Monday, July 5, 2010

Husha Busha and RNRL falls down

As expected, with a hurried up merger meeting on a Sunday, the writing was on the wall that the merger ratio will not be a good one.

The merger ratio fixed was 4:1 (personally I thought it should have been based on the closing price of the market).

Surprisingly, the analysts changed their opinion about RNRL so quickly.
Initially their sales pitch was that RNRL had a great future with 4 CBM blocks and gas which can be traded over.

Now they claim RNRL was actually a nothing company with CBM blocks discovery far away and gas @ 4.2$/mmBtu.

All those folks who tried to make a killing by buying RNRL before SC decision or before GSMA with RIL, would be upset (mild word).

Spare a thought for the poor folks who bought it @ higher levels.

Saturday, July 3, 2010

RNRL - RPower Merger. Damn, what going on?

News has it that ADAG group will meet on 4th July to decide on RNRL merger with RPower.

RPower IPO was a flop.
It still hasn't recovered its original price and we still have investors awaiting it to rise to IPO (cum bonus) price to sell off.

Add to that, the news of this merger.

Whom does it really benefit?

RNRL was founded to get gas from KG basin and provide it to RPower and RInfra.
The difference in price was the profit. Add to it, it has been allotted 4 CBM blocks (old news reference).

With RIL winning the Supreme court case, RNRL will not make trading profits.
Thus, it is being merged with RPower.

According to book value: Merger should be in the ratio 5 (RNRL):1 (RPower)
According to market cap: Merger should be in the ratio 4 (RNRL):1 (RPower)
According to market last close value: Merger should be in the ratio approx 2.5 (RNRL):1 (RPower)

Investors who may have purchased RNRL @ 20 odd levels may be happy and may sell off RPower as soon as they get those shares.

Whatever be the ratio, if its anywhere like 5:1 or 4:1, expect a downfall in RNRL on Monday (5th July).

5th July is a Bandh in India, can we pray for a RNRL trading-bandh on 5th July.
If wishes were horses...........

Friday, July 2, 2010

OIL Prices De-regulated - Will OMC's benefit?

OIL Prices De-regulated - Will OMC's benefit?

Govt of India de-regulated OIL prices last week.
This week we got a statement that OMC's (Oil Marketing companies) are free to market the prices of petrol.
The Govt would only intervene if the prices are way too high.

huh?
Well if we say we weren't expecting that statement, we are fooling ourselves.

No Govt would want to sell petrol @ 100 Rs/litre etc.
They know it would be detrimental.
Prices of everything around us would shoot up.

Do you think then it is the right time to buy OMC's like HPCL/BPCL/MRPL/IOC?

The answer is part yes and part no.

In the short term, these OMC's will see lesser subsidy rates and obviously their profit will shoot up.
Some of them, IOC/MRPL etc are already close to expansion and hence more volume implies more sales will help them.

In the long run, obviously the govt will keep a close watch on the prices on which these OMC's will sell.

What does this imply?
In my understanding, the profits will grow. Hopefully the dividends too.
Most of the folks do not take into consideration the real estate value of these OMCs. These are huge valuation.

I am going to bet on IOC. It has the highest volume as well as more expansion plans.
I would also bet on MRPL but there is a background thought process whether it would be ever merged with ONGC and in what ratio.
That thought makes me a bit skeptical.

However, the flavor of the current scenario is OMC's like HPCL/BPCL/IOC/MRPL.

Lets hope everyone makes money while there is time to make some.

List by profits
http://www.moneycontrol.com/stocks/marketinfo/netprofit.php?optex=BSE&indcode=Refineries&opttopic=netprofit

List by sales
http://www.moneycontrol.com/stocks/marketinfo/netsales.php?optex=BSE&indcode=Refineries&opttopic=netsales