TEN REASONS WHY ONE SHOULD NOT INVEST IN SKS MICRO FINANCE IPO

1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.


2. Unsustainable business model: The business model will not sustain in the long -run.


3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.


4. Look at the salary of top executives :

Suresh Gurumani - Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.

Dr. Vikram Akula - chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.


5. Mohd. Yunus says - “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”


6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.

7. Government /RBI will not be mute spectators to the exploitation.
They are bound to regulate the segment. This will make the business un- attractive.


8. Financial inclusion initiatives taken by the public sector banks will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.




9. The average cost of acquisition of shares by promoters is less than Rs50/-The Company has limited period of history and no dividend payment record.


10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.
  
FOR IPO ANALYSIS OF SKS MICRO FINANCE LOG ON TO  FIRSTCHOICEIPOANALYSIS.COM

MICRO FINANCE LENDING

It is sin to charge interest @ 26-36%p.a. on the monies lent to the hapless poor and the down trodden. These MFIs are no better than the blood sucking money lenders. The argument that we can not lend below 26% holds no water. The fact remains that the MFI s are in business to make more money by exploiting the situation. MFIs should function as NGOs. If you can not do business like an NGO do not do that, no body is forcing you to do that. The government is bound to regulate interest rate. That will happen sooner than you think. The MFIs which are not functioning on the lines of an NGO will crumble. These MFIs will realize their sin. If you want to help the poor, lend it like an NGO. Even if you lend it 10 people it is a noble work.

IPO ANALYSIS: HINDUSTAN MEDIA VENTURES LIMITED – SOARING CIRCULATION, STRONG BRAND EQUITY - INVEST

One of the leading print media company, which publishes, among others, ‘Hindustan‘, the third largest daily newspaper in India, in terms of Readership, with a Readership of 9.3 million readers. ‘Hindustan‘ began publication in 1936, during freedom movement and has been one of India‘s eminent Hindi newspaper dailies for over 70 years. ‘Hindustan‘ has the largest Readership in key Hindi-speaking markets of Bihar and Jharkhand, with a strong and growing presence in Delhi NCR and the states of Uttar Pradesh and Uttarakhand. It is one of the fastest growing Hindi daily newspapers in India.

‘Hindustan‘is presently printed at 16 locations in the states/regions of Uttar Pradesh, Bihar, Jharkhand, Uttarakhand, Punjab and Delhi NCR. The distribution of newspapers takes place through a multi-tiered network of agents and vendors.

They also publish two Hindi magazines, ‘Nandan‘, a children‘s magazine, and ‘Kadambini‘, a general interest magazine. The company also operates the website, www.livehindustan.com, which focuses on providing news in Hindi with regional content.

ISSUE DETAILS:

ISSUE OPENS/CLOSE ON	05-07-10 / 07-07-10
ISSUE SIZE/FV	RS 300 CR/ RS 10
PRICE BAND	RS 162-175
BRLMS	EDELWEISS,KOTAK MAHINDRA
PROMOTERS	H T MEDIA LIMITED

  

FINANCIALS - RS IN CRORES

	08	09	31-12-09
REVENUE	16.85	17.73	52.14
NET PROFIT	0.28	0.19	3.57
EPS	0.70	0.28	5.11
RONW	2.54%	1.74%	21%

OBJECTS:

The objects of the Issue are to raise funds for (1) setting up new publishing units (Rs 66cr) (2) upgrading existing plant and machinery (Rs 55cr) (3) prepayment of loans (Rs153cr)
CHALLENGES:


The Indian newspaper and magazine industry, particularly the Hindi newspaper and magazine industry, is intensely competitive. In each of the markets, the company faces competition primarily from other newspapers and magazines for circulation, readership and advertising. In addition, there is competition from other alternative forms of media including, but not limited to, television broadcasters, magazines, pamphlets, flyers, radio broadcasters and internet websites. These other forms of media compete with newspapers for advertisers and for the time and attention of the readers. Ad-spend by the advertisers and the ability to attract new advertisers is influenced largely by the circulation and readership, the geographical reach, readership demographics of the newspapers and the preference of advertisers for one media over another. Pricing in the short term may be affected by the Circulation of the newspapers and magazines among the readers which is an important source of revenue for the Company since its derives significant revenues from subscriptions and sales. In addition, circulation and readership significantly influence ad-spend by advertisers and the advertising rates in the newspapers. Circulation and readership is dependant on the quality and reach of the publications and the loyalty of the existing readers. Circulation in the Indian market is also largely affected by price and, therefore, the circulation of the newspapers may be adversely affected if the company fails to meet any price competition.

Changes in technology may render the current technologies obsolete or require the company to make substantial capital investments.

STRENGTH:

• Hindustan – Strong brand recognition.

• Emerging as a leading Hindi daily with leadership in key markets.

• Ability to successfully launch ‘Hindustan’ daily - in new markets.

• Strong relationship with Advertisers.

• Ability to provide local, national and international news with quality editorial content.

• Credible editorial team.

• Modern and advanced printing and technology infrastructure.

• Synergies with HT Media Limited.

• Strong management team.



RECOMMENDATIONS – INVEST

HMVL is a professionally run company and focuses a lot on adopting good corporate governance practices. It is a subsidiary of HT Media, which has been acknowledged as one of the top 25 companies adopting good corporate governance practices for 2009 by the Institute of Company Secretaries of India. HMVL draws its governance practices from HT Media itself and is expected to have similar robust board practices. HMVL
has a completely different senior and second line of management.

BHARAT BANDH: WHY CANNOT OPPOSITION RULED STATES REDUCE VAT.

The BJP and some other political parties have called for Bharat Bandh on 05-07-10 against price rise and for increase in prices of petroleum products. Assuming for the sake of argument, that Center's policies are flawed and the present UPA government is anti-poor. Among others, VAT constitute any where between 24 -33% of the petroleum product prices. VAT is a state subject and the respective state governments have the power and authority to slash the rate to zero level if they are so concerned about the common man,for whose sake the strike being called.
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DOES OUR BUSINESS HOUSES HAVE SOCIAL CONSCIENCE

The Indian business houses do some charities as a public relation exercise. They do not spend from their personnel wealth. Whatever money spent is accounted in the books of the company or its subsidiary or a SPV created for publicity. We need lot of funds in the field of education, basic health care, housing and infrastructure, particularly in the rural areas. The corporates are interested in enriching themselves in the name of creating value for stake holders. We have business magnets who are ready to invest up to Rs 1000cr for a housing complex for themselves and for their beloved ones. Lakhs of houses can be built for the poor even if 10% such amount is earmarked for social cause.This is only an example. Business magnets spend mind blowing money on marriages, birthday parties / other parties.They have left the uplift of the poor entirely at the mercy of the selfish politicians. No one is worried about the poor. Expecting the Indian businesses to follow the Buffet and Bill Gates philanthropy is a mirage.

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