Patriots on Dalal Street tense after attack by Pakistan
Today was a tense day for Dalal Street after Pakistani jets intruded India’s airspace in an attempt to create terror.
#NewsAlert — Pakistani jets violate Indian air space, enter border areas of Nowshera sector in J-K's Rajouri district | @shreyadhoundial with more details pic.twitter.com/P5wnPw4CUv
— News18 (@CNNnews18) February 27, 2019
Thankfully, they were foiled by the brave hearts of the Indian Air Force and had to turn tail before doing much damage.
One of their F-16 Aircrafts was shot down.
From ANI:
Pakistan Air Force's F-16 that violated Indian Air Space, shot down in Indian Retaliatory Fire pic.twitter.com/cYQly7sGXR— CNBC-TV18 (@CNBCTV18Live) February 27, 2019
However, unfortunately, the Indian side also suffered casualties.
Wing Commander Abhinandan Varthaman‘s MIG-29 aircraft was damaged. He brought it down inside Pakistani territory and was taken into custody.
One can see Wing Commander Abhinandan Varthaman with a calm and confident demeanor in a video show with Rocky and Mayur.
Here officer Abhinandan appears in @rockyandmayur show in 2011, a calm & confident young man. https://t.co/7Sy4Qjfz94
— Rofl Gandhi (@RoflGandhi_) February 27, 2019
Surabhi Upadhyay succinctly summed up the sombre mood on Dalal Street.
#Nifty in the red.
But that's the least of our concern at the moment.. These boys..
Thoughts. Prayers…
We stand with you. #IndianAirForce #IAFStrikesJeM #IndianArmedForces https://t.co/zXgyTZjtkl— Surabhi Upadhyay (@SurabhiUpadhyay) February 27, 2019
Bring the hero back.
— Anu Sharma (@awnusharma) February 27, 2019
Dear Wing Commander Abhinandan, 1.3 billion Indians pray for your safe return. ?? pic.twitter.com/AqVVkusSfj
— Nalini ? (@nalinisharma_) February 27, 2019
?? I’m sorry to hear that one of our brave IAF pilots is missing. I hope he will return home soon, unharmed. We stand by our armed forces in these difficult times. ??
— Rahul Gandhi (@RahulGandhi) February 27, 2019
Thankfully, by the EOD, both sides decided to de-escalate the situation and ensure return to normalcy as soon as possible.
Pakistan PM @ImranKhanPTI says invite India to sit down for talks & resolve this situation pic.twitter.com/Sn3fzOcZs8
— CNBC-TV18 (@CNBCTV18Live) February 27, 2019
Signs of de-escalation. Notice to shutdown Airports withdrawn. https://t.co/deA2W5VPXH via @BloombergQuint
— Sajeet Kesav Manghat (@sajeetkm) February 27, 2019
#TravelUpdate3: Airspace restrictions that were announced earlier today for Northern India have now been removed. We plan to operate our regular schedule to Amritsar, Jammu, Srinagar, Chandigarh, and Leh starting tomorrow. (1/2)
— Vistara (@airvistara) February 27, 2019
#GoAlert
Please note that airspace restrictions have been withdrawn for Srinagar, Leh, Chandigarh and Jammu and all flights will operate as usual with effect from 28th February. Please check #GoAir flight status on https://t.co/rGDDlTxTq7 or SMS G8 <space> FlightNo to 57333.— GoAir (@goairlinesindia) February 27, 2019
Nifty & Sensex show resilience while KSE faces “big breakdown”
Investors hate uncertainty and so it is natural that the Nifty and Sensex took it on the chin.
#MarketAtClose | Market gives up gains amid rising tensions at the LoC. Sensex slips around 500 points from day’ high, Nifty around 130 points; Midcap index manages minor gains, ends 0.4% higher pic.twitter.com/3UovqbHTxA
— CNBC-TV18 (@CNBCTV18Live) February 27, 2019
However, the two indices demonstrated admirable resilience and bounced bank into strength, posting minor losses by the EOD.
Investors in the Karachi Stock Exchange faced a harrowing time because the Index crashed nearly 1500 points.
Karachi stock exchange spooked by #IAF air strike; index tanks nearly 1500 pointshttps://t.co/Nqcckt2zen
— CNBC-TV18 News (@CNBCTV18News) February 27, 2019
Some technical experts predicted that a “big breakdown” is on the way.
