IPOs in search of Alpha?

Equity investing is the new gold rush. Or has been ever since BJP came to power in 2014.

Market’s thrive on volatility. Punters love it. Clueless commoners loathe it.

One profits from the others fear. The other is devoured by the one’s greed.

Modi’s BJP provides an endless supply of volatility, through systemic jolts to the economy (demonetisation, GST, LTCG on equity), and socio-political acts borne of intolerance that nevertheless vitiate the economic climate (harassing NGOs over origin of funds, steamrolling environmental objections to infrastructure projects, eroding the autonomy of national institutions, viz, the judiciary – meddling in the collegium for appointments--, and the central bank – vicious attacks on governors who did not tow the FM’s line on demonetization and rate cuts).

An environment where equity MFs have generated wealth for investors up unto 2017, fueled a new found belief in the market’s potential. SIP investments continue undeterred, although MF returns have suffered by comparison in the past two years.

In search of ‘alpha’ (market beating) returns, the ambitious retail or high-net worth individual turns to primary market offerings, aka IPOs. But can IPOs lead to wealth creation for the common man, or even the HNI?

Let’s explore the subject using the Rs 750-crore IPO of Ujjivan Small Finance Bank (USFB), which was over-subscribed by 165.6 times on average, by the third and final day of the IPO (Wed, 4th December 2019).

The retail investors portion (10%), was subscribed 48.67 times.

The non-institutional investors (NII) portion (15%) -- including HNIs-- was oversubscribed 473 times.

The qualified institutional buyers portion (75%) was oversubscribed 110.7 times.

Applications were constrained by a lot size and increment tick of 400 shares, at an issue price of Rs 37.

Retail segment customers are also constrained by a SEBI mandated maximum application value of Rs 2 lakh. That makes for a maximum application size of 13 lots ( 200,000 / (400 * 37)).

However, due to retail segment over-subscription, actual allotment is limited to a single lot, per SEBI’s mandate to accommodate the largest pool of retail customers. And that, by lottery system. Which means even assuming the share price jumps 50% (to Rs 55) on listing day, and you win the single lot lottery, your profit on selling one lot is just Rs 7200 (Rs 18 * 400).

Nope, an oversubscribed IPO doesn’t generate wealth for the retail customer.

There exists an unofficial gray-market for IPO shares. A gray-market premium indicates high demand for an IPO, and could correlate to listing day gains. Being an un-regulated market it comes with high counter-party risks, but is used as a sounding board by HNIs for investing in an IPO.

The HNI portion of an IPO sees allotment on a proportional basis. That is if the issue is over-subscribed 400 times, for every 400 shares applied, a single share will be allotted. With the knowledge of gray-market premium (which in Ujjivan SFB’s case was 50%), an HNI will commonly raise a bridge loan from his broker at a low rate of interest, for a large sum, say 1 crore, and that too on the last day of the issue. That lets him apply for 675 lots (675 * 400 * 37). However, in the end with an issue that is 400 times oversubscribed, he is allotted a single lot (1 share for every 400, makes for less than two lots of 800). Not much to make in this scenario either.

All in all, IPOs don’t seem to be major wealth creators for anyone, save sovereign funds and domestic institutional investors (AMCs) that invest in the pre-IPO phase as anchor investors to the issue.

A related issue is the viability of an IPO from a pricing and profitability point of view. An initial offer by a first time offer is likely to be much more reasonably priced than an Offer For Sale (OFS).

The former is usually to raise capital for business expansion or service debt. The latter is usually a way for Private Equity (PE) investors to cash-in on their investments in the company. And the PEs are usually marquee VC brands.

Take the example of the planned SBI Card IPO, which is an OFS by it’s PE investors. Do you think their focus would be to reasonably price the IPO for retail or on making a good return on their investment?

In the case of Ujjivan SFB, the mandate was a dilution of promoter holding (courtesy RBI), and the intended use is for Tier 1 capital adequacy augmentation of the microfinance bank. The upper band of Rs 37 was at a premium of 2.5 times to the book value (2.5 * P/BV) for 2019). Many brokerage houses hailed this as reasonable, due to potential for growth, and that explains the oversubscription and gray-market premium. But like I said earlier, IPOs are not really a wealth generator unless you're a QIB.

