India 154746.11 70.96 9222.87
8 Hind. Unilever 388278.71 67.19 8503.3
9 General Insuranc 40298.57 85.78 8374.04
10 HDFC AMC 42772.58 82.72 7579.3
11 Bank of India 30966.93 87.05 6828.21
12 Interglobe Aviat 62920.24 74.93 6247.98
13 Hind.Aeronautics 23796.69 89.97 5942.03
14 ICICI Pru Life 56557.72 74.98 5644.46
15 Allahabad Bank 18850.5 92.01 5091.52
16 New India Assura 24390.4 85.44 4985.4
17 Siemens 48348.67 75 4834.87
18 Corporation Bank 16484.01 93.5 4697.94
19 UCO Bank 14282.66 93.29 4040.56
20 Punjab Natl.Bank 37776.21 75.41 3932.5

We believe SEBI will of course give 3 years of Time for these companies to dilute their Shareholding
from 25% to 35%, majority of these companies ex Government Companies are High Quality stocks &
will get buyers.
 Monthly Newsletter July 2019

What will be an Impact of this on the Stock Price? – We don’t know but let’s look at history. A
Similar thing happened in 2010 where companies had to cut down stake to 75% in 3 years from June
2010 to June 2013. The Weighted Average Market Cap Fall in top 20 Companies was -13% v/s -11%
for CnxMidcap.

Top 20 Market Cap 2010 Stake in June Market Cap 2013 Change In
Companies Stake March 2013 March Stock Price
Wipro 79.45 103772.38 73.55 107663.49 3.7%
DLF 78.64 52432.69 75 39860 -24.0%
Reliance
Power 84.78 35832.16 74.98 17265.58 -51.8%
Adani Ports 77.5 31663.74 75 27797.18 -12.2%
Oracle
Fin.Serv. 80.46 19287.39 74.99 21472.71 11.3%
JSW Energy 76.72 18335.76 75 8962.87 -51.1%
Sun TV
Network 77 16880.61 75 15428.41 -8.6%
JP Power
Ven. 87.7 14156.32 64.96 7609.42 -46.2%
Tata Comm 76.15 7991.4 75.66 6666.15 -16.6%
Fortis
Health. 76.47 5813.49 71.92 4048.05 -30.4%
Mahindra
Holiday 83.09 4580.85 75 2175.25 -52.5%
Tata Tele.
Mah. 77.72 4486.88 77.21 1498.79 -66.6%
Godrej Inds. 79.1 4455.93 74.96 9888.4 121.9%
D B Corp 86.34 4340.81 74.98 4150.58 -4.4%
BGR Energy
Sys. 81.26 3868.2 78.01 1363.1 -64.8%
Godrej
Propert. 83.79 3584 74.98 4131.19 15.3%
3M India 76.01 2507.63 75 4238.59 69.0%
Puravankara 89.96 2158.74 75 1930.38 -10.6%
Whirlpool
India 75.1 2038.8 75 2794.31 37.1%
Berger
Paints 75.59 2029.58 75 6770.17 233.6%
TOTAL 340217.36 295714.62 -13.1%

We have used data from Capitaline & may not be 100% Accurate but it should give us a broad
understanding. There were a lot of things discussed on News Channels yesterday about MNC’s
Performance during stake Sale, We of course tested MNC Data of 2010 to 2013 dilution as well &
here are the results.
 Monthly Newsletter July 2019
MNC's Stake 201003 201303
Sale Promoters[201006] Promoters[201306] Market Cap MarketCap Returns
3M India 76.01 75 2507.63 4238.59 69.0%
Astrazeneca
Phar 90 75 2373 1635 -31.1%
Blue Dart
Exp. 81.04 75 2762.41 8806.56 218.8%
Elantas Beck 88.56 78.4 374.61 925 146.9%
Gillette India 88.73 88.76 5643 6849 21.4%
Honeywell
Auto 81.24 75 1903 2440 28.2%
INEOS
Styrolut. 83.33 75 317 1311 313.6%
Kennametal
India 88.16 75 1016 964 -5.1%
Linde India 89.48 75 1502 3220 114.4%
Novartis
India 76.42 75 1831.95 1913.76 4.5%
Saint-Gob.
Sekur 85.77 75 193.15 201.81 4.5%
Singer India 85.37 75 34 101 197.1%
Thomas
Cook (I) 77.23 75 1417 1233 -13.0%
Timken India 80.02 75 886 855 -3.5%
Wendt India 79.74 79.74 140.7 220.47 56.7%
TOTAL 22901.45 34914.19 152.5%

Well Data from MNC’s is very clear, they went up 152% v/s -11% even after increased Supply
between 2010-2013.

2) Budget Announcement – NBFC’s are bailed out finally. Well the Indian Government is like in
Police in Movies, they come when all the action is over. What Started as a Confidence Crisis
in NBFC’s in September 2018, quickly became a Liquidity Crisis & now we are facing a
solvency Crisis. The Finance minister has approved what Ajay Piramal had asked for, The FM
proposed the government encourage public sector banks to buy high-rated pooled assets of
up to Rs 1 Lakh Crore of financially sound NBFCs, for which the government will provide a
one-time six-month partial credit guarantee for the first loss of up to 10 per cent. The banks
can buy assets of NBFCs up to Rs 1 Lakh Crore during FY20. I believe this Budget is a Positive
for NBFC’s but real estate problems will persist.

3) The Government – Modi became Prime Minister because people saw what he did in Gujarat,
he was extreme Capitalist & that created Jobs & prosperity but PM Modi has become an
extreme socialist in last 3 years of his first government. We don’t think with these policies an
8%+ GDP Growth is possible.

We are in socialist government era & Socialist government are not bad for Stock markets as
long as they don’t keep increasing corporate taxes. The State of Business remains weak &
Q1Fy2020 would probably be one of the worst Quarters in last 4-5 Years with Auto, Real
Estate & NBFC struggling a lot. Surprisingly Volume Data of Export of Chemicals from India
 Monthly Newsletter July 2019
has been very weak in this Quarter, the sector needs to be closely tracked. Overall we must
get used to socialist policies of this government, we should consider it the New Normal. In
the Long term India doesn’t grow because of Government, it grows INSPITE of
Governments!

4) Our Strategy :

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Disclosure: None the above stocks are recommendations in any way and should be used for
information purposes only.