IPO investing is no more a lottery; make sure you see value when investing in them

Coal India changes nothing

Do not draw the wrong conclusions from the Coal India IPO

The recently listed Coal India scrip has been a far bigger success than anyone had envisaged. However, it is important that investors do not draw the wrong conclusions from this. Unlike most issues in recent years, Coal India has had a robust subscription from retail investors. Given the state of the markets, it is also very likely that the stock will register good returns when it starts trading.

However, investors should not use Coal India as a guide to whether to invest in other IPOs to follow, whether from the public sector or from the private sector. The basics of IPO investing have not changed because of Coal India. Whether you make money from a particular IPO or not remains a toss-up that depends on how the general market outlook will be and how generous the promoters are.

To take a less charitable view, it depends on how scared the promoters and the investment bankers are of the issue bombing. For investors, the best combination is that of promoters and investment bankers who are afraid that the issue may not do well along with a robust market at the time of the stock listing. This will ensure a reasonable price coupled with a strong opening. In Coal India's case, this is exactly what has happened. The issue was probably priced reasonably because there was some nervousness about its massive size.

Going forward, this may not be the case. If there's an 'IPO season' up ahead, then investment-worthy issues will have to be selected carefully. The success of the Coal India IPO will doubtlessly encourage other issues to be priced to the hilt. Anyhow, none of this changes the basics of IPO investing, as it applies to individual investors. By and large, it doesn't make sense for individual investors to invest in IPOs. In India, we have this idea that IPOs are somehow especially suited for retail investors. This is an outdated concept that actually makes little sense, as I've written earlier.

There is nothing about IPOs that makes them especially suited for the casual retail investor. If anything, compared to listed stocks, IPOs are actually less suitable for such investors. The reason is simple. IPOs are lesser-known entities. The balance of power (in the sense of information) lies with the seller. The companies have not been in the public eye at all. Invariably, the promoter has spent the preceding months carefully building up an image to ensure that the investing public has a positive image. Unlike listed stocks, the financials haven't been scrutinised by analysts quarter after quarter for years. And of course, the price is the promoter's gambit, rather than one that has been through the price discovery cauldron of the market.

In the case of the government's offers for sale, this is even truer. In this case, while the promoter may not have been able to organise any elaborate window-dressing of the company, the money is not going to the company and is therefore not making any contribution to the improvement of the company's fortunes.

No matter how much of a sure bet an IPO appears to be, investors must approach it with caution. In the old days, it was possible that an IPO could go up by a huge margin on listing and never again be available at the original issue price. Such lottery tickets simply don't happen any more, least of all in a booming market. Each IPO should be evaluated on its own merit, and then most of them should be rejected.

-- Dhirendra Kumar
-- Value Research

Performance Audit Report on the Issue of Licences and Allocation of 2G Spectrum by the Department of Telecommunications

Performance Audit
(Report No. 19 of 2010-11)
2009-2010

CONTENTS
Preface
Executive Summary
CHAPTER - 1 Introduction
CHAPTER - 2 Audit Approach
CHAPTER - 3 Implementation of Unified Licensing Regime
CHAPTER - 4 Procedures Adopted in Issues of UAS Licences and Allotment of Spectrum
CHAPTER - 5 Financial Impact
CHAPTER - 6 Conclusion
Annexures

Source Link :
http://www.cag.gov.in/html/reports/civil/2010-11_19PA/contents.htm

Complete stuff in one file :
https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B-0hzoMM8_XZMGI0ZjhhOTItNjNkYi00MjdmLThiNjgtNDg4OGMyMzU3ZjA0&hl=en

Download PDF File (Zipped) :
https://docs.google.com/leaf?id=0B-0hzoMM8_XZMjAyZWEwNDctM2M5YS00MGE5LTkwN2YtODJhZGM1ZGViMjNk&hl=en&authkey=CL79m-AF

Excess of Input Tax to lapse - TN VAT

Tamil Nadu: Ordinance to bring provision of the Tamil Nadu VAT (Second Amendment) Act, 2010 into force with retrospective effect

The notification which was earlier effective from 19.8.2010 has been brought into effect from 1.1.2007 advising dealers that if input tax exceeds output tax, excess of input tax cannot be adjusted and will lapse. This will have an impact on VAT assessments from 1.1.2007 for all dealers has sold goods at a price less than the price of the goods purchased by him.
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TAMIL NADU GOVERNMENT
TAMIL NADU ORDINANCE No. 7 OF 2010
CHENNAI, 29th OCTOBER 2010

An Ordinance to bring provision of the Tamil Nadu Value Added Tax (Second Amendment) Act, 2010 into force with retrospective effect

WHEREAS, the Legislative Assembly of the State is not in session and the Governor of Tamil Nadu is satisfied that circumstances exist which render it necessary for him to take immediate action for the purpose hereinafter appearing;

NOW, THEREFORE, in exercise of the powers conferred by clause (1) of Article 213 of the Constitution, the Governor hereby promulgates the following Ordinance:—

1. This Ordinance may be called the Tamil Nadu Value Added Tax (Special Provision) Ordinance, 2010.

2. Notwithstanding anything contained in sub- section (2) of section 1 of the Tamil Nadu Value Added Tax (Second Amendment) Act, 2010 (hereinafter referred to as the 2010 Act) and in the notification of the State Government in the Commercial Taxes and Registration Department No. II (2)/CTR/527(b)/2010, published at page 1 in Part II - Section 2 of the Tamil Nadu Government Gazette Extraordinary, dated the 19th day of August 2010, section 2 of the 2010 Act shall be deemed to have come into force on the 1st day of January 2007.

28th October, 2010
SURJIT SINGH BARNALA
Governor of Tamil Nadu


EXPLANATORY STATEMENT

In order to protect the revenue of the Government, Section 19 of the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act 32 of 2006) has been amended suitably by Tamil Nadu Act 22 of 2010 providing for reversal of the amount of the input tax credit for the goods over and above the output tax of those goods, in a case where a registered dealer has sold goods at a price less than the price of the goods purchased by him and the said amendment has been given effect to from the 19th August 2010.

2. Now, the Government have decided to give effect to the said amendment from the date of coming into force of the said Tamil Nadu Act 32 of 2006 (i.e.) from the 1st day of January 2007 itself, in order to prevent any loss to the State exchequer from that date.

3. The Ordinance seeks to give effect to the above decision.

(By order of the Governor)

S. DHEENADHAYALAN
Secretary to Government
Law Department

Life goes on... (Nov. 2010)

There was a farmer who grew watermelons. He was doing prettty well, but he was disturbed by some local kids who would sneak into his watermelon patch at night and eat all his watermelons. After some careful thought, he came up with a clever idea that he thought would scare the kids away for sure.

So he made up a sign and posted it in the field. The next day, the kids show up and they see a sign saying "Warning! One of the watermelons in this field has been injected with cyanide."

So the kids run off and make up their own sign and post it next to the farmer's sign. The farmer shows up the next week and looks over the field. He notices that no watermelons are missing, but reads the sign next to his : "Now there are two!!!"