Caveat emptor. This is not an authoritative piece, and is basis my layman's research on IPOs as investment tools. That said, my understanding (and the math) could be faulty, and I welcome constructive criticism.

Fixed unresponsive power button on the Kindle Touch

I love my Kindle. The Touch (non-backlit) from 2015 was even easier on the eyes than the PaperWhite imho.
So when the power button stopped responding I was a bit saddened.
I fought off the urge to say stopped responding suddenly -- as apparently nothing is sudden. The malfunction might have been brought on by a few drops of the bag.
Found a video from powerbookmedic.com on disassembling (through a link on ifixit.com).
And apparently opening it up and tightening a few screws does the trick. (Short of that I would have tried inserting a spacer between the button and it's contact  suggested by one comment on ifixit.

Pictorial guide to cooking Methi-Palak Saag

On a mission to raise Hb levels, I've been dishing up 'saag' in overdrive over the past 10 days.
Nothing original about it -- this them recipe here is lifted from two I web searched (and followed for the more comprehensible parts of each).

Between this, and methi parathas (fenugreek-wheat flour pancakes), and iron supplements (which I consider least effective) -- we saw 0.8 point increase in Hb in a span of four days.

So here's a mish-mash saag recipe in honour of the long-ebbed rage that was social food-p***.

Ingredients

 what you need:
* tomatoes - 3 medium sized
* onions - 2 medium sized (of which one is for the tempering)
* garlic - 5-6 cloves
* ginger - an inch-long piece (the one in the photo above is a tad larger - didn't use it all)
* radishes with leaves - 2 (Mooli)
* spinach - 2 bunches (Palak)
* fenugreek (methi) - 1 bunch
* butter - 1 teaspoon
* salt - 1 teaspoon
* oil
* ajwain (carom) - optional
* black pepper powder

for the tempering (chaunk):
* ghee (clarified butter) - 2 tablespoons

 Preparation:
* cut (stalks) off the Palak, methi & Mooli leaves & wash meticulously -- methi is particularly muddy so.
* peel the radishes, ginger and garlic. slice the radishes, grate the ginger & garlic and set aside
* chop the tomatoes and 1 onion. set aside
Now we start to cook:
* heat a teaspoon butter and oil in a kadai (wok)
* once heated, add some ajwain (serves as a digestive), and let the carom crackle (will only do so if the oil was hot enough to start with)
* add the grated ginger and garlic. watch the flame intensity - this can burn fast. follow up with onion.
* once the onion starts to brown, add the diced tomatoes.
* add a teaspoon of chilli powder (the less pungent variety being Kashmiri mirch)
* add the chopped green leaves (methi, palak, mooli patta), stirring to mix with the onions, etc.
* add the sliced radishes
* cover and cook -- taste to check. the greens will settle down from a bulky mound as shown below.
* once cooked, let it cool and then blend to a thick sludge (don't overdo it).

 Phase two:
* heat the ghee in a wok
* add and brown onions
* add the green sludge that is the end product from phase one (post blending)
* mix and cook (cover too as it sputters all over the place)
* bring to a boil and you're done

Tada-dee, tada-dum.

