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First Global -Private Sector Bank Stocks

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Topic: First Global -Private Sector Bank Stocks
Posted By: chimak10
Subject: First Global -Private Sector Bank Stocks
Date Posted: 14/Mar/2009 at 5:54pm
First Global
Why are India’s Private Sector Bank Stocks tanking?

ICICI Bank has lost 45% in the past 60 days. Axis Bank is down 43%. HDFC Bank is down nearly 25%. What’s going on here? Well, what’s going on is that the market is getting really nervous about the quality of their loan books. Remember, Indian private sector banks have been on a tear last few years. Great asset growth. Great earnings growth.

Precisely the kinds of things that make me lose sleep. I just hate fast growing banks. I operate with the simple-minded belief that any bank that does that comes to grief, sooner or later. Banking is arguably the dumbest business known to mankind, and a fast growing bank is the dumbest beast in the jungle.

The only model of banking that makes sense to me is a small, focused, narrow footprint bank, where the CEO knows every borrower, runs a dull, boring business that trades at book value.

Any other model will self-destruct at some point. Citigroup exemplifies this self-destruct model, having lived on the edge for over 20 years. It survived its last brush with bankruptcy thanks to Alwadeed, who must surely rank as an even worse investor than what Warren Buffet has lately become.

Indian Private Sector Banks have grown on all fronts last five years (the same 5-year syndrome again!). But surely this breakneck growth must have given birth to some warts that will show up when the cycle turns down?

For sure. First Global’s Banking Analysts highlighted this risk in a
report “Banking: Food for Thought - How serious is the threat to the loan book of Indian private banks? (Sector downgrade)” dated November 28, 2008.

The key points that were highlighted in that note (which also downgraded all the major Private Sector Banks like ICICI, Axis and HDFC Bank): “Exposure to real estate alone was 175% of Net Worth for ICICI Bank, 180% for Axis
Bank and 88% for HDFC Bank…and this was after the serial fund-raisings by all of them..…plus there was significant exposure to other cyclicals like steel, textiles, et al.

Unsecured loans were (and probably still are) are between 112-165% of tangible networth. Total Sensitive Sector exposure + Unsecured lending, of these banks is: 305% of Tangible Net Worth for ICICI Bank; Axis Bank has the same ratio at 316% of Tangible Net Worth; and HDFC Bank, 292% of
Tangible Net Worth. Sensitive Sectors are Real Estate and related sectors + Capital Markets”.

Mind you, this ratio excludes exposure to other troubled sectors like Gems & Jewellery, Textiles, Steel, etc. Do the math or just send us a mail for our November report. It does not make for pleasant reading, though, I must warn you.

The above ratios are the key to understanding why we turned outright bearish on these names a while back. Looking at the above numbers, our take was that there was no way the lofty 2-4x Price/Book of these banks would last. Their book values will take some hits in the coming months, and that is precisely what the market is saying through its price action on these names. So don’t
start getting carried away by the usual sell-side rubbish about how attractive these banks are at these P/BVs.

The Other Important thing to remember
When folks start talking about the security of the Indian banking system (and of course, it is fairly secure…so far), and how it weathered the ’98 Asian crisis so well, bear in mind one very important thing: back in ‘90s, there were virtually no Private Sector Banks of any size or consequence around:

HDFC Bank was barely 2 years old at the time of the Asian crisis, Axis didn’t exist, ICICI Bank was still a development bank. It is since 2002-03, that Private Sector banking has become the dominant force in Indian Banking, on an incremental basis: their business has grown at CAGR of 34% last five years, vs 25% for the entire Indian Banking industry.

And we all know Private Sector Banks take far higher risks than state-owned banks. This is precisely my worry about India’s banking situation: in the ‘90s, the state-owned banks ran relatively conservative banks. In this decade, the risk-meter has swung more to the right, what with the Private Sector Banks’ pressure of quarterly numbers, growth, and the desire to impress the Street. None of which, generally speaking, makes for sound banking practice.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.
= = = = = = = = = = = = = = = = = = = = = = = = = = =

I have no idea on this just posting......... is FIRST GLOBAL IN BEAR CARTEL?


Replies:
Posted By: Vivek Sukhani
Date Posted: 14/Mar/2009 at 6:13pm
Originally posted by chimak10

First Global
Why are India’s Private Sector Bank Stocks tanking?

ICICI Bank has lost 45% in the past 60 days. Axis Bank is down 43%. HDFC Bank is down nearly 25%. What’s going on here? Well, what’s going on is that the market is getting really nervous about the quality of their loan books. Remember, Indian private sector banks have been on a tear last few years. Great asset growth. Great earnings growth.

