Lehman Brother Files for Chapter 11 Bankcrupcy

Lehman Brothers has filed for Chapter 11 Bankcruptcy after Barclays and Bank of America abandoned talks to buy the company.

Lehman said that no broker-dealer subsidiaries will be included in bankcruptcy filing. It added that it is exploring sale of its broker-dealer operations. It further said that it is in advanced talks with potential buyers for investment management division.

Lehman added that the customers of the company may continue to trade/take action with respect to their accounts.

The Saga of Lehman

Only a day ago, the head of Lehman Brothers, the beleaguered investment bank, sought to assure Wall Street that the firm could survive on its own.

But those assurances seemed empty on Thursday as Lehman’ share price went into another free-fall, declining 41 percent, to $4.22. Lehman, which had been negotiating to sell its prized investment management division, is now seeking to sell the entire company. Fed officials have hinted that they would be more receptive to a bank buying Lehman, rather than a private equity firm.

Watch Crude Sinking to 80$/bbl

I think Crude will sink to 80 USD per barrel in coming days... Watch it Out....

What’s China doing differently than India?

Dear Friends, I am writing this very small article just to mention some major differences between the Indian and Chinese economy. I tried to be very simple and straight-forward in this article.

The Key Factors:
1) The Chinese economic model has been screaming “Foreign Direct Investment” and “free enterprise”.

2) The Chinese export market is mostly funded by Foreign Direct investments. Majority of the export manufacturers have foreign investments – a large portion of it coming from the Chinese population living abroad!

3) China has empowered its local authorities to clear foreign investment proposals. This makes the process faster than that in India, where RBI still has a major role to play with respect to inflow of foreign funds.

4) India’s policy to protect private domestic players is in contrast to China’s ‘free enterprise’ policy.

5) India hasn’t been as successful in tapping the potential of NRI funds.

6) Banks in China furnish loans at comparatively low interest rates to encourage entrepreneurship.

7) China has channelized its economic policies on manufacturing growth as well as the services industry. For example, the growth in the hardware manufacturing has fueled demand for related software services. One must note here that the cheap and hardworking, disciplined labor from China poses a threat to India’s software dreams!

8) The infrastructure development in China has also been overwhelming. The rising skyline of Shanghai is a result of a decade of hard work and constant labor. The Chinese economic policy has been protective of its State ventures. Most of the infrastructure development in China has been undertaken by the public sector.

REPORT ON GREMACH INFRA – Investors can take this as Buy Call

Dear investors, I am giving buy call on gremach infra for a medium to long term (2 to 3 years). We can see multifold returns in this counter. I am writing this article with all me consensus
Gremach’s foray into the oil rig business and the robust demand prospects suggest strong growth. GIEPL’s foray into oil rigs holds immense potential

Sources:
www.bseindia.com , www.money.rediff.com , www.gremach.com

CMP: 80

Year High: 504

Year Low: 72

PE: 3.28

EPS: 24.43 (March 08)

Expected EPS: 30 (FY 09)

Sales: 102.36 Crores (June 08)

Equity MCAP: 127.76

Return on average equity ~ 35%

Debt/equity: 0.6

Net Operating Income per share: Rs 135 (March 07)… amazing



Some Key factors that are favoring gremach to become a money machine:

Drilling rigs
Addition of four onshore drilling rigs with plans to add36 more in three-four years, acquisition of controlling stake in coal mines in Mozambique and the booming market for equipment rentals suggest good earnings prospects. There is a global shortage and crisis of hard coking coal and this will add huge value to the profitability of the Company.

Demand-supply mismatch
A demand-supply mismatches resulting in rising oil rig rentals. Rising rentals and better utilization levels have shrunk the average payback period for oil rigs.

NEPL
The increasing number of onshore blocks in each and every phase of the New Exploration License Program (NEPL) points to strong demand prospects. Drilling costs account for 20-25 per cent of the cost of developing an oil well and are showing an increasing trend in the earnings of company. Great factor to consider

MOU
Gremach has signed a MOU (memorandum of understanding) with Baoji Oilfield Machinery (BOMCO), subsidiary of China National Petroleum Corp for the delivery of 40 rigs, which includes 36 onshore and four offshore rigs

Infra-Equipment business- rose exponentially
The rental business of infra equipment has rose exponentially due to back of firm demand..