Nation-building as a Parental Concern

Parents and permissiveness seem to have joined hands in an assault on the institution of parenting. I consider it an institution - no less - as it plays a key role in nation-building.
The values we instill in our children today are the ones our nation will exhibit when their generation finds it voice.
Do we want to raise a generation of xenophobics -- the likes of White racists who propelled a dumb-ass like Donald Trump to the Presidency. [TAIBBI2017]
When we give in to our worst instincts in assailing the independence of teachers -- (your child tells you the teacher struck him or her and you raise hell in the Principal's office)-- without hearing the other side of the story. What message are you sending your children?
That they are beyond reproach and can get away with anything -- including hooliganism and rioting which you demonstrate, but don't want them to follow (unless you plan to raise an arsonist MNS follower).
You justify -- saying your child was wronged and the teacher was wrong to raise his hand. But what about making yourself and your child understand the value of empathy -- a teacher burdened with 30 kids -- all raising hell and undisciplined.
Were you in the same situation -- would you not yell at or even raise your hand on your child -- how else would you discipline him without admonishment and punishment?
So instead of teaching the child the value of empathy, respect for authority and discipline -- you give them a license to manipulate people.
No of course children are angels -- yours more so -- angelic souls with cherubic cheeks.
But do you forget that they are wily manipulators too?
A child will seek sympathy from the most pliable quarter. The working parent, who is softened by thoughts of missing out on the sweet smile and innocence of his child during the day, is often supplicated by the child at the receiving end of the wrath of the stay-at-home parent who is equally flustered  by the child's tantrums. Never had your child trigger your protective instinct to get them off the hook in such cases?
How different is it when you do the same with a teacher whose greatest contribution is instilling values. If you defang them and denude their authority - what sort of students, adults and nation are you raising?

Children need to be disciplined -- to learn the value of discipline.
You might agree at a conceptual level. But how often do you admonish your child for unsociable behaviour.
The child is yelling and raising a stink.
'Dada! I want xyz!!! Get me xyz!!! I want xyz!!!'
She doesn't get it. Cries, hurls things, stomps about in a rage!

Do you tolerate it, or admonish her and put a stop to it?
If she simpers and cries pitiably, do you relent and reverse your stand immediately?

Or do you provide a lesson in values -- you are teaching the child that tantrums are not an acceptable mechanism to manipulate people into submission -- that the child has to learn to see reason and maybe earn the right to have something she desires.
Everything has a cost after all -- no free lunch -- even in relationships.

If you relent all the time, what sort of adult do you think the child will grow into?
One who thinks they are always right -- justified in yelling at subordinates and their partners (two groups that suffer and tolerate the most).
But what will it do to their relationships and reputations as adults?
And how will it reflect on your values and on the nation?

---

[TAIBBI2017] Taibbi, Matt Insane Clown President: Dispatches from the American Circus London: WH Allen, 2017 ↩

Replacing Thermal Paste on your CPU

Ever since I got my first laptop, I've noticed it works fine the first few years, and then starts overheating with minimal use.
The culprit could be dust clogging the CPU fan vent, as well as the effectiveness of the stock thermal paste on your cpu wearing out.

Phaltu poem series - The mad rush

'I am going crazy', I am thinking,
what with all this mad rush!
'Where am i Going', I ask myself,
my inner voice is going quiet.

Not knowing when all this is ending,
constantly feeling rushed, rushed.
'What a mad rush!', I am feeling,
my head is in a jumbled state of thought.

First to please dear heart's desire,
I go about doing and buying things,
and always I am still feeling,
at the end of the day, 'What a mad rush!'.

'Is this really important, or can I break away,
from all the little things, that force me to say,
my head is a mush, and my life,
nothing but a mad rush.

Khushali

Ek thi Khushali

Zindagi ke safar main kuch aise mod aaye,
Jeevan ki karvaton se kabhi hamne chot khaye,
Nirash jo hota tha mann, ye soch kar ummeed paye,
ki ek na ek din, kisi mod par, hum bhi khushali paye.

Rozmarra ke jeevan main to nahi the milansaar hum,
aur waise bhi rahein hai kuch sansargsheel kum,
to pasara bhoojal ki duniya main hamne apna jaal,
par idhar bhi moolya roop se nishfalta hi huwi praapt.

Phir ek din dekhe ek hasta chehra, aur soche,
waah bhaiyya, ye to hai bada sunehra.
Phir kya tha, bhej diye unki profile pe anusmarak prastaav,
teen saptah paschat unki choti behen ne kiya sweekar,
andar se huwe hum kafi prasanna,
aur kuch bechaiyn hoke unke pitaji ko phone lagaye.