Precisely the kinds of things that make me lose sleep. I just hate fast growing banks. I operate with the simple-minded belief that any bank that does that comes to grief, sooner or later. Banking is arguably the dumbest business known to mankind, and a fast growing bank is the dumbest beast in the jungle.

The only model of banking that makes sense to me is a small, focused, narrow footprint bank, where the CEO knows every borrower, runs a dull, boring business that trades at book value.

Any other model will self-destruct at some point. Citigroup exemplifies this self-destruct model, having lived on the edge for over 20 years. It survived its last brush with bankruptcy thanks to Alwadeed, who must surely rank as an even worse investor than what Warren Buffet has lately become.

Indian Private Sector Banks have grown on all fronts last five years (the same 5-year syndrome again!). But surely this breakneck growth must have given birth to some warts that will show up when the cycle turns down?

For sure. First Global’s Banking Analysts highlighted this risk in a
report “Banking: Food for Thought - How serious is the threat to the loan book of Indian private banks? (Sector downgrade)” dated November 28, 2008.

The key points that were highlighted in that note (which also downgraded all the major Private Sector Banks like ICICI, Axis and HDFC Bank): “Exposure to real estate alone was 175% of Net Worth for ICICI Bank, 180% for Axis
Bank and 88% for HDFC Bank…and this was after the serial fund-raisings by all of them..…plus there was significant exposure to other cyclicals like steel, textiles, et al.

Unsecured loans were (and probably still are) are between 112-165% of tangible networth. Total Sensitive Sector exposure + Unsecured lending, of these banks is: 305% of Tangible Net Worth for ICICI Bank; Axis Bank has the same ratio at 316% of Tangible Net Worth; and HDFC Bank, 292% of
Tangible Net Worth. Sensitive Sectors are Real Estate and related sectors + Capital Markets”.

Mind you, this ratio excludes exposure to other troubled sectors like Gems & Jewellery, Textiles, Steel, etc. Do the math or just send us a mail for our November report. It does not make for pleasant reading, though, I must warn you.

The above ratios are the key to understanding why we turned outright bearish on these names a while back. Looking at the above numbers, our take was that there was no way the lofty 2-4x Price/Book of these banks would last. Their book values will take some hits in the coming months, and that is precisely what the market is saying through its price action on these names. So don’t
start getting carried away by the usual sell-side rubbish about how attractive these banks are at these P/BVs.

The Other Important thing to remember
When folks start talking about the security of the Indian banking system (and of course, it is fairly secure…so far), and how it weathered the ’98 Asian crisis so well, bear in mind one very important thing: back in ‘90s, there were virtually no Private Sector Banks of any size or consequence around:

HDFC Bank was barely 2 years old at the time of the Asian crisis, Axis didn’t exist, ICICI Bank was still a development bank. It is since 2002-03, that Private Sector banking has become the dominant force in Indian Banking, on an incremental basis: their business has grown at CAGR of 34% last five years, vs 25% for the entire Indian Banking industry.

And we all know Private Sector Banks take far higher risks than state-owned banks. This is precisely my worry about India’s banking situation: in the ‘90s, the state-owned banks ran relatively conservative banks. In this decade, the risk-meter has swung more to the right, what with the Private Sector Banks’ pressure of quarterly numbers, growth, and the desire to impress the Street. None of which, generally speaking, makes for sound banking practice.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.
= = = = = = = = = = = = = = = = = = = = = = = = = = =

I have no idea on this just posting......... is FIRST GLOBAL IN BEAR CARTEL?
 
Wondereful post, Chiak10 Sir.......
 
Whether FG belongs to Bull cartel or Bear cartel or Pig cartel or for that matter any cartel, is something which I dont know, but this particular article makes wonderful sense......thanks for sharing


-------------
Jai Guru!!!

Posted By: jain208
Date Posted: 14/Mar/2009 at 7:44pm
Originally posted by chimak10

First Global
Why are India’s Private Sector Bank Stocks tanking?

ICICI Bank has lost 45% in the past 60 days. Axis Bank is down 43%. HDFC Bank is down nearly 25%. What’s going on here? Well, what’s going on is that the market is getting really nervous about the quality of their loan books. Remember, Indian private sector banks have been on a tear last few years. Great asset growth. Great earnings growth.

Precisely the kinds of things that make me lose sleep. I just hate fast growing banks. I operate with the simple-minded belief that any bank that does that comes to grief, sooner or later. Banking is arguably the dumbest business known to mankind, and a fast growing bank is the dumbest beast in the jungle.

The only model of banking that makes sense to me is a small, focused, narrow footprint bank, where the CEO knows every borrower, runs a dull, boring business that trades at book value.