#Karachistockexchange #KARACHI100 headed towards 30700
Big breakdown on big charts pic.twitter.com/4ZGt00pl9g— Rakesh Bansal (@iamrakeshbansal) February 27, 2019
This weakness in the KSE is not surprising given that the Pakistani economy is quite puny.
In fact, the entire stock exchange’s market capitalisation is smaller than that of HDFC Bank/ Reliance Industries.
Did You Know: Pakistan's entire stock m-cap is lower than HDFC Bank or even RIL m-cap. #DontTakePangaWithIndianshttps://t.co/jfbjl5KiZP
— Varinder Bansal (@varinder_bansal) February 27, 2019
FYIP: Karachi stock exchange index is down 15% in last two days. Also the total market capitalisation of all the companies which are listed there is less than that of Reliance Industries Limited. Jai Hind
— Ra_Bies (@Ra_Bies) February 27, 2019
In fact, a Pakistani TV show named ‘Dunya News’ candidly admitted that the Ambani Brothers alone can buy every company on the Karachi Stock Exchange and still have $30 billion to spare.
#PakTaughtLesson: Pakistan feels the heat for the 2nd day. Pakistani F-16 shot down by ground fire. Pakistani jets confronted by India's Sukhois. Karachi stock exchange plummets. | @RShivshankar with details. pic.twitter.com/mkOysnnCpJ
— TIMES NOW (@TimesNow) February 27, 2019
?? Best trade: Long India & Short Pakistan 🙂
— Varinder Bansal (@varinder_bansal) February 27, 2019
Karachi Stock Exchange is down 1200 Points while Bombay Stock Exchange is down about 500 points today. Last time I checked, both countries were classified as third world countries with millions living below poverty line. I hope this warmongering stops now. #SayNoToWar
— Rehman Siddiq (@RehmanSid) February 27, 2019
Rain Industries tanks after reporting poor Q3FY19 results
Investors in Rain Industries also had a harrowing time because the stock tanked like a ton of bricks and tripped the lower circuit of 10%.
This happened because the company reported a whopping loss of Rs. 139 crore versus a profit of Rs. 310 crore on a YoY basis.
#3QWithCNBCTV18 | Rain Industries reports a loss of Rs 139 cr in Q3FY19 against profit of Rs 307.2 cr in Q3FY18 pic.twitter.com/oCjxn1886i
— CNBC-TV18 (@CNBCTV18Live) February 27, 2019
#EarningsWithETNOW | RAIN INDUSTRIES Q4FY19:
Loss of Rs 139 cr vs profit at Rs 310 cr YoY
Sales at Rs 3440 cr vs Rs 3150 cr YoY pic.twitter.com/L3nFEWAWUU— ET NOW (@ETNOWlive) February 27, 2019
RAIN Industries Q3 net loss Rs1.39bn (expectation profit 1..7bn) vs profit Rs2.45bn, EBITDA Rs1.18bn (down 81% YoY) – expectation Rs5.1bn, EBITDA margin 3.4% (expectation 14.6% YoY) vs 21.9% (YoY) and income Rs34.4bn (up 12.8% YoY). #MOMarketUpdates
— Motilal Oswal Group (@MotilalOswalLtd) February 27, 2019
According to the investors presentation, the reason for the grim state of affairs is the following:
• Carbon segment affected due to petroleum coke import ban in India
• Earnings impacted due to lag in price resets of finished products versus raw materials
• One-time events such as provision for bad debts, severance payments in Germany and strategic projects
• Although realisations improved, performance reduced due to lower volumes and increased raw material costs
It is worth recalling that S. Venkat Ramana Reddy, the Company Secretary of Rain Industries, had already sounded the warning that the results would be poor owing inter alia to the bad debt from a Venezuelan client and lower prices for finished products (see When It Rains, It Pours: MiLords Bring Gloom To 10-Bagger Stock Of Mohnish Pabrai & Dolly Khanna)
“Dream Manager” Jagan Mohan Reddy quits abruptly
However, what spooked investors in Rain Industries the most is the fact that Jagan Mohan Reddy, the promoter, abruptly quit from his post as Managing Director.
The official statement on his resignation is as follows:
“Mr. Jagan Mohan Reddy Nellore, Managing Director is also the Chief Executive Officer of Rain Carbon Inc., a wholly owned Subsidiary. Considering that the Carbon business is requiring more attention due to the current global uncertain environment, Mr. Jagan Mohan Reddy Nellore has submitted his resignation from the position of Managing Director but will continue to be the Director & Vice Chairman of the Company with effect from March 31,2019.”
It is to be noted that Jagan Mohan Reddy is not an ordinary run-of-the-mill manager.
