Oil India IPO overbid 1.41 times: Should you subscribe?

Oil India Ltd. (OIL), the second largest oil and gas company in India, opened its initial public offering (IPO) of 26.45 lakh equity shares of face value Rs 10 each for subscription today. Its issue price has been fixed at Rs 950-1050 per equity share and it will raise around Rs 2,512 - Rs 2,777 crore.

It has been subscribed 1.41 times so far and has received bids for 3.72 crore shares as against issue size. Till yesterday, its QIB (qualified institutional investors) portion subscribed 2.3 times.

Moneycontrol.com conducted a poll among market experts to find out if you should subscribe to the issue or not. While most experts say 'subscribe', SP Tulsian and Sajeev Dhawan say 'avoid'. Moreover, those who advice to subscribe believe that this will be a long-term bet.

Source: MoneyControl

Frontliners to rally further, midcaps won't: Morgan Stanley

Narayan Ramachandran of Morgan Stanley says that the industrial production (IIP) data as well as economic indicators are showing positive signs, which is helping the markets move higher. "They have broken the upside range," he says, adding that the markets can rally another 10-15% from here. However, he feels that the mid-caps may not outperform going forward.
Ramachandran says he would not buy commodities for the long-term. "Gold remains hedge in every portfolio."

Source: MoneyControl

Buy United Phosphorous, target of Rs 225: Sharekhan

Sharekhan has maintained its buy rating on United Phosphorous with a target of Rs 225 in its September 7, 2009 research report.

"We have fine-tuned our earnings estimates to factor in the details from the annual report of the company. At the current market price the stock trades at 11.0x and 9.1x its FY2010E and FY2011E earnings respectively. We maintain our 'Buy' recommendation on the stock with the price target of Rs 225," says Sharekhan's research report.

Oil India — IPO: Invest at cut-off

Oil India (OIL) may not be in the same league as Oil and Natural Gas Corporation (ONGC) in terms of its size of business, extent of reserves or scale of operations.

Where it scores over its big brother though is in its ability to show a growth trend in crude oil production and in adding to its reserves, more than what it produces every year.

OIL’s offer at Rs 950-1050, is at a fair valuation that compares favourably with its peers on most parameters. The offer band is at a price-earning multiple (PEM) of 9-10 times the 2008-09 earnings. ONGC has a valuation of 16. OIL also compares favourably on price-to-book value terms with a ratio of 2-2.2; ONGC’s is at 3.2.

Unlike other recent IPOs, OIL has left something on the table for investors. Investors can subscribe at the cut-off price and hold the stock for the medium-term.

Source: thehindubusinessline

Analysts bullish on full subscription of OIL IPO on Day 1

With investors looking bullish on public sector undertakings, the initial public offering of Oil India -- the second state-run to firm to hit the capital market this year -- starting tomorrow is expected to elicit good response, analysts said.

OIL has fixed a price band of Rs 950-1,050 per share for the IPO, which is expected to raise up to Rs 4,982 crore.

"Despite the aggressive pricing, the public offer of OIL will sail through comfortably and would be fully subscribed within hours of opening as investors still want to invest in PSU IPOs," Taurus Mutual Fund Managing Director R K Gupta said.

The OIL IPO, which would close on September 11, comes a month after the successful offering by hydroelectric power generator NHPC. The shares of OIL would be listed on the bourses on September 29.

The IPO of state-run hydro-power company NHPC received robust response from investors with the issue getting subscribed nearly 24 times. The company raised over Rs 6,000 crore from the IPO, marking it as the second biggest public offer after Reliance Power last year.

"There is demand in the market and the government is trying to capitalise on that... State-run companies have a good track record of investor returns and they want to raise as much money possible," Gupta said.

Both retail investors and institutional players would be betting more on OIL, he noted.

According to analysts, aggressive pricing of the government IPOs would gradually lead to investors taking a cautious stance before investing in them in future.

"There is not much left for the investors. These days even PSUs are not leaving money on table for retail investors and in due course of time the huge demand generated will also come down," SMC Capitals Equity Head Jagannadham Thunuguntla said.

Further, the listless debut of NHPC and Adani Power on the bourses, seem to have dampened the aggressiveness in the IPO financing market.