Any other model will self-destruct at some point. Citigroup exemplifies this self-destruct model, having lived on the edge for over 20 years. It survived its last brush with bankruptcy thanks to Alwadeed, who must surely rank as an even worse investor than what Warren Buffet has lately become.

Indian Private Sector Banks have grown on all fronts last five years (the same 5-year syndrome again!). But surely this breakneck growth must have given birth to some warts that will show up when the cycle turns down?

For sure. First Global’s Banking Analysts highlighted this risk in a
report “Banking: Food for Thought - How serious is the threat to the loan book of Indian private banks? (Sector downgrade)” dated November 28, 2008.

The key points that were highlighted in that note (which also downgraded all the major Private Sector Banks like ICICI, Axis and HDFC Bank): “Exposure to real estate alone was 175% of Net Worth for ICICI Bank, 180% for Axis
Bank and 88% for HDFC Bank…and this was after the serial fund-raisings by all of them..…plus there was significant exposure to other cyclicals like steel, textiles, et al.

Unsecured loans were (and probably still are) are between 112-165% of tangible networth. Total Sensitive Sector exposure + Unsecured lending, of these banks is: 305% of Tangible Net Worth for ICICI Bank; Axis Bank has the same ratio at 316% of Tangible Net Worth; and HDFC Bank, 292% of
Tangible Net Worth. Sensitive Sectors are Real Estate and related sectors + Capital Markets”.

Mind you, this ratio excludes exposure to other troubled sectors like Gems & Jewellery, Textiles, Steel, etc. Do the math or just send us a mail for our November report. It does not make for pleasant reading, though, I must warn you.

The above ratios are the key to understanding why we turned outright bearish on these names a while back. Looking at the above numbers, our take was that there was no way the lofty 2-4x Price/Book of these banks would last. Their book values will take some hits in the coming months, and that is precisely what the market is saying through its price action on these names. So don’t
start getting carried away by the usual sell-side rubbish about how attractive these banks are at these P/BVs.

The Other Important thing to remember
When folks start talking about the security of the Indian banking system (and of course, it is fairly secure…so far), and how it weathered the ’98 Asian crisis so well, bear in mind one very important thing: back in ‘90s, there were virtually no Private Sector Banks of any size or consequence around:

HDFC Bank was barely 2 years old at the time of the Asian crisis, Axis didn’t exist, ICICI Bank was still a development bank. It is since 2002-03, that Private Sector banking has become the dominant force in Indian Banking, on an incremental basis: their business has grown at CAGR of 34% last five years, vs 25% for the entire Indian Banking industry.

And we all know Private Sector Banks take far higher risks than state-owned banks. This is precisely my worry about India’s banking situation: in the ‘90s, the state-owned banks ran relatively conservative banks. In this decade, the risk-meter has swung more to the right, what with the Private Sector Banks’ pressure of quarterly numbers, growth, and the desire to impress the Street. None of which, generally speaking, makes for sound banking practice.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.
= = = = = = = = = = = = = = = = = = = = = = = = = = =

I have no idea on this just posting......... is FIRST GLOBAL IN BEAR CARTEL?


Nice piece!!!

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=======================================
The more it changes, the more it’s the same thing.

Posted By: kanagala
Date Posted: 14/Mar/2009 at 9:24pm
Originally posted by jain208



Nice piece!!!


Very good article. Fair play to FG. They are making the same arguments about pvt banks from the beginning of 2008.
Does it mean that  one should not invest in Banking stocks? Banking still looks like a very scalable business in India. These stocks are available at reasonable levels.?


-------------
While one person hesitates because he feels inferior, the other is busy making mistakes and becoming superior.

Posted By: Hitesh Shah
Date Posted: 14/Mar/2009 at 9:39pm
Originally posted by kanagala

Originally posted by jain208



Nice piece!!!


Very good article. Fair play to FG. They are making the same arguments about pvt banks from the beginning of 2008.
Does it mean that  one should not invest in Banking stocks? Banking still looks like a very scalable business in India. These stocks are available at reasonable levels.?


See, the problem is that banks are trying to do more than basic banking in order to produce "growth". I don't say that one should NOT invest in banking stocks, but having a portfolio concentrated in the financial sector may be imprudent for most investors.

Further, the point of being available at reasonable levels  raises the issue of false anchoring.





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Posted By: deveshkayal
Date Posted: 14/Mar/2009 at 9:59pm
I have completely opposite view of FG. Major Real-estate companies like HDIL, Parsvanath, Sobha Developers, Purvankara have all taken loans from Public sector banks and are now undergoing through restructuring process. I think FG analysts dont read business newspapers. Deepak Parekh has been bearish on real-estate since two years. ICICI's lending to property developers have slowed considerably since the start of FY09. Private Banks has 2-3x collateral securities against loan to property developers.

