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basant
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   Posted: 20/Jun/2007 at 1:54pm |
Originally posted by tushar
thank you basantji,
I got what you are saying....So essentially the promoters take a termed-bet on the company by issuing themselves warrants...so if the company does well in the next 4-6 quarters they shall en cash those warrants...and if the company doesn't do well, they have nothing to loose!
So basically all this talk of promoter stake being too low is not that solid. Because in the long run the promoters can anytime increase their stake through such means.
A company that is growing at say 60%-80% bottom line can always afford to dilute equity through by issuing warrants to the tune of 5-10% of the total shares almost every year...And yet the promoters can easily and slowly increase their stakes.
Good thing here is that the promoter is willing to take a bet by buying the call option.
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That is the trend normally but some fradulent promoters do issue warrants at deep discount to market price.
Even otherwise warrants at the current market price means a discount because it does not calculate the time value of money. Ideally longer the exercise date higher the premium!
Edited by basant - 20/Jun/2007 at 1:58pm
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smartcat
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Posted: 22/Jul/2007 at 1:33pm |
Originally posted by kulman
In evaluating people, you look for three qualities: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you.---Warren Buffet
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Warren Buffet says management quality is important. Every stock market investment book has a couple of paragraphs on how important it is to analyze the management before making an investment.
Is it really so?
To begin with, what constitutes 'good management' and 'bad management' practices?
Educomp's management practices are not exactly sound, going by this thread. DLF's management is not supposed to be shareholder friendly. But they didn't have much problems collecting close to Rs. 10,000 crores. Subhash Chandra of Zee TV is not exactly an angel and doesn't rank high among management quality, but Zee has given stellar returns in the past 3 years. RELCOM's management is known to bend the rules to suit its requirements - but now it is the 5th largest company in India.
I have never looked at 'management quality' before investing in a stock. I'm comfortable as long as promoter holding is high. The management will not intentionally jeopardize the future of his company when most of his wealth is tied to the growth of the company.
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us121
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Posted: 22/Jul/2007 at 2:53pm |
Originally posted by basant
fine print is whetrher this dilution is happening at below market prices or not. Ideally it should happen at above market price with a 10% downpayment(non refundable) because it is like a call option really. |
Can any one post list of such companies where dilution is made with 10%or more of market price. And also if any knowledge on they having paid money/ part of money in advance. just to know about some examples...
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ABILITY will get u at d top. CHARACTER will retain u at d top
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deveshkayal
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Posted: 22/Jul/2007 at 7:56pm |
I'm comfortable as long as promoter holding is high
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This is the first point my dad looks at when investing...No doubt,he invested in Wipro by the same funda..But management quality is important..Example: BSEL Infra is a cheapest stock in Infra space bcoz of management while IVRCL with just 10% promoter holding is valued at par with Nagarjuna,etc...
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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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basant
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Posted: 22/Jul/2007 at 8:13pm |
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How about Infy with a single digit promoter holding?
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kulman
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Posted: 22/Jul/2007 at 8:47pm |
- While on the subject, L&T has no promoter group as such. After LIC's 19 % holding the largest shareholder with 13 odd % is L&T Employees Welfare Foundation!
- Integrity is a MUST. Otherwise how shareholder's wealth would get created? There are enough examples of siphoning off money for individual benefits.
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Life can only be understood backwards—but it must be lived forwards
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smartcat
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Posted: 22/Jul/2007 at 10:31pm |
INFY, L&T, ICICI Bank - all these are multi-billion dollar market cap companies. If the management/promoters/board has managed to get the company so far, they are obviously doing something right. No point in staying away from such mega-cap companies just because promoter holding is low.
Now, if the market cap is less than, say Rs. 5000 crores or sales is less than, say Rs. 500 crores, only then I would look at promoter holding. Teledata quickly comes and goes right out of the window.
Perhaps, management quality/promoter holding issues matter only for small cap companies. For the rest, business fundamentals should have the maximum weightage.
Unfortunately, very little information will be available in public domain regarding small cap companies and its management. Government owned website http://www.watchoutinvestors.com is a pretty good idea though.
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India_Bull
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Posted: 22/Jul/2007 at 4:48am |
Excellent views smartcatjee,
I am also in the same opinion that holding is important criteria for small companies, needless to say high promoter holdings makes one more comfortable.
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India_Bull forever Bull !
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