Essar which was earlier planning to delist all its companies from the stock market pulled a rabbit out of the hat. Today it announced a mega 6 Billion Dollar refinery plan. It also plans to issue a 2 Billion Dollar GDR issue at 200/- a share.
Since I had earlier recommended my friends to buy Reliance Petroleum (at 65/-), a couple of friends were asking what do i think about it.
One word… Stay away from it….. don’t even think about it.
Essar are a bunch of cheats. I do not know how they do it, but all its companies always end up in bankruptcy while its promoters flourish. They have never ever made any money for their shock-holders or returned the money borrowed from the banks. Neither in my father’s generation, nor in my generation.
Crisil downgrade Essar Bonds from C grade to D grade.
They even managed to use their political clout to reduce the Coupon rate (interest) on their bonds.
Do you think that such a company can ever again raise fresh capital from the market?
This January they arbitrarily announced that they intend to delist Essar Steel and Essar Oil. They even offered to buy back the shares from the public … as usual at far below the market price… Hence trying to cheat the share holders of the fair value of their much deserved investments.
They indulge in insider trading, artificially manipulating the prices… Best example is that Essar Oil, which never traded above 70/- (and was trading at 61/- on 7th November) suddenly shot up to twice its value a week before the news was public? and not to mention that for the past couple of months the promoters have been buying stock like crazy.
BTW SEC has very stringent listing and compliance norms. The director of the company is personally liable for criminal charges in case of misreporting/insider trading. I am 100% sure the Essar group promoters are not foolish enough to list the company and then spend the rest of their life behind bars.
Its all noise, filter it out.. and if you can short sell the shares, then do it….. (UPDATE: I did short sell this stock on 2nd Jan .. when the stock was trading at 350/- and made quite a killing)
No investor Foreign or Indian will ever pay 2billion dollars at 200/- a share for a share of a company that consistently makes losses (even though refinery margins are at the highest levels ever) and has a meager revenue of a few tens of millions USD.
Ankur Aggarwal
sree
Sandip Chaudhuri
vbr
shobhendrasrivastava
how do they do it ??
have u heard of political connections??
do u know how they managed all those loans from fis like ifci and how they got them converted to bad debts
this is the saga of controlled economy and political patronage
Comment by prax — November 17, 2007 @ 4:09 am
and the beauty is that there never has been a probe on them… no media group has even questioned where the money went…
its like the world did not notice that the investors and the banks have lost a few billion dollars.
Comment by Ankur Aggarwal — November 17, 2007 @ 8:20 am
God, now you tell me!
I think I must count myself lucky that I cut off my losses at 5000 today!
I could have paid off the one lakh and held on for a couple of days, but I thought I wouldn’t risk it further.
The Devil in me is whispering, “Make up this loss by buying Essaroil tomorrow when it just begins to inch up…”
I am sure you are shuddering at my immaturity!
Comment by rambodoc — November 19, 2007 @ 6:21 pm
@ram…
i posted this news on the friday night.. neways its a good learning and 5k is a small price to pay.
although i am not into trading, a word of advice….
since you are just weeks into stock market.. please do not buy in lots of 1L… i am considered an aggressive investor who has been following markets for over a decade now (but trading for just than 3 years).. still even i don’t trade in such big lots.
reserve the first 3-6 months of your stock market journey as a small time investor… trade in minimum lots of 5-10k… if you feel that the stock is really good, then wait for the evening/next day and buy another 5k lot… but not too much….
surely the profits would be of the order of 500-1,000/- but by doing so your losses will be curtailed.. and who knows if you are lucky and get a knack of it.. you could as well scale it 5-10 times.
secondly in spite of the fact that you do day trades, invest only in stocks of wonderful companies, bluechips, GARP (growth at reasonable prices) etc. so that even if you make a loss in the short term.. eventually the stock will rise and offset the losses.
i wish i could be of more help… but feel free to ask
Comment by Ankur Aggarwal — November 19, 2007 @ 6:41 pm
wow, thanks for the tip !!
Comment by cyberkitty — November 20, 2007 @ 4:23 pm
good guidance
Comment by surendar — December 25, 2007 @ 1:46 pm
thanks guys
My father just pointed out that Essar Oil has a terrible history.
In 1995, Essar oil oil IPO came for 40/- and in 5 years the stock went down to 4/- (while the promoters build castles)
Essar had issued a very lucrative debenture issue with 14% coupon rate….. but within a couple of years Essar defaulted on them. Whats worse that instead of liquidating the assets to pay off the bonds, it got the Gujarat High court to reduce the interest rate.
This can happen only in India.
http://www.indianexpress.com/res/web/pIe/ie/daily/19990715/ibu15037.html : Crisil downgrade Essar Bonds from C grade to D grade.
http://www.thehindubusinessline.com/2003/04/25/stories/2003042500140900.htm interest rates getting readjusted
Comment by Ankur Aggarwal — January 8, 2008 @ 3:43 pm