In this series of Moneycontrol's 'Word on the Street' column, here is some unreported chatter from the world of business and markets, put together by our fly-on-the-wall reporters.
Never say ‘sell’
When facts change, opinions must too. That is one of the truisms of investing, and many brokers preach that rule, at least on their calendars promoting rules of good investing. But in reality, it is not easy to take a diametrically opposite view on a stock after having either praised or panned it at the start. Some brokers try and couch their revised ratings in respectable terms, but some steadfastly cling to the original call.
With the downturn in the market getting worse, many investors are taking to social media to call out such recommendations.
Just recently, Motilal Oswal Securities got trolled for its decision to stay bullish on Vodafone despite the stock price witnessing a steady slide. The brokerage first came out with a buy rating in January 2018 with a target of Rs 120, when the stock was in the mid-60s. Since then the stock has been falling like a stone, and while Motilal Oswal has been lowering its price target, it has retained its buy call on the stock. In May this year, the brokerage rated the stock a buy with a price target of Rs 20. The stock is now down to Rs 5.70.
Other brokers too have been finding it hard to rate their favourites a ‘sell’. For instance Prabhudas Lilladher rated Yes Bank a ‘buy’ with a price target of Rs 438 in July last year. It then lowered the price target thrice while rating it ‘accumulate’ as the stock kept falling. Last month, the brokerage trimmed its rating on the stock to ‘hold’ with a price target of Rs 101. The stock is now down to Rs 60.
ICICI Direct had a buy rating on Eicher with a target price of Rs 35,600 in May last year. Over the last 15 months, the broker has been steadily lowering the target price, but has rated the stock a ‘hold’. Earlier this month, it set a target price of Rs 15,875 for the stock, with a ‘hold’ rating.
Of paan and chuna
IndiGo Co-founder Rakesh Gangwal’s ‘paan ki dukaan’ barb has had friend-turned-foe Rahul Bhatia responding in ingenious ways. Paan has now become a regular fare in many of the meetings held by the IndiGo top management, including Bhatia. Rumour mills were quick to point out that despite the stretched IndiGo board meeting held in July, paan was served. At the end of a similar meeting, Bhatia offered a guest, a paan wrapped in silver foil. “We can’t end the meeting without it,” he said with a big smile on his face. When asked if it was a sweet paan, or a Banarasi paan, Bhatia – firmly tongue-in-cheek – said, “I don’t know about that. But what I know is that this one doesn’t have chuna!”
For those not well versed with the Hindi phrase, chuna lagaana (lime) is slang for cheating.
Repayment in kind
Investors who have put their money in real estate funds and portfolio management services schemes (equities) are being presented a Hobson’s choice when they want to redeem their investments. Midcaps and small caps that looked like multibaggers about a year ago are not finding any takers for these stocks in a falling market. So when investors call up their PMS managers to redeem their investments, they are being offered the dud stocks in the portfolio instead of cash. Investors have the choice of either taking the shares and then waiting patiently until they can be sold in the market, or not getting anything at all.
A group of high networth individuals (HNIs) who had put money in a real estate fund many moons ago had a similar experience. The fund was managed by a corporate house with interests spread across many sectors. The investors were told that they could take possession of the luxury residential apartments which the fund had bought, but the price of which was way below the purchase cost. Trouble here was that a single flat would have had to be shared between two or three investors depending on the amount they had invested and depending on the value of the flat. Like many of the midcaps and smallcaps in the current market, these flats too are not an easy sell.
A new headache
The Indian pharmaceutical industry, which is already grappling with weak prices and fierce competition in the US generic drugs market, has a fresh challenge at hand. This time, it is an image problem more than a revenue problem. The recently launched “Bottle of Lies” by US-author Katherine Eban, has generated much negative publicity for the industry.
This is all the more worrying because the US accounts of nearly one-third of the export revenues of the sector. The book explains in detail the violations at Ranbaxy, the largest Indian drug maker at the time and a culture of lying and manipulation.
The book points out that the Indian culture of bending rules and 'jugaad' is suitable to produce medicines following modern manufacturing practices. Eban argues for bringing back surprise USFDA inspections at Indian facilities.
The book is being widely discussed in the US media, leaving Indian drug makers red-faced. To counter this, the Indian Pharmaceutical Alliance (IPA) has hired a reputed PR agency, and is opening up facilities of its members for media to see. A top executive of an IPA member company told Moneycontrol that the book tries to extrapolate things that have happened 10 years ago, and connect it to the present.
Perform or refund
A handful of PSU banks are eager to sell stake in their insurance ventures, but have had little success in finding buyers. A Mumbai-based public sector bank which has been trying to sell stake in its insurance venture for the past one year has failed to attract investors despite having a top consulting firm on board. The process has failed twice and the bank has now asked the consulting firm to refund part of the fee. The consulting firm is of course having none of it and has threatened to walkout.
The hidden officeWith the tax-filing season extended by a month to August 31, most accounting firms are having to make employees work on holidays. But considering that there could be workers’ unions of political parties opposing this move, offices are being operational with the shutters down and minimal lighting. Last year, workers of a local political party had forcefully downed shutters of one such firm when it was operational on a public holiday.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.