Anyway next two quarters results will distinguish men from the boys!


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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

Posted By: kanagala
Date Posted: 14/Mar/2009 at 10:02pm
Originally posted by Hitesh Shah

Originally posted by kanagala

Originally posted by jain208



Nice piece!!!


Very good article. Fair play to FG. They are making the same arguments about pvt banks from the beginning of 2008.
Does it mean that  one should not invest in Banking stocks? Banking still looks like a very scalable business in India. These stocks are available at reasonable levels.?


See, the problem is that banks are trying to do more than basic banking in order to produce "growth". I don't say that one should NOT invest in banking stocks, but having a portfolio concentrated in the financial sector may be imprudent for most investors.

Further, the point of being available at reasonable levels  raises the issue of false anchoring.

They are available at reasonable levels based on the each stock historic high/low BV multiples. It is not false anchoring. It is based on the numbers i have looked at. I am not saying they are at screaming buy levels. FG wrote this article at the beginning of 2008.

You are right. One should not concentrate on Financial sector. It is very complicated and risky for normal investors.



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While one person hesitates because he feels inferior, the other is busy making mistakes and becoming superior.

Posted By: Hitesh Shah
Date Posted: 14/Mar/2009 at 11:05pm
Originally posted by deveshkayal

....Private Banks has 2-3x collateral securities against loan to property developers.
....


Devesh, any idea what is the nature of the collateral?


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Posted By: Hitesh Shah
Date Posted: 14/Mar/2009 at 11:09pm
Originally posted by kanagala

....
They are available at reasonable levels based on the each stock historic high/low BV multiples. It is not false anchoring. It is based on the numbers i have looked at. I am not saying they are at screaming buy levels. FG wrote this article at the beginning of 2008.
....


The FG piece we're talking about (Chimak's post) seems to be quite recent and not at the beginning of 2008.

What is a genuine or a false anchor is clearly a subjective call but historic high/low BV multiples are not beyond being false anchors.


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Posted By: basant
Date Posted: 14/Mar/2009 at 7:39am
If Private Banks fail then the PSU stocks which First Global  has been recomending for long will go down the hole as well. Sometimes good writing skills should be distinguished from smart intellect and probably these are one of those times.
 
One cannot be ultra bullish on PSU stocks and ultra bearish on private Banks at the same time after all they both are  catering to the same market place. So one could be bearish on Banks as a place but bearish on one segment and bullish on another is something that really makes my mind ring twice.
 
The only place where the CEO  knows each borrower personally is the village money lender maybe that model impresses him but I am not in that camp.
 


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: arunshah2k
Date Posted: 14/Mar/2009 at 9:05am
And add to that the article assumes that HDFC Bank and Axis Bank and other private banks lent indiscriminately without doing a profile check of borrowers and their repayment capability. The article indirectly questions the processes of these banks which must have been strictly overlooked by the management.

I myself had taken two home loans - one with ICICI and Abn Amro, I dont think it was a cake walk getting the loans approved/disbursed.

I had a hard time in getting second loan approved with Abn Amro as they felt I would have repayment issues Wink

Now, HDFC is lending since past 30 years, does its CEO know its borrowers?

Posted By: Hitesh Shah
Date Posted: 14/Mar/2009 at 10:23am
Originally posted by basant

If Private Banks fail (1) then the PSU stocks which First Global  has been recomending for long will go down the hole as well. Sometimes good writing skills should be distinguished from smart intellect and probably these are one of those times.
 
One cannot be ultra bullish on PSU stocks (2) and ultra bearish on private Banks at the same time after all they both are  catering to the same market place. So one could be bearish on Banks as a place but bearish on one segment and bullish on another is something that really makes my mind ring twice.
 
The only place where the CEO  knows each borrower personally is the village money lender maybe that model impresses him but I am not in that camp (3).
 


I don't follow FG in detail, but ...

  1. In the article in question, they do not claim that private banks will fail.
  2. Again, the article doesn't show ultra-bullishness on PSU stocks.
  3. Agreed!

Incidentally, I currently hold Axis Bank, HDFC Bank, Andhra Bank, SBI, & Bank of Maharashtra as 8.7% of my current direct equity exposure. That's why I'm interested in this topic Big%20smile



-------------

Posted By: chimak10
Date Posted: 14/Mar/2009 at 10:39am
i got the full report just few hours back................well the report is dated 12 march 2009

here is the rest of the report......

The Azhar Syndrome

The Occasional that talks sense... most of the time
(March 12, 2009)
By: Le Grand Fromage
Email: [email protected]


Sometimes we get what we wish for, and then we get the rest of our lives to repent.


