ValuePickr Forum

VP CHINTAN BAITHAK GOA 2015: Anant Jain: OFF MARKET TRANSACTIONS

Time to be amazed by yet another Young Turk at VP - Anant Jain.
This guy is the only guy I know who specialises in Off-Market Transactions. In fact if I am not wrong, before he accidentally discovered VP, he was mostly doing off-market transactions only, and very profitably, thank you!

Off Market Transactions-Anant Jain-VP CHINTAN BAITHAK-GOA 2015.pdf (381.2 KB)

This is a short and sweet very - crisp presentation, but there is GOLD in it :smile:
I have been making noises to Anant for about a year now, that I want to break my comfort zone and do something here. There is enough in this presentation to make me think - time to ACT!!

Over to you folks and Anant. Enjoy!

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Thanks @Anant, Very insightful stuff.

Correct me, if I am wrong? Would the brokers specializing in Off-Market Transactions be classified as “Market Makers”?

Only buy companies only where there is a high chance of listing in
next two years.

With reference to the above point, are there any restrictions between the time DRHP is filed and the IPO offer date is formally announced?

I would like to try it out for the upcoming IPO on Nuziveedu Seeds (NSL) which also has Regen PowerTech (Inox Wind competitor) as its group subsidiary.

@crazymama Not exactly. Frankly they do not care if a scrip gets listed or not. For example RBL bank has been trading since last 3 to 4 years and some companies like Lux Industries from the Kolkata stock exchange became dysfunctional.

I think DRHP expires after six months of filing and you have to file it again after that. SMC Global has filed DRHP multiple times in last few years.As far as Nuziveedu is concerned I do not think it has been traded ever by the brokers who I interact with.

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Thanks for the clarification.

Disappointed to know about Nuziveedu not being traded. :disappointed:

But wrt the “Market Makers” query, I think they are not the same.
NSE has provided a list - http://www.nseindia.com/emerge/participants/content/sme_mm_list.htm

Its a good strategy .I made good money using it in Oil India Buying shares from its employees in physical forms @300-700 before IPO but missed out in OMDC.There are some brokers who accepts or offer demat shares only making the transactions quicker.

I have a large no of scrips lying in physical forms like Iggi Resorts,Uniworth textiles and otehr pieces of paper collected mindlessly during IPO boom of 90s.Any hope?recently sold off kanchi karpooram at 41 after it got listed.

Hi Vivek,

Generally they are worth nothing. I have my share of papers. Incase any of the companies that you have are the once which were listed on regional bourses and have not disappeared do let me know. I can try finding out about them.

May I please know what type of off-market transaction does ICICI lombard and ICICI prudential, HDFC Standar will fall under ? ICICI Bank currently owns its insurance division. Sorry for being ignorant.

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These insurance companies have issued ESOPs to their employees. Some of the employees look for exit options at better prices than offered by company buybacks if any. For example ICICI Prudential offered two buybacks one in 2008 at 400 odd levels and one recently at 220

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US has many online marketplaces for off-market transaction. Its very easy to buy and sell in these online marketplaces. How about India ? Are there any online marketplace or at least a legit broking house where we can get help on these ? Please advice.

There is a platform called BSE/NSE Dissemination board where companies delisted from regional stock exchange can trade. I have not participated there. Beyond this there is almost nothing like a market place. I do not know if there is a legit broking house which does this. There are some folks who do have an online (3A securities, Abhishek Securities, Kajaria Securities) presence but they are mainly into luring retail investors to sell them at very low prices.

Price at listing time is surprisingly close to listing price

I didn’t get the meaning of this statement. You mean the price just after price discovery ? Can you please elaborate more ?

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For example in some of the scrips that I have worked with a lot of times the listing price was very close to the price at which these got traded in off-market. JMA was traded at 180 levels just before it got listed to NSE where it got listed around similar price, Same thing happened with some other stocks. This is just to inform people that securities traded off market may not necessarily have a price advantage when they get listed. Further price discovery after listing can also take some time.

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got it. thanks for the explanation.

Anantji, !Such an insightful presentation.very interesting topic.Thanks for sharing :smile: .As many guys who don’t have much exposure to this particular strategy will have a little difficulty to grasp the matter :sweat: will you please share names of some brokerage houses etc who can aid in off market transactions…as you have mentioned most stocks in this category tend to be value traps…how should go about choosing the right company…wish we could have more information about the platforms,tools or even some mental models for this arena…guess I am being greedy!Thanks again for introducing us to a new avenue!

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First of all you need to understand why would you like to invest in Off-Market companies. You should be very very clear in your head, I have mine. Information digging and collaborative work is way more difficult here and entry/exit spread makes it worse. Further if you are in a liquidity crunch the spread could hurt you even further. Very few companies offer a spread of 2% to 3%. The reason I did not put up brokers contacts is again because most retail investor get a raw deal from brokers, and believe me the brokers are very smart here. I have made my share of mistakes but I just got lucky.

Now with all cautionary statements in place there is no difference in choosing a company here vs in the listed space (MQ/BQ) except that the listing visibility introduces another new variable. As I mentioned in the presentation sticking with quality along with two years of listing horizon is my idea of right company.

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Today’s ET reports that there is some issue for the RBL to be listed as they have not followed SEBI regulations while issuing shares on earlier occasions. It seems there is a question mark on now on the IPO which was about to happen. How would such news impact the off market prices? Is the behaviour similar to listed securities? Would this cause a fall in the off market prices? As there are no circuits, are the falls sharper?

I do not think there will be any fall because it hasn’t moved muchafter the listing announcement. RBL over the last year and half has moved from 120 levels to 205 - 215 levels. One of the reasons for no change in price is also because the expectation is that the IPO price would also be in the range of 190 - 210. In their DRHP they have mentioned that they are likely to offload a max of 2.5 crore shares aggregating a max of 500 crores for an existing investor (besides new equity), this has resulted in almost no price movement.

Thanks Anant. So does it imply that off market volatility is lesser?
Not much movement on good news or bad news. Or would it depend on case to case basis?

Generally the volatility is lesser. As I have mentioned the volatility is generally confined to a very few scrips. Incase of RBL bank I think this should have a very minor impact (or zero impact) on listing since the reported transactions happened prior 2008 and before the new mgmt. took over. Also the size is very small (around 2.5 lac shares allotted). Good part is that the current management disclosed all this info in the DRHP.

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Anant,

Do you exit these scrips before listing. Or Do you hold and sell a few yrs after the listing.