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Sunday, January 29, 2017

Is it fair for DCB to extend ESOP exercise period due to strategic change?

A niche private sector bank DCB(Development Credit Bank) was named by Motilal Oswal in its annual wealth creation study as a potential 100x bagger, subject to management validation :D
In Oct-15, they announced an ambitious plan(http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/22B0BC71_2E4B_42AF_8CE5_3CABA08280AE_171649.pdf)  to double their branch network in 12months. They had even stated upfront that this investment would pay back only in 3-4 years. Unsurprisingly, despite their detailed planning, the stock market punished them by hammering down the stock by ~50%. Then the management rolled back the plan and said they would consult the analysts going forward  http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/6577829A_1250_4D5C_AE43_DF6253C10D48_080642.pdf

Things settled down and the stock has nearly returned to its earlier levels. However, while reading the annual report, I came across this nugget indicating repricing of stock options 
During the year under review, the Bank has extended the exercise period from 5 years to 8 years from the date of vesting for all the unexercised options in force, as on July 1, 2015

I could not locate any specific shareholder approval for this measure, and it appears this was done to protect employees from their underwater stock options(remember the shares as at Mar 31,2016 was trading at ~Rs 70/share vs earlier levels of 140). This is quite sad that the 3yr extension was given without revising the exercise price upwards. Where is the skin in the game for the management to feel the pain like equity shareholders? Ironically, this extension happened even when the stock price was way above the weighted average exercise price of Rs 47(as at 31 Mar 2015), and hence most options would not have lapsed. 

Dr Vijay Malik has explained the volte face of the management very beautifully in his blog post

Tuesday, January 10, 2017

Value Investing Courses for Indians-some guides

Ok I admit it. The title is kinda clickbait to draw folks like you to this post. But having come here, why not spend 2min to decide whether it is worth while? While everyone feels their situation is different, that of the Indian markets is especially so. Like Ambit Capital opined in their Nov-16 report, while earnings yield of value stocks looks attractive, these stocks display limited potential to actually realise those earnings given their declining return ratios, excessive leverage and poor accounting practices. While the rising tide of demographics, reforms, zero interest rates driven liquidity lifts all boats, value investing is good to know to avoid being caught naked while the tides go out. For those interested in a detailed overview, read responses to the question on Quora.

Below are some links. Do note I do not specifically recommend any of these, so please do your due diligence

Distance Learning-Paid

Distance Learning-Free

Classroom Training/Workshops
http://www.flame.edu.in/academics/executive-education/fil-with-the-masters This is invite only
Valuepickr forum members sometimes meet up in cities like Mumbai, Kolkata, Delhi, Pune. Try and attend these meets.

https://www.linkedin.com/pulse/value-investing-internship-2016-ankur-jain  Might be one-off but for those serious, worth a try