Don’t get influenced and unduly excited by placements of part of their stakes by Promoters of DLF (at Rs 230) and Suzlon (at Rs 77) especially, and of TCS (at Rs 627)…..They have sold shares now as they desperately need funds and can’t raise it any other way……The Credit Crunch and Contraction has simply overwhelmed the corporate sector
In fact you can even expect our government to sell some of it’s jewels…expect IPOs of PSUs in Q2 and Q3 this year…Even the Government desperately needs funds to fund the dangerously high fiscal deficit as it has reached saturation Borrowing Levels.
Otherwise,just ponder…..why did they not sell stakes in 2007 and 2008 when their Shares Prices were 5 to 10 times they are now !
So if a Foreign Bank operating in India was able to comfortably manage these placements,remember these were at stressed and possibly distressed prices…so there were many takers……not really prices at which the Promoters should sell !
But Desperate Times call for Desperate Measures
3 thoughts on “DLF,Suzlon,Tatas…Stress Stake Sales at Stress Prices in Stress Times”
Hello Gaurav,
These are infrastructure/energy and software majors. Their financial woes are pointers to what might happen within a quarter or two in the economy-a very likely scenario of deflation in commodity prices! Right now, the crunch is visible only in the discretionary spending areas. It is not so easy to imagine the fall out of such an event across all other sectors. Some sincere economists had been saying this and now we are seeing why they may be right.
Point is that they are desperate for funds to reduce debt or fulfill commitments…Tatas have got stuck badly with Jaguar and Corus at high acquisition prices funded by a lot of Debt…They have been continuously selling shares of their Crown Jewel,TCS, in 2008 and 2009 to reduce the debt burden as they have not been successful in raising funds any other way
Deflation is inevitable in the Short Term…but USA,more than India,faces the potential threat of hyper inflation in the coming decade if it continues to print significant new currency to fund Rising Deficits
India has the relative advantage of a continuing positive GDP Growth rate,albeit lower, and also a domestic consumption story as a potential saviour….Also it has a Savings Rate of 35% +… USA is battling with an insignificant 1.5% Savings rate.
So,Yes, India is relatively on a better footing…It’s reflecting in a smartly surging Sensex
Well, thanks Gaurav-those are very relevant points. But in India the organized sector is so small that we really do not know how these macroeconomic fundamentals like healthy savings rate etc. translate into corporate revenue growth. Yesterday I was watching a report on FMCG sector projections in India by a leading consultancy firm and it was clearly sounding caution except some services the demand for which is inelastic in short run. I hope that this is proved wrong but there is a genuine fear that we are not decoupled from the developed world and that we are all entering a long and painful phase of secular stagnation and lay-offs from organized employment.