This is precisely what has happened to India.
This country has craved a bull market since the day a few Gujus got together and formed the
Bombay Stock Exchange under a tree (actually, that’s probably a charitable description. More likely,
they formed it in a slum). Since then, this country has lived on in the hope that it will get a secular
bull market, akin to what the US got between 1982 and 2000. And intermittently, it did get bull
markets…short, sharp ones, that enriched no one but the brokers. But nothing ever got even close to
the US bull market. All of us sell-side low lives sold the mythical India story to dumb foreigners
through the ‘90s, gobbled up their dollars at Rs.31.37/$, got them to buy loads of rubbish that
miraculously turned more illiquid than molasses come a mini-bear market so that the foreigners
could never take back the dollars they had brought in. But the broad bull market never came.


Then came the 2003-2007 bull run. And that ruined the country.


This bull market inflated dumb promoters to God-like status. It made mediocre fund managers
become stars. It made below-mediocre sell-siders become ace stock-identifiers. It made the fiscal
deficit nearly go away, however illusorily. It made even lowly back office clerks become Bloomberg
operators at JP Morgan’s outsourcing units, getting in a month what they were getting in a year, so
tight was the market for Bloomberg operators.


MBA graduates joined their first jobs, with the laser-like clarity that the first task they needed to get
accomplished, was to shoot off their resumes to all the other wannabe securities firms planning IPOs.
IIM graduates shamelessly played one company off another to get $250 k joining packages from
Lehman and like firms. The MBA institutes dutifully instilled the virtues of greed and avarice in
their wards. Not that they needed to do much, for their wards had been coached into these virtues
from childhood by their middle-class parents from Phagwara, who had never driven anything better
than a beat up Ambassador. “Puttar, jitney paise mile, kam hai. Yaad rakhna, tere baap ne bahut
mehnat karke tujhe padhaya. Ab, jaakar phatte chak de”: would be the mom’s sage advice (Son,
money is everything. Remember, your father worked really hard to put you through MBA. Now, go
and grab the maximum you can get”). With such solid middle class values deeply ingrained, young
MBA kids ran amuck. And this led to the crazy spectacle of the recruiter actually being a person who
was getting less money than the recruitee. There was simply no fairness in the world back then. But
fairness is back. IIM graduates are being hired in dozens by state-owned Union Bank of India. Serves
the losers right. One only hopes they don’t turn Union Bank into Lehman.

In the bull market, promoters dreamt up grandiose businesses. Did silly acquisitions. Bid for
nonsensical projects. And then went and poached “talent” from competitors at salaries that made
Wall Street compensation look distinctly Cleveland-ish.


It was crazy, and just plain out of control. All that is over, and isn’t coming back for a while to come.
Thank God for that.

But it is hurting: the fact that one year you were in the Forbes 400 Richest List, and now, you will
more likely make the List of 400 Most Indebted Promoters. As Darryl Hannah told Charlie Sheen in
Wall Street “Bud, one day you’ll realize that it’s a whole lot worse to make money and then lose it
all, than never having made it at all.”


This line sums up India’s plight. If the bull market hadn’t happened, the Tatas wouldn’t have had
Jaguar and Corus. The Ambanis wouldn’t have had organised retail or nation-wide broking.
GMR, GVK wouldn’t have got the airports. The brokers would never have listed. The real estate
companies would have never accumulated land banks in the Andaman & Nicobar Islands or some
such God-forsaken place. Subhiksha would have never got Rs.750 crs of debt (who are the dumb
bankers who gave this kind of money to a cash negative retailer with no hard assets?) The peons
wouldn’t have become Bloomberg operators, and then gotten laid off. The MBA kids would have
never joined Lehman. Low intelligence, high momentum hedge fund managers wouldn’t have got
any assets worthy of mention. Vijay Mallya wouldn’t have got his airline (now that would have
been a shame, for Kingfisher First is far and away the best Business/First Class in the world).


And now that the high watermark of life has been set, almost anything else seems a huge failure now.
A guy drawing $250k now gets an offer of $100k, heads out to commit suicide. In 2002, he would
have been spraying Veuve-Clicquot on Marine Drive.


This is precisely what The Azhar Syndrome is all about. Azhar is the kid from the slums in
Slumdog Millionaire. He flew to LA for the Oscars, slept on clean sheets in an air-conditioned
hotel room, for the first time (and possibly the last time)…came to his Bombay slum home…and
moaned to the press “It is so hot here, and the mosquitoes…I can’t sleep”. He is finished. A few
nights in a clean hotel room, and the guy can’t adjust back to the reality of his slum existence.
And before LA happened, he was happily rolling in the mud all day, and sleeping soundly with
mosquitoes and all, in precisely the same slum.