Baapuji bole, 'apna profile batao, hum dekh kar batayenge',
aur maine man-hi-man socha, sweekar karte waqt to dekha hi hoga?
Khair, ek aur hafta ruke, aur koi call nahi aaya,
to frustration main hamne swayam call lagaya,
aur bole, 'Uncle, kya huwa, kya aapko hamara prastaav bhaaya?'

Uncle bole, 'Aaj kal hamari sukanya yahi chuttiyan mana rahi hain,
ham unse baat karke tumhe batate hai',
aur phir callback karke unka number hi de diya.

Huwe to ham aur bhi prasann, aur phir kuch aur ghabra kar,
agle hi din khushali ki talash main kanya ko phone lagaya.

Thine eyes...

Thine eyes,
was there ever such a mirror as these?
A vision of your soul they show,
an image of the hopes and desires
that lie beneath.
Dreams of love and longing,
hints of warmth and belonging.
Thine eyes,
was there ever such a mirror as these!

Sweet innocence your face,
trusting your dainty touch,
and thine eyes, thy sweet-sad eyes!

One Amazing Thing by Chitra Banerjee Divakaruni

A candidate for a movie-script -- a series of short-stories really - a la Jhumpa Lahiri - neatly woven into a tapestry of a bunch of motley characters trapped in a building by an earthquake.

My favorite was probably the first - Jiang, now a gramma, recounting her days as a young Chinese girl in Chinatown who falls in love with a dashing Bong and how their lives are rendered by the Sino-Indian conflagration of '62.

Then there's the pathos of Mrs Pritchett - the well-to-do accountant's wife who tries to take her life when she realizes that their relationship is missing a deeper love - and the realization from an apparition that wells up from within her - that she was responsible for giving up her own dream and passion as the young Vivienne - to settle instead for a life of promised domestic bliss with a serious kind of bloke whom she didn't understand well enough to start out with.

The sub-story of Tariq, the ABCD (American Born Confused Desi) is probably the best fit for a Karan Johar directorial, set as it is in the backdrop of America post the twin-tower bombing.

A motley set of individuals, each confronting and baring their desires, shortcomings and heartbreaks. A sweet recipe for a movie-script. i'm surprised it's not been picked yet.

The ending is left a bit open.
To paraphrase, 'The iron-boot clad giant thumps overhead as Uma begins the end of her story'.
I take it that the aftershocks set the tremulous roof crashing over the group and they all perish.
What's your interpretation?

A Tragedy Relived & Outlasted...

In a country where life is cheap and social trauma fast forgotten, I still felt a cold shiver reading a recap of the events of 26/11/2009. It was unthinkable when it first happened, it stays equally shocking today. Ajmal Kasab's hanging and the excellent reporting by ToI, while it brings a little emotional closure to the tragedy, also throws into relief some key issues.

1) For every tragedy there are some unsung heroes. Take ASI Tukaram Omble. His almost primitive act of leaping on and holding onto - in the face of certain death - Kasab whose AK47 was blazing away. Had it not been for this adrenaline charged act, Kasab would have never been caught alive.

2) Which brings on the corollary - it is really insignificant that the Government spent nearly 50 crores (going with the unofficial estimate, which is usually more tenable than the official state figure) on keeping Kasab alive and his prosecution these 4 years. Yes I would've liked Kasab to hang earlier and save that cost.

And even ignore the national outrage over the attack that resulted in a pilloried national executive and PM Manmohan Singh - lambasted for not taking on the obvious perpetrators of this social crime.

After all the loss of life and trauma, what matters most is not that our individual or collective desire for revenge be satiated. What really matters is, through a painstaking inquiry under Judge Tahaliyani, the innards of the conspiracy behind this attack were laid out for all the world to see and judge.

True our judicial system allows too much leeway for a criminal to retract his confessions (twice in case of Kasab), but the skeletons of organized terror that tumbled out, coupled with the enormity of this case and the multitudes that have been tracking it, has made us aware as a society of the dangers that lurk around us. 

For once we see, how easy it is for someone to rend the fabric of our peace. At once we have been reminded to stay watchful. And once more have we come to see that individual acts of valour - Omble for holding Kasab alive, Vishnu Zende for announcing warnings and saving commuters at CST, Judge Tahalayani who worked holidays to conclude a fast track trial in exactly a year and delivered a judgement that the Supreme Court recommended for inclusion in the curriculum of the National Judicial Authority - often unheeded, make an immense difference to our lives, and make us bow our heads in gratitude.

A tremendous price to pay for the world to finally sit up and take notice of the state-sponsored brand of terrorism that India continues to suffer at the hands of rogue military states.

Memories of a Vacation

God knows how badly I was in need of a break from routine. Two years since my last vacation, I was getting a bit grumpy in general. Landing in Goa, the drive from airport to resort itself seemed to kick-start the recovery process. Cool, soothing breeze (at 3 pm) -- I later learned it'd rained the previous day -- rolling in from the window, lust green fields and foliage all around, village homes with their distinctive local architecture dotting the roadside. The roads I used to decry during previous years as potholed - now so smooth and even - they'd been resurfaced after the monsoon perhaps. They put the current state of roads in New Bombay to shame.

Back in our familiar resort, settling into a nice big apartment with a master bathroom that outsizes the biggest room in our home in the city. The resort has  nice little store - well stocked - so I pick up a bottle of port wine, a pair of swim trunks (only used the pool once, but it was worth it), bread, and (seen and tasted after ages) Amul Cheese Spread. My maternal uncle supplies two jars of my favorite Alphonso Mango jam. It's amazing how good toasted bread and cheese-spread & jam sandwiches feel at breakfast. We still follow it up with breakfast at the resort restaurant. Small wonder I tip the scales an extra three kilos by the end of the vacation. Fish, cashews, good food - oh we ate!

And relaxed! Long strolls by the beach, sploshing in the waves as they gently break on the beach. Felt at peace - a sense of just being and melting into the vastness of the universe. I wonder why the sea is so calming. Maybe it's immensity makes one's bothers seem insignificant. Maybe it's the sound of the waves - constant, soothing. Maybe it's the feeling of one's feet sinking into the sand and sploshing in the water. Who knows.

Back from a peaceful and refreshing vacation. Was hoping our adoptive cat was okay. Had requested the neighbour to feed it in our absence. But apparently poogie didn't feed out of her dish and disappeared altogether after two days. It's now the fourth day since our return but still no sign. Hope the little bugger is ok and returns soon.

Had been living without a regular camera for a long time (was using the smart phone till it conked - but doesn't compare with a dedicated cam). Got a digicam some months ago and put it to good use on the vacation. There's a lot to be said for high-res, good quality snaps that come out of an adjustable focus camera lens. Even more to be said in favour of printing and distributing prints of pix among friends and relatives. Reliving happy memories and sharing good times is what keeps us going and healthy. Something we've generally cut back on since the transition from film roll to digital clicks. Sure almost everyone we know is on Facebook now. But there'll always be a generation that hasn't completely bridged (the latest) wave in the digital divide, and some folks who have a preference for tactile. Or maybe it's just me that's a bit old-fashioned.

Of planes, bitches and beaches

a simple vacation... an eyeopener that provides many insights.
Just how dependent have we become on electronics. I sat up till 1.30 am this morning, packing and repacking. Repacking?  There's this marked preference for travelling light, instilled in me by my father, in our joint amazement and ridicule of, the mountain loads of luggage that the average Indian family carries on flights and vacations in general. You know the sight -- trolleys laden with bags that would take a strongman to lift  -- bags with dimensions that might give you a hernia at the thought of lifting them off a baggage carousel. So we always ganged up on my mother to get her to reduce the load that a woman feels inclined to pack on a trip outside home -- namely the urge to transport home with her.

anyhow, on this occasion, my mission was to reduce two bags to one. which i did, at the expense of some shuteye. (that I was industriously engaged in this endeavor till the wee hours -- and I'm someone who loves to snooze - should tell you how obsessed i am with travelling light).

but i digress. electronics! i needed my laptop yes, as I had some work to tend to during the vacation. but i also wanted to take advantage of the free time to listen to audio books,  music, catalogue my collection and cleanup some deadwood. so that meant i'd take my dedicated juke box (a netbook) along, and also my mp3 player for listening to before bed time. and of course what's a vacation without a camera. and then there are cellphones and chargers, and the camera usb cable/charger adapter. and of course i'd like to be able to do some reading on the beach or the bus, so there goes the kindle and it's cable. oh and the laptop adapters, and mouse! at the end of this my backpack felt like it was loaded with rocks! luckily it's built pretty sturdy and didn't give way. but in the end, i realised i'm packing as much electronics (or more), as I have clothes! so much for travelling light.

at the airport, was forced to catch sight of (they were in the waiting lounge standing next to their kids seated in  the row of chairs directly facing me), some hot young mothers. Young girls really, wedded into rich money, dressed ultra-stylishly in minis, and the most expensive clothing and accessories from head to toe. didn't hurt that they weren't too bad looking either -- which would explain why they were married into rich money. but i digress again. they had with the three kids in tow, a nanny -- who herself was a young girl, quite pretty by any standard, and well dressed -- like a trendy teenager from any upper middle class family. Now this nanny's job profile was to take care of the feeding and play activities of the kids, while the mother's themselves played out their part of bored, rich ultra-mod babes (mommies, no! eeks! just babes with kid appendages.) It was amusing. and i'm willing to bet those kids will grow up with complexes or maybe lack of affection towards their natural mothers, or worst case a bunch of people who treat affection as an object that is up for sale, like a trophy wife.

back on the beach after nearly two years, it doesn't cease to amaze me, the power of transportation, whether physical or ethereal, like the communication of ideas. just this morning i was 300 miles away, and now here i am with the waves shifting white sand under my feet.

Standing with my face out to the ocean, watching a red sunset, listening to the rough yet soothing crashing of the waves. the sea meeting the horizon with a tranquility that brings the edginess of my mind into relief. that's when i sense the insignificance of my being. the elemental nature of the thing that is me. lying in those cool white sands i wonder how far removed I am from my essence. staring into that vast infinity of the ocean, i glimpse both insignificance and potential. But i cannot absorb that potential, unless i empty myself first. and so i go to the infinity of the ocean, to empty myself on it's shores and to breath in again, anew.

Riding on the wrong side of the road...

Got back to cycling after a two week hiatus.

KH (Kharghar Hill) is off limits during the monsoons - they block the roads for safety from rockslides - so missing that beautiful 6 km climb.
Got restless by evening and took the bike out for a spin in Kgr (Kharghar) instead.

On my last climb of KH, had spotted from the top, what looked like a good uphill trek opportunity. The entry point is a bylane that starts right before the Kgr Valley Golf course.

So I pedalled upto there and explored as much of the bylane as I could. The bylane turns out to be a a rocky road strewn out alongside the surviving table top hills in this extension of the Sahayadri range. The passage hugs the perimeter of the golf course, all the to a valley in it's backyard. Could afford many opportunities for hill climbing at a later date, for now just a little off-roading adventure.

Pedalled out of there and back into Kgr, passing the entry point for Pandavkada falls, which is more like an extended car parking zone right opposite Central Park, with people enjoying the drizzle and charcoal roasted corncobs on the sidewalk.
Right after Tata Memorial Hospital, there's a brand new tarred stretch of road that's currently closed to motorists, stretching upto the other (village) entry point for Pandavkada. Felt beautiful cycling there without the road bumps. Smooth, virgin road. At the end, I caught up with a rainbow.

Cycling back, I rode, on the wrong side of the road. Primarily to feel safer against the onslaught of increasing traffic in the evening. But it really felt scarier with bikers and cars trying to overtake in the slow lane! You also get to take in addition sights - apart from the natural beauty - lassies doing photo shoots,  and somewhere, a couple making out in their stationary car - now I'm not one to ogle or interrupt, I just happened to glance as I stuck to the extreme right side of the road.

Reached home and washed down my bike and me, both mudcoated from the ride. Discovered later, that I had quite the rooster trail - from the seat of my pants to the back of my head. So I'm definitely getting a set of mudguards before my next ride.