Anant, Could you elaborate on the taxation part. How is it different from the listed securities we buy / sell via stock exchanges?
Some I have exited before listing mostly due to price realization and my understanding of quality (eg. Lux Industries). Courtsey VP. Some I have waited for listing (eg. JMA) and exited on NSE. RBL I am holding and willl continue to hold until/post listing.
Taxation part is very different depending on the kind of scrip. I am aware of following:
a) Capital gains from delisted companies (voluntary delisting eg. RBL)/unlisted companies (eg. ICICI Pru) depends on your bracket (can go upto 30%).
b) Capital gains from companies listed on non-functional stock exchange are 15% for short term gains and 10% from long term gains.
This is to the best of my awareness. Do consult an auditor on this.
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I approached a broker for RBL Bank a while back. He said, We need to sell before listing or hold for at least 1 yr post-listing. Apparently that is the regulation. Employees who have been issues shares pre-listing are exempt. Is this true?
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Anyone buying shares prior to 1 year from date of listing will have a lock-in period of 1 year post listing. This information is also present in the EGM document that happened last year in October 2014 Also there is a SEBI regulation around this.
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Regarding employee ESOPs I am not sure how that works. I have heard multiple versions from employees/brokers.
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Anant -
I was interested in ICICI Pru Life. One of the market maker quoted Rs 270/share (min 500 shares); almost 25 times its earnings. One of your criteria says promoter holding should be less than 55% and the spread be less. I’m note sure if that is a raw deal that is being offered.
How is the liquidity in ICICI Pru, is it as same as RbL bank? Why would ICICI do a buyback if their holding is already over 99