Azhar enjoyed a 5 day bull market. And his life is ruined forever. India enjoyed a 5-year bull
market. And a whole generation has been scarred for life. Before the bull market, a stock market
that doubled in three years seemed miraculous. An economy that grew 5% seemed fabulous. A
market cap that reached a billion dollars in ten years was a gift from God. A salary that rose 9% a
year was stuff that dreams were made of. An AUM of $50 mln was enough to get the sell-side to
send you the hottest escorts.


Naah…we were all so much better off without the bull market. Just as Azhar was so much better
without the Oscar trip. We would all have been as happy as pigs rolling in sh*t. We are all rolling in
sh*t all right. Except that we aren’t happy.


Which brings me to this whole Slumdog mania. (I find the name utterly insulting. The book on
which it’s based was called ‘Q&A’!). I mean…this guy, Danny Boyle has rubbed the face of this
country with…well, you know what. And this country is dancing in the streets, in the aisles, in the
sh*t-pits, in the Parliament, in the election campaigns…The newspapers have been breathless, the
radio jockeys have been gushing, some brand consultants have even said that this will boost tourism,
just as Lord of the Rings boosted tourism in New Zealand!


Danny Boyle is lucky. If he had done an equivalent film about Singapore (on whatever soft
underbelly Singapore has), he would have been behind bars, getting caned across his butt with sticks
dipped in alcohol. But then…what does one do with this country that loves becoming the laughing
stock of the world? Where a Cabinet Minister states that the movie shows how the slums are a
beehive of entrepreneurial activity. Unbelievable.


Of course, Slumdog was going to win the Oscars. Look, there is a formula that wins Oscars. You
crack the formula, you win. Further, a triumphalist film like Lagaan could never have won the
Oscars. Everybody knows why.

Have I seen Slumdog? No. Why should I pay to watch something I can see for free?
= = = = = = = = = = = = = = = = = = = = =
then follows my orginal post about banking
= = = = = = = = = = = = = = = = = = = = =

The World According To CMIE
One of the most puzzling phenomena last 12 months has been the venerable Centre for Monitoring
Indian Economy (CMIE)’s amazingly bullish forecasts about the Indian economy. Slowdown, what
slowdown, has been Mr. Mahesh Vyas’ refrain all this while. India will grow 8.5-9% in FY09. All
this talk of a slowdown is plain rubbish.
But now, CMIE has outdone even the most Polyanna-ish forecast of Indian corporate profits. It now
says that Indian Corporate profits will rise 75% or so in FY10, and margins will double. Talk about
CMIE being on steroids or some other substance.
I have no doubt whatsoever that CMIE’s Excel sheets have become all corrupted as all the good
Excel operators now work as construction crane operators (that became one hot paying job in India,
believe it or not), and the formulae being fed in have gotten crazily mixed up. Unfortunately, the
only guys believing these forecasts are living in Lutyens’ Delhi, and nowhere else.

Posted By: jain208
Date Posted: 15/Mar/2009 at 4:24pm
Originally posted by chimak10

i got the full report just few hours back................well the report is dated 12 march 2009

here is the rest of the report......

The Azhar Syndrome

The Occasional that talks sense... most of the time
(March 12, 2009)
By: Le Grand Fromage
Email: [email protected]


Sometimes we get what we wish for, and then we get the rest of our lives to repent.


This is precisely what has happened to India.
This country has craved a bull market since the day a few Gujus got together and formed the
Bombay Stock Exchange under a tree (actually, that’s probably a charitable description. More likely,
they formed it in a slum). Since then, this country has lived on in the hope that it will get a secular
bull market, akin to what the US got between 1982 and 2000. And intermittently, it did get bull
markets…short, sharp ones, that enriched no one but the brokers. But nothing ever got even close to
the US bull market. All of us sell-side low lives sold the mythical India story to dumb foreigners
through the ‘90s, gobbled up their dollars at Rs.31.37/$, got them to buy loads of rubbish that
miraculously turned more illiquid than molasses come a mini-bear market so that the foreigners
could never take back the dollars they had brought in. But the broad bull market never came.


Then came the 2003-2007 bull run. And that ruined the country.


This bull market inflated dumb promoters to God-like status. It made mediocre fund managers
become stars. It made below-mediocre sell-siders become ace stock-identifiers. It made the fiscal
deficit nearly go away, however illusorily. It made even lowly back office clerks become Bloomberg
operators at JP Morgan’s outsourcing units, getting in a month what they were getting in a year, so
tight was the market for Bloomberg operators.