Instead, he has been described as a “dream manager” who has not made “even one dumb decision” by Mohnish Pabrai.
In fact, Mohnish made it amply clear in his investors’ letter that Jagan Reddy is the only reason he did not sell Rain Industries when the going was good.
“In the last 3+ years that we have owned Rain, I have seen Jagan Reddy (Rain’s Managing Director and 40+% shareholder) make one smart decision after another. In fact, I have never seen Jagan make even one dumb decision. He has made very large capital allocation calls over the last 12+ years and they have been flawless. It is a remarkable record. He is a dream manager,” Mohnish gushed (see It Was Mistake To Not Sell 10-Bagger Stock, Mohnish Pabrai Admits, While Revealing Performance Of His Funds).
Rajiv Khanna, the alter ego of Dolly Khanna, paid similar tribute to Jagan Reddy when describing the stock as a “no brainer” (see Dolly Khanna discusses the prospects of Rain Industries and whether it will be multibagger).
Naturally, Jagan Reddy’s abrupt departure sparked fear amongst cloners.
unbelievable development in RAIN industries @proxy_investor @omprakashece
Mr. Jagan Mohan Reddy Nellore has submitted his resignation from the position of Managing Director but will continue to be the Director & Vice Chairman of the Company with effect from March 31, 2019. pic.twitter.com/m8FPTqBANd
— Gautham Polisetty (@Gautampolisetty) February 27, 2019
Mr. Jagan Mohan Reddy Nellore has submitted his resignation from the position of Managing Director but will continue to be the Director & Vice Chairman of the Company with effect from March 31, 2019.#RAIN @mohnishpabrai #mohnishpabrai
— Surabhi Chauhan ?♀️ (@WonderWoman991) February 27, 2019
“It is a drain industries, it can go to any price downward as performance cycle is downward, better to avoid at present, further jagan mohan reddy considered to be very efficient had to resign, then who can save the company having huge debt, this is a gone case it looks, up cycle may take years to come back,” a punter at MMB said.
However, some kept a brave face.
“So many companies posted negative results..that doesn`t mean it is permanent…business cycle of rain will be improved soon within 1-2 quarters,” one said.
“Result is bad but not as bad as I was expecting. it may not touch skyhigh but will be stable in next couple of quarter. it may touch 70 in between on the lower side. the most important thing promotors have not yet reduced their stake %. can be invested until promoters feel that it will not recover,” another added.
Some had studied the results in-depth:
“hey guys, i too had a chance to look at the results…i m happy to see that revenues have held steady inspite of pet coke ban…this implies to me that probably the company enjoyed uptick in average selling prices so as to offset downtick in volume due to pet coke ban .. .on the expense side, raw material cost was higher by 300 crores, while provision of 250 crores was made for venezuela customer, and penalties towards environmental issues …. if the coy had not made these 2 provisions, it could have shown a no profit quarter …. further, coy had already advised that raw material cost is higher as they are using earlier inventory which was purchased at higher price that they havent been able to pass on to customers …. if they are able to maintain the same revenues, i believe they will show EPS of 5 atleast for the Q1 of 2019 bcos no need to make additional provisions and also raw material cost would be that of prices that are current …. the very fact coy making provisions and not trying to manage shareholder desires by showing a profit shows that we are dealing with an ethical and prudent management …. it is this trait that gives me confidence to remain invested and not book a loss due to head winds of 3 to 4 quarters,” a distinguished bronze member opined.
Conclusion
Obviously, the situation in Dalal Street is quite grim at the moment. We will have to await Wing Commander Abhinandan Varthaman’s return coupled with a total de-escalation of hostilities before we can think straight about investment matters. We can then seek Mohnish Pabrai’s counsel as to what to do with Rain Industries!
Seems nothing is going right for Rain. Supreme Court ban, Current loss, Debt repayment burden and Dream Manager resignation. Hardly any uptick in sales turnover inspite of CAPEX. Rain needs atleast 300 Crores for debt servicing and with the current loss, situation is going to be very very tough for Rain going forward. It is next Suzlon in making.
In the last few months, much has been written about the fate of Rain Industries.
Heydays are over.
Next Suzlon in the making is a chilling warning.
He is joining Pabrai as a fund manager since both have never made a dumb decision.
Looks like Kitex garments
sell and run!!!
Mr. Pabrai’s lack of experience in dealing with promoters at home is evident. One after another his bets are falling! Sadly he has much to learn, perhaps not in America, but back home!