Tuesday, July 30, 2013

29th state in India - Telangana

Andhra Pradesh is a state that was formed on linguistic basis as having people speaking Telugu. Telangana, Royalaseema and Coastal Andhra were part of Andhra Pradesh. Telengana is fighting for its own statehood for a long period of time. Today, Congress Working Committee (CWC) announced the approval for the formation of a new state called Telengana state. Hyderabad would be a common capital for both Telengana and Andhra Pradesh for atleast next 10 years. The new state will be formed after the resolution is formed in the parliament, probably, in the next 4-5 months.

Are Telengana people excited?
Mostly, Yes. But they would be really excited if Hyderabad was made their capital and Andhra Pradesh was made to create its own capital.

Are other Andhra people happy?
No. They still think this should not have happened. They are worried about the future of their people in Hyderabad and the future of Hyderabad as such.

Is this really true? Everyone agreed?
Yes. Its hard to believe. But its indeed true. There has been times when Congress said Telengana cannot be formed and a commission will be put to analyze the Pros and Cons and no steps were taken for a long time. Congress, know to be a silent observer and usually doesn't involve in making bold decisions, has made this bold decision through the CWC. We have to wait and see how the resolution in the parliament goes for the formation of the new state.

Future of Hyderabad:
Hyderabad belongs to the Telengana regions. The development of Hyderabad happened because it was the capital of entire Andhra Pradesh. All the people in all the regions of Andhra has helped in developing Hyderabad and making this as an important capital. Both Telengana and Andhra as different states, would like to own Hyderabad. Hyderabad has stalled in creating new developments in the past few years due to political instability. There were no big developments. This city also has faced numerous threats and few areas are always in red alert. When Hyderabad is owned by both Telengana and Andhra, more problems is likely to be created. It is possible that people from Andhra would move into Telengana as usual and take up positions in Hyderabad. But new developments is most likely to be stalled. Time being the great healer, would help in Hyderabad's cause and brings new developments to happen in future.

Other Views:
Most of the people in Telengana itself also believes that United Andhra Pradesh would do more good than separating it to two states. This will cause more bifurcation in other states, which asks for their new state.

As such, this was never an easy decision to make for Congress. They may have been opportunistic to come up with the announcement just before the election time.

Do comment on your views.

Monday, July 29, 2013

CRISIL Open Offer: Subscribe or Not to subscribe?

CRISIL is the leading credit rating company in India. It researches other companies and gives rating to IPOs, other financial debt and equity instruments. It is completely debt free and is one of the best mid to large cap company one can invest in. It also has a good management team and reporting profits year after year. It has always enjoyed being the pioneer in the industry and had good valuations.

Now, McGraw Hill Asian Holdings would like to increase the promoter shareholding in the company through an open offer priced at Rs. 1210/-. The open offer period is from July 24 to August 6, 2013. So, the price would be stabilized around Rs. 1210/- till the end of the offer period and then goes back to the real valuation from the market. McGraw Hill Asian Holdings currently hold 52.77% and would like to increase another 22% through this open offer.

What does it really mean when a company is making an open offer?
If a company is making an open offer, it actually believes in the business more and would like to invest in its vision more. If companies are having excess cash, they can buy back the outstanding shares.

How does it work out?
People who have the company's shares can apply for the open offer. Based on the number of shares tendered, company will give the open offer price to the qualified shares. If the total number of shares tendered at the open offer price is exactly 22% , all the shares tendered would be given the offer price. If the number of shares tendered is more than 22%, say 44%, one in two shares alone would be given the offer price.

Can I buy now? Is it an arbitrage opportunity?
The current quoting price of the stock is Rs. 1185.15/-. The open offer price is Rs. 1200/-. The difference is Rs. 24.75/-. This seems to be an arbitrage. Yes. There is an opportunity. But how big? If you buy the stock now, you will end up paying a brokerage of 0.5 to 1% based on the broker. It sums up to Rs. 11.85/- . After this, you need to pay tax on the profit. This profit will be added to your income and would be taxed at your tax rate. So, if you are in no tax bracket, you can get Rs. 13/- per share as arbitrage.

There is a catch though. Not all the shares tendered will be taken by the company. If everyone tenders their shares (worst case), only one in two shares will be given the open offer price. And, think of the higher risk. If the price of the stock moves down after the open offer (which is most likely based on the previous open offers from various other companies), you will end up making a bigger loss.

Current shareholding stays at
Promoters: 52.77%
Foreign Institutional Investors: 10.35%
Domestic Institutional Investors: 16.15%
Others (Public) : 20.73%

If the Institutional investors doesn't tender any of their shares, every retail investor who gave his shares would get the open offer price.

The arbitrage opportunity was huge when the announcement of the open offer was made on July 23, 2013. The shares were promptly rose by 20%.

I already have CRISIL shares. Should I subscribe for the open offer?
It really depends on your scenario. The open offer price is better than the secondary market price and this would mean you can make better money by selling to the open offer price. The profit that you make here will be taxed as per your tax slab. This profit will be added as your income. If you stand in more that 10% tax slab and you have bought the shares about a year back, it always works out better to sell it in the Secondary market. This is because, there will be no tax for long term gains as STT is paid in transactions made through the market. So, the additional profit that you get from open offer price is completely wiped off by your taxes.

If you had bought this in less than an year and you fall in 20% tax bracket or less, you need to see how much will be your taxes in both the cases and identify the best case. Hopefully, tendering the shares would make much sense for you here.

CRISIL, as such, is a good share to own. It always have moved from one strong position to another strong position. They have a niche and is a great share to hold. If you want to make use of this open offer opportunity, you can probably sell this now and buy this at a lower price after the open offer.

Let me know your comments and on your decision. All the best.

Tuesday, July 9, 2013

How to find the best engineering college

There are about 520 engineering colleges in Tamil Nadu that are affiliated to Anna University. Most of the parents wants their children to become a doctor or engineer. The counsel ling for all the engineering colleges affiliated to Anna University started from 21-Jun-13 and happening till 26-July-2013 as per the schedule in here

Because of sheer number of colleges and the number of students coming out every year, the engineering stream has completely lost its sheen for those students coming from average colleges. Most of south Indians invest heavily on education of their children. There should be some amount of analysis that should be put in as college is one of the important phase in everyone's life.

Students should understand their needs and check if the college satisfies everything that they are looking for. Some of the important parameters that can be used for analysis is provided below. This is no particular order and the priority differs for each student based on their background.

- Fees
- Placements
- Discipline
- Course
- Accommodation and Travel
- Infrastructure and Facilities
- Professors and Lecturers
- cut-off marks

The cut-off marks along with the list of colleges that was opted by students last year is made available in the link - http://annauniversitybe.info/TNEA-2012/. Please note that there will certainly be some changes this year and this cut-off marks wouldn't repeat in the same way. This will just act as a guide.

Shortlist few of engineering colleges according to the needs mentioned above. Then, interact with the alumni, students and college officials by visiting them in person before the counsel ling starts. The alumni and students of the college can help in giving the right picture of their college. The expectations will be set clear.

There are some engineering colleges offering management quota seats. According to the needs, if one wants to get into a college that is already filled in counsel ling, one can opt for management quota. Here as well, its advisable to meet up with students and their parents to set the expectations right.

Please provide your comments on your experience in getting into the engineering college.