MBA graduates joined their first jobs, with the laser-like clarity that the first task they needed to get
accomplished, was to shoot off their resumes to all the other wannabe securities firms planning IPOs.
IIM graduates shamelessly played one company off another to get $250 k joining packages from
Lehman and like firms. The MBA institutes dutifully instilled the virtues of greed and avarice in
their wards. Not that they needed to do much, for their wards had been coached into these virtues
from childhood by their middle-class parents from Phagwara, who had never driven anything better
than a beat up Ambassador. “Puttar, jitney paise mile, kam hai. Yaad rakhna, tere baap ne bahut
mehnat karke tujhe padhaya. Ab, jaakar phatte chak de”: would be the mom’s sage advice (Son,
money is everything. Remember, your father worked really hard to put you through MBA. Now, go
and grab the maximum you can get”). With such solid middle class values deeply ingrained, young
MBA kids ran amuck. And this led to the crazy spectacle of the recruiter actually being a person who
was getting less money than the recruitee. There was simply no fairness in the world back then. But
fairness is back. IIM graduates are being hired in dozens by state-owned Union Bank of India. Serves
the losers right. One only hopes they don’t turn Union Bank into Lehman.

In the bull market, promoters dreamt up grandiose businesses. Did silly acquisitions. Bid for
nonsensical projects. And then went and poached “talent” from competitors at salaries that made
Wall Street compensation look distinctly Cleveland-ish.


It was crazy, and just plain out of control. All that is over, and isn’t coming back for a while to come.
Thank God for that.

But it is hurting: the fact that one year you were in the Forbes 400 Richest List, and now, you will
more likely make the List of 400 Most Indebted Promoters. As Darryl Hannah told Charlie Sheen in
Wall Street “Bud, one day you’ll realize that it’s a whole lot worse to make money and then lose it
all, than never having made it at all.”


This line sums up India’s plight. If the bull market hadn’t happened, the Tatas wouldn’t have had
Jaguar and Corus. The Ambanis wouldn’t have had organised retail or nation-wide broking.
GMR, GVK wouldn’t have got the airports. The brokers would never have listed. The real estate
companies would have never accumulated land banks in the Andaman & Nicobar Islands or some
such God-forsaken place. Subhiksha would have never got Rs.750 crs of debt (who are the dumb
bankers who gave this kind of money to a cash negative retailer with no hard assets?) The peons
wouldn’t have become Bloomberg operators, and then gotten laid off. The MBA kids would have
never joined Lehman. Low intelligence, high momentum hedge fund managers wouldn’t have got
any assets worthy of mention. Vijay Mallya wouldn’t have got his airline (now that would have
been a shame, for Kingfisher First is far and away the best Business/First Class in the world).


And now that the high watermark of life has been set, almost anything else seems a huge failure now.
A guy drawing $250k now gets an offer of $100k, heads out to commit suicide. In 2002, he would
have been spraying Veuve-Clicquot on Marine Drive.


This is precisely what The Azhar Syndrome is all about. Azhar is the kid from the slums in
Slumdog Millionaire. He flew to LA for the Oscars, slept on clean sheets in an air-conditioned
hotel room, for the first time (and possibly the last time)…came to his Bombay slum home…and
moaned to the press “It is so hot here, and the mosquitoes…I can’t sleep”. He is finished. A few
nights in a clean hotel room, and the guy can’t adjust back to the reality of his slum existence.
And before LA happened, he was happily rolling in the mud all day, and sleeping soundly with
mosquitoes and all, in precisely the same slum.


Azhar enjoyed a 5 day bull market. And his life is ruined forever. India enjoyed a 5-year bull
market. And a whole generation has been scarred for life. Before the bull market, a stock market
that doubled in three years seemed miraculous. An economy that grew 5% seemed fabulous. A
market cap that reached a billion dollars in ten years was a gift from God. A salary that rose 9% a
year was stuff that dreams were made of. An AUM of $50 mln was enough to get the sell-side to
send you the hottest escorts.


Naah…we were all so much better off without the bull market. Just as Azhar was so much better
without the Oscar trip. We would all have been as happy as pigs rolling in sh*t. We are all rolling in
sh*t all right. Except that we aren’t happy.


Which brings me to this whole Slumdog mania. (I find the name utterly insulting. The book on
which it’s based was called ‘Q&A’!). I mean…this guy, Danny Boyle has rubbed the face of this
country with…well, you know what. And this country is dancing in the streets, in the aisles, in the
sh*t-pits, in the Parliament, in the election campaigns…The newspapers have been breathless, the
radio jockeys have been gushing, some brand consultants have even said that this will boost tourism,
just as Lord of the Rings boosted tourism in New Zealand!


Danny Boyle is lucky. If he had done an equivalent film about Singapore (on whatever soft
underbelly Singapore has), he would have been behind bars, getting caned across his butt with sticks
dipped in alcohol. But then…what does one do with this country that loves becoming the laughing
stock of the world? Where a Cabinet Minister states that the movie shows how the slums are a
beehive of entrepreneurial activity. Unbelievable.


Of course, Slumdog was going to win the Oscars. Look, there is a formula that wins Oscars. You
crack the formula, you win. Further, a triumphalist film like Lagaan could never have won the
Oscars. Everybody knows why.

Have I seen Slumdog? No. Why should I pay to watch something I can see for free?
= = = = = = = = = = = = = = = = = = = = =
then follows my orginal post about banking
= = = = = = = = = = = = = = = = = = = = =

The World According To CMIE
One of the most puzzling phenomena last 12 months has been the venerable Centre for Monitoring
Indian Economy (CMIE)’s amazingly bullish forecasts about the Indian economy. Slowdown, what
slowdown, has been Mr. Mahesh Vyas’ refrain all this while. India will grow 8.5-9% in FY09. All
this talk of a slowdown is plain rubbish.
But now, CMIE has outdone even the most Polyanna-ish forecast of Indian corporate profits. It now
says that Indian Corporate profits will rise 75% or so in FY10, and margins will double. Talk about
CMIE being on steroids or some other substance.
I have no doubt whatsoever that CMIE’s Excel sheets have become all corrupted as all the good
Excel operators now work as construction crane operators (that became one hot paying job in India,
believe it or not), and the formulae being fed in have gotten crazily mixed up. Unfortunately, the
only guys believing these forecasts are living in Lutyens’ Delhi, and nowhere else.




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=======================================
The more it changes, the more it’s the same thing.

Posted By: Vivek Sukhani
Date Posted: 15/Mar/2009 at 7:05pm
While most of what is said is hypothetical, but there's little doubt as to which among PSU Banks and Private banks are safe. Otherwise, why would have big corporate houses moved their money from private banks to PSU banks.
 
But then, most of the opinion we get have a vested interest....so practically all opinions should be outrightly rejected on the face.


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Jai Guru!!!

Posted By: Vivek Sukhani
Date Posted: 15/Mar/2009 at 7:10pm
Originally posted by Hitesh Shah

Originally posted by deveshkayal

....Private Banks has 2-3x collateral securities against loan to property developers.
....


Devesh, any idea what is the nature of the collateral?
 
Who knows this value tell me? Banker....hahaha!!!????!!!!!!!
 
Boss, markets are much more smart than what we think they are.


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Jai Guru!!!

Posted By: investor
Date Posted: 16/Mar/2009 at 1:14pm
Whether its 2.5x or 0.5x, we should be happy that atleast Indian banks still have a book value, look at the U.S. where none of the banks even have a book!!

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The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!

Posted By: investor
Date Posted: 16/Mar/2009 at 1:27pm
The author of this report seems to have forgotten one very important point, and that is that this is what makes life!!  Its all nice and good to put this in a writeup, but if everything was always at par and all stocks traded at fair value all the time, there would be no markets, and life would be so dull! Think about it. Wink

Imagine a game of golf where every player was scoring at par, without any birdies or bogeys being shot.... that would make for one lousy and pathetic game of golf, not just for the spectators and followers, but even for the players themselves! Life is also like that only - thats why God created the bulls and the bears, the Infys and the Satyams,  the Narayana Murthy's and the Ramalinga Raju's.... life is about learning to live with the ups and downs, and having fun both ways! Smile

Originally posted by chimak10

i got the full report just few hours back................well the report is dated 12 march 2009

here is the rest of the report......

The Azhar Syndrome




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The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!

Posted By: MissingLink
Date Posted: 18/Mar/2009 at 10:28am
sorry for being repetative, the report that chimak was referring to, can be downloaded in pdf from the following site:
 
http://download85.mediafire.com/jms2ytvmskdg/imyjilznmzn/Le_Grand_Fromage_4_March_12_2009.pdf - http://download85.mediafire.com/jms2ytvmskdg/imyjilznmzn/Le_Grand_Fromage_4_March_12_2009.pdf


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Missing a train is only painful if you run after it! Not Matching the idea of success others expect from you is only painful if thats what you are seeking.
-- Nassim Nicholas Taleb

Posted By: equity analyst
Date Posted: 19/Mar/2009 at 10:11pm
well said investor.......Clap

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"Markets are the places where two types of people meet up in the morning: those with experience and those with money. Towards the end of the day, they exchange their assets and go home."


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