Entering into Coal Business
Gremach has taken a 75 per cent controlling stake in 11 coal mines in Mozambique. This region falls in the Karoo basin, which is recognized as a prime hard coking coal area in Africa

Gremach has incorporated a Singapore based SPV named Petrogrema Energy Pte Ltd. Gremach shall be making investment up to USD One Billion considering the vast global market potential in oil drilling business (subject to requisite RBI approval). This business proposal is considered highly profitable, with projected IRR 35% in the light of huge market demand for on shore and off shore drilling rigs considering unprecedented rise in crude prices. Infact, rig rental day rates for Off-Shore Rigs have risen by 13%, averaging to around $ 3 to 5 lacs per day. In the case of on shore rigs the payback period is estimated at 3 years. Several reputed Banks and other financial institutions have evinced keen interest to fund the above business Proposal / Acquisition.


The Financial Data - Impressive
Net Sales of gremach has grown from 347.38 million in quarter June,07 to 1023.62 million in quarter June, 08. Net profit has risen from 40.55 million in quarter June,07 to 121.31 million in quarter June,08. EPS for the same period has jumped from Rs. 2.66 to Rs. 7.97 in the current quarter. Sequentially, the EPS has grown from Rs. 6.16 in quarter March, 08 to Rs. 7.97 in quarter June,08. Net Profit margin has also gone up both sequentially as well as quarter on quarter.
Year High ~ Rs 500
Current CMP ~80


See its Client List…….. Hmmm it’s quite impressive…
Larsen and Toubro Ltd.
VRCL Infrastructure & Projects Ltd
Gammon
JMC Projects Ltd.
Punj Lyod
LG E & CD – NCC JV
ACC Ltd.
Reliance Eng. Assoc. Pvt.
Madhucon Projects
Nagarjuna Constructions Ltd
Hindustan Cons. Co. Ltd.
Simplex Infrastructure Ltd.
Grasim
UP State Bridge Corp.. Ltd.
IRCON International Ltd. (Govt.)
Afcons

The most esteemed infra players are the clients of Gremach. In my views its really impressive clientele list.


Shareholding pattern --- Good Holding by Promoters and MFs / Banks
Promoters: 55.68%
FII/MF/Banks: 16.36%
Public: 44.32%



Risks:
Delay in Delivery of rigs or drilling projects
Downfall in rigs rental


I would like to play on this counter for long term… remember it takes years to have multifold returns….

BOOK BUILDING PROCESS – A Must Read For Every Investor

BOOK BUILDING PROCESS – A Must Read For Every Investor

Dear Readers, pls note that this article is for novice investors, thos who dont know the basic terminologies of market. I have tried to simplify the term Book Building.

I was surprised this year when one of friend was filling up the IPO of Reliance Power. He told me that he is unaware of the term “Book Building” though he listens to this term 100 times a day in advertisements and newspapers.

My this article is for those investors who don’t know the Book Building process. I have taken most the part of this article from www.bseindia.com

Book building acts as scientific method through which a consensus price of IPOs may be deter-mined on the basis of feedback received from most informed investors who are institutional and corporate investors like, UTI, LICI, GICI, FIIs, SFCI etc. The method helps to make a correct evaluation of a company’s potential and the price of its shares.

Book Building is essentially a process used by companies raising capital through Public Offerings-both Initial Public Offers (IPOs) or Follow-on Public Offers ( FPOs) to aid price and demand discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the issuer. The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the bid closure based on the demand generated in the process.

The Process:
1) The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'.

2) The Issuer specifies the number of securities to be issued and the price band for the bids.

3) The Issuer also appoints syndicate members with whom orders are to be placed by the investors.

4) The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction.

5) The book normally remains open for a period of 5 days.

6) Bids have to be entered within the specified price band.

7) Bids can be revised by the bidders before the book closes.

8) On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels.

9) The book runners and the Issuer decide the final price at which the securities shall be issued.
Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share.

10) Allocation of securities is made to the successful bidders. The rest get refund orders.

Guidelines for Book Building
Rules governing Book building are covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000.

BSE's Book Building System
BSE offers a book building platform through the Book Building software that runs on the BSE Private network.
This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS.
The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line real-time for the entire bidding period.
In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals.