panch-tattva talk…not for bulls

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Friends,
I am neither  a bull nor a bear but somebody who looks at
possibilities. Way back in 2000 Infosys was selling 16500/- per share
ex-bonus. At that stage the m/cap for the same was 65000 crs and the
sales were around 4000 crs per year. I told my friends that how a
m/cap of 65k crs cab be serviced by a sale of just 4k crs where as the
interest on 65k crs at only 10% will work out to 6500 crs. The answer
used to be ”aap nahin samajhate , growth bhi to pachas taka hai sales
mein” . What happened that the company maintain the grwoth rate of
above 30% on average through out but the share price is below 16500/-
in 2007 (considering one split and two bonuses inratio of one to one
since 2000). This is the magic of selling dreams. The one who sold
such dreams in almost all leading IT companies ( the well known
K-factor) is himself out of scene notwithstanding the money banks and
other institutions lost.Those who have seen the Harshad times do know
the logic given by him ie the replacement cost theory when ACC was
sold for 10000/- apiece. ACC is selling 50% higher than at that time
(after bonus and rights are considered) but the gentleman had to
suffer a very bad phase in his life and the sufferers included the
then PM, the PM now ( not for wrong doing but for failing to contain
the damage to Indian economy) and also the present FM (for getting his
name sullied even if for no fault). The time factor and the
price/return machanism do not spare any body.It is the simple
mathamatical equation that has to work. 10000/- rupees in 1992 at
compounded return of just 12% work out to 60000/- rupees today. Even
after the dream run for so many years and India becoming the Asian
Tiger the ACC has just been able to give back 15000/- in terms of
value. You may be wondering afterall what I have to say in fact. The
ones with some understanding of numbers and macro level possible
limits would understand what I mean to convey.

The above scenario is being played out under the leadership of LT
along with company of a few more scrips.It also has more than 1.25 lac
crs of m/cap while the sales is just under 20k crs (not enough to give
back nominal return of just 2% on the m/cpa in terms of profits). The
Planning commisiion has just given the target of Rs1.50 lac crs
investment in infrastructure in 11th plan and if the LT gets the whole
work awarded the it can make a profit of just Rs.30 K crs in five
years and the m/cap will be expected to be Rs. 3 lac crs . Can you
digest the magnitude of expectation from it ? The Rome was not built
in a day , Gentlemen.Please develop your own understanding of numbers
and economy , if you want to stay in market as somebody who can make
out where the limit have been streched beyond the wildest imagination.
Who are at the back of it is not known yet. But they will have
capacity to influence the market only so long as their identity is not
known . the day their identity is known the game would be over and who
knows who will become answerable and who would bear the brunt. I am
happy the public is not getting fooled by the rhetoric. The broader
market has been immune to the invitation extended by the bull cartel
to join. They (the cartel) would not have the capacity to take the
entire market on the course of Nifty or Sensex. If they do so they are
sure the Indian promoter group and the investor group will load them
with every piece of paper tradable. The genius of Indian businessmen
is not limited. It can creat a business of same type and size for one
fifth the cost. Why would they not accept the largess so liberally
being their way and hand over their respective companies on decorated
platter. The Licence Raj restriction are not there any more to curb
their future effort in creating newer company where there in no
unwanted lugges to be carried like the employees of little compitence
and calibre. Where the recolation will be at the right point and where
the synergies would be taken care. I can speak endlessly but need not
for there are many who will catch the hint.
HariOm,
krsnaKhandelwal