"Post the disappointing debut by NHPC on the bourses the IPO financiers were forced to pay the interest cost on the borrowing out of their pocket. This has somewhat dented their investment spirit," Thunuguntla added.

Source: EconomicTimes

Did Bernanke save US from another Great Depression?

The causes of last year's financial upheaval remain hotly debated, but many analysts say a swift and massive response by US authorities may have averted another Great Depression.

A year after the collapse of Lehman Brothers and a near-meltdown of the financial system, a fragile recovery appears to be underway that will put a bookmark on the worst crisis of the post-World War II era.

Perhaps the most important player in the crisis was Federal Reserve chairman Ben Bernanke, a scholar of the 1930s determined to avoid a repeat of that economic devastation.

"The Fed's policies averted a second Great Depression," says Joseph Brusuelas, at Moody's Economy.com.

"Under Bernanke's leadership, the Fed's unorthodox response to the crisis is without precedent. It has slashed the policy rate to zero and flooded the financial system with liquidity."

Brusuelas said the Fed's series of liquidity programmes "slowly rebuilt confidence in the banking system" and helped unfreeze credit markets to help revive economic activity.

Jeffrey Sachs, economist at Columbia University, said that at the time of the Lehman collapse, "a depression seemed possible," but that now "the storm has broken" as a result of the exceptional action of the Fed and other central banks.

"Months of emergency action by the world's leading central banks prevented financial markets from crashing," Sachs writes.

Diane Swonk, chief economist at Mesirow Financial, said that the Fed and Bernanke "performed unbelievably well in the height of the crisis."

"He reacted so quickly, he was doing things creatively," she said. "Once Lehman went there was nowhere to go but down, the question was how far we were going to fall."

Yet Bernanke does not escape his share of blame for the crisis, both for his role as a Fed governor under then-chairman Alan Greenspan from 2002-2005 and after taking the helm at the central bank in early 2006 as the crisis was unfolding.

Economist Allan Meltzer at Carnegie Mellon University said the Lehman collapse represented a mistake of historic proportions.

"Allowing Lehman to fail without warning is one of the worst blunders in Federal Reserve history," he wrote in a Wall Street Journal essay.

Ahead of the crisis, Bernanke "consistently downplayed the danger signs that others brought to his attention," said John Browne, senior market strategist at Euro Pacific Capital.

Source: EconomicTimes

Bartronics India: Buy

Investments with a two-three year perspective can be considered in the shares of Bartronics India, considering the company’s strong order book position, increasing Indian footprint on the back of large government deals and prospects of winningmore orders over the next few years.

At Rs 166, the stock trades at 5-6 times its likely 2009-10 per share earnings. As Bartronics is seeing high growth in revenues and profits and, despite being in a hardware-intensive business, has consistently managed an operating profit margin of over 25 per cent and net profit margin of close to 15 per cent, there may be scope for further capital appreciation.

Between 2006-07 and 2008-09, the company has seen its revenues and operating profits grow nine-fold. It has increased its revenues from India to nearly 65 per cent in recent times from about 30 per cent a couple of years ago. This was made possible by growing presence in government deals, where heavy technology spends are happening. The company also delivers smart cards (mostly SIM cards) to telecom operators, again a high-growth area.

A few quarters ago, Bartronics secured a Rs 5,000-crore deal from the “Aapke Dwar” project of the Municipal Corporation of Delhi spread over nine years. Revenues are set to kick in from October with the launch of 300 kiosks in the first phase. The deal also confers on Bartronics the right to advertising revenues from these kiosks. With the Commonwealth Games set to begin in Delhi in 2010, the scope for substantial advertising revenues makes this deal even more lucrative. The company has tied up with banks for the Rs 750 crore capital expenditure needed for this deal. This could step up interest costs and strain margins. But with interest coverage of over six times, the burden of servicing debt may not be too heavy.

Apart from this deal, the company has an order book worth Rs 600 crore as of June 2009, to be executed over the next year. A large part of this has come from its high-margin RFID solutions business. Armed with key technical certifications, Bartronics hopes to win deals from the Delhi Metro and Indian Railways, with both entities set to increase technology spends. The company has several deal wins from State governments and Government projects in Singapore. Another target area is animal tagging, where the company has the necessary certification.

Source: thehindubusinessline