What’s common between Sonam Kapoor and Firstsource Solutions?

29 Oct

What happens when a high debt company becomes debt free all of a sudden?

The same thing that happens to Sonam Kapoor when she lost a few tens of Kgs. after a crash diet.She became a mainstream actress!!

In a single stroke, or a with a 260 Cr. rupees glass of ENO Firstsource Solutions has cured its FCCB indigestion. I would really like to congratulate F.S. management for pulling off this coup! CESC shareholders should rejoice that their management has just made 13o Cr. rupees for them by buying F.S at a bargain price of Rs.12 point something.

But alas! Market is not excited by this nuptial.  FS and Sonam are still not the darlings of mainstream media and market respectively. Likewise, both CESC and F.S stocks have fallen after the news.

How is Firstsource solutions doing a Sonam Kapoor?

Well, it certainly seems so. From a point where they were goofing up their Forex hedges(I read their conf. call statements) and begging banks for long term loans to issuing 35% fresh equity in return for their Rs.260 Cr. to the RPG group. It seems like a classic Sonam Kapoor story.

It is like saying Vijay Mallya has managed to sell Kingfisher at a profit!!!! Never before have I seen such adversity converted into opportunity but for F.S.

Ok! So what’s the deal ?

The deal is simple. The stock of the firm is trading at around Rs.12. Before this transformation deal F.S’s book value per share was about Rs.30-32. After this deal it gets diluted by 35%. Meaning, it becomes about Rs.19-20. The depression of obesity(read debt) had depressed its price to record lows!

However, this sudden loss of flab fills our Sonam Kapoor a.k.a F.S. with truckloads of confidence . All we have to do is wait for Mr. Bhansali to offer her a role in “Saanwariya”. In market lingo, we have to weight for the market to put a fair price on F.S.

One thing is for sure, Vijay Mallya will never be able to sell Kingfisher at a profit!

However, there is a good chance that one might earn about 50% ROI on his investment in F.S. at its current price within a reasonable time(2-3 years).

Advertisements

2 Responses to “What’s common between Sonam Kapoor and Firstsource Solutions?”

  1. Soniya Sharma October 31, 2012 at 7:33 am #

    Liked the comparision u hav managed to bring in…

  2. Rihan December 19, 2012 at 11:51 am #

    nice parallel

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

DIY PR guide

Settle in Canada

Capital Mind

active investing

Quest for Value

Price is Everything. Price changes Everything

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics

%d bloggers like this: