The Shapoorji default of 100 cr. does not really mean that the SP group doesn't have 100 cr., IMHO.

It's a signal that they want to negotiate. It's basically saying, I'm in default, now let's restructure the loans.
The important point is that they defaulted on Commercial Paper in the money market, not on a loan. A loan default could have been "hidden" within the banking system, because banks get 3 months to negotiate before a loan turns NPA.

They chose to tell the world instead.
Also, there's a little bit that Franklin funds own a good portion of the group bonds, and renegotiating now might be an interesting proposition since holders of those funds might be expecting a haircut anyhow.
But this is going to be a larger trend, in all probability, with more stressed players signalling quickly that they need to restructure. And some of it will be through planned defaults.
Remember also that because of a RBI/SEBI notification, rating agencies won't downgrade to D ratings if the situation was made this bad ONLY because of Covid.

No fear of a downgrade. A one time restructuring is open. This is going to be a crazy time.

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More from @deepakshenoy

11 Sep
SEBI decides that Multicap funds must truly be multicap - so min 25% in large caps, min 25% in midcaps and min 25% in smallcaps.

Smallcaps are companies below roughly 7,000 cr. market cap. Cannot absorb the buying.

We're going to see money flow out of multicap funds..
This could fuel a smallcap rally, even in anticipation. However,
...the SEBI rule indicates that at 75% equity, a multicap fund can't have foreign exposure beyond 25%, which will hurt some.
Read 5 tweets
2 Sep
I have an LIC insurance plan invested 20 years ago. Premium was Rs. 2216 per year. This was a money back policy.

It matures this month. I have to go PERSONALLY visit the LIC office and give documents. Nothing online works.

I will get back Rs. 97,000. That's 6.3% post tax.
Why did I stick with this so long? Insane surrender charges. All past premiums are sunk cost, so ignore that. At any point since 2004 (when I realized how crappy this was), and now, surrendering was a worse choice than just paying up and waiting. Because of high surrender fees.
I thank my stars I didn't take a policy bigger than that. The agent was known to the family, and I was charmed by some calculation at a time when Rs. 97,000 was perhaps a big amount.

Engineer who didn't know the excel RATE function.
Read 4 tweets
18 Aug
Reliance buys Netmeds (60%) for 620 cr. This is interesting - remember, Reliance is Indian and can have inventory. I really like this - the game is really one of scale. Disclosure: Invested in Reliance
Netmeds is online and a marketplace and has delivery capabilities, apparently 57 lakh customers in 20K pin codes - The valuation seems to be Rs. 2000 a customer which is steep, but will probably 1/100th that at the Reliance ability to scale.
Netmeds valuation - It raised three rounds - $50M, $14M, $35M - a total of $99M. Assuming reliance ONLY paid 620 cr for Netmeds (it got 60% of the parent), the group was valued at 1000 cr.

That's about $150M. Looks like the investors will just about recover their investment.
Read 6 tweets
14 Aug
This is just ridiculous. RBI has 15 lakh crore extra money, and it chooses to give just R.s 57,000 cr. as dividend to the government - in a Covid kind of crisis. Why the RBI is allowed to hoard this kind of money I have no idea. But they need to have given a lot lot more.
RBI's buffers have gone up by over 400,000 cr. in the last few months. Remember this: The RBI balance sheet does not play a role in an economic rescue - only the government does. The RBI can expand balance sheet at will for any liquidity buffers - the government needs the money.
In general, India needs to have a strict rule that RBI cannot have more than a 15% or 20% buffers, period. Current balance sheet size is 47 lakh crores. Current buffers are 15 lakh crores = which is over 30%!

Terribly unnecessary especially at this time.
Read 5 tweets
26 Jul
This is an important change that all investors and traders must note. (Thread)
Assume you have only stocks, and have no balance with the broker. You can sell the stocks, but you can only use the money on T+2 - two days later.

Use the money = to buy other stocks, to place F&O trades. (Except one odd case: You can buy options, it seems)
For futures and options players only, this doesn't change. You can trade it like earlier - but intraday leverage is gone. So 20% margin means max 5x leverage (some players were offering intraday 10x etc, which will be removed)
Read 10 tweets
22 Jul
Why are real estate prices not falling much? The answer, they'll tell you, is that costs are so much or that anyhow circle rates are this much and prices can't fall below. But really, the answer is more complex.
A big factor is that current owners and buyers don't want prices to fall. Imagine an under-construction project when you've paid Rs. 8000 per sft, and the builder cuts it to Rs. 6,000 to just get it out of his system. You'll protest and demand that your price be cut too.
That is simply unsustainable. If you've agreed to pay Rs. 8,000 then further price cuts are not automatically yours, but people will withhold further payments in the hope they can negotiate. This screws up things for everyone.
Read 9 tweets

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