Buy Bharti Airtel at every decline

With spectrum auction out and the M&A rules defined, the telecom sector is finally getting out of the regulatory interference which is a big positive for all the telecom players in India. Though the debt level of the sector will further rise, consolidation and tariff rationalization will make the leverage position of the sector comfortable in next 1-2 years. Both the big telecom players Bharti and Idea Cellular appears attractive for investment at current levels but Bharti Airtel in particular is very attractively poised at current price of around Rs. 290. Here is why?

1. Back of the envelope calculation suggest limited downside and reasonable upside. Lets consider following valuation points assuming around Rs.92000 crores of revenue, Rs.30000 crores of EBIDTA and net debt of Rs.60000 crores for FY-15.

Corporate Governance Rating for listed companies in India

SEBI is considering a "Corporate Governance Rating" for every listed company in India which, in my view, could be a game changing event for minority shareholders. Security Exchange board of India is in the process of finalizing its new Corporate Governance Code and revamp insider trading norms. Beside having new rules that are largely targeted to protect minority shareholders, Governance Rating for each company will be very handy specially when a small investor is investing in mid and small cap companies.

Like IPO grading, a grading system for companies on governance front is a much needed reform that will strengthen the overall capital market of the country. For minority shareholders, governance is much more important than valuations and the former being subjective it becomes very difficult to asses the score in that front. 

If "Corporate Governance Rating" become reality it will help all of us in flushing out almost all crap and scam ridden companies. All we need to do is check the score and completely avoid companies which are below certain level. 

In my whole investing career more than 90% of my loosing bets were due to governance issues in the companies. Strong insider trading rules and tough penal actions for the guilty along with Corporate Governance Rating will surly help build confidence in the Indian Stock Markets and encourage wider participation by small retail investors. 

Engineers India FPO Analysis: Avoid

Engineers India Limited is coming up with its FPO to offer 33,693,660 equity shares of face value 5 each from 6th February, 2014. The issue details are as follow:

Offer Size: 33,693,660 Equity Shares of face value of 5 each

Price Band : 145 - 150 (Discount of 6 for Eligible Employees and Retail Individual Investors)

Issue Opens on Feb 6, 2014

Issue Closes on Feb 10, 2014

Lot Size : 100 Equity Shares and in multiples of 100 Equity Shares thereafter (Min Investment Rs.14500 to Rs.15000)

Should one apply to this FPO?

The straight answer is "NO" as the company is witnessing falling revenues and profitability. Also the price at which the issue is being offered is very close to the current market price which is Rs.150. As far as valuations are concerned the stock @150 is trading at 11 times FY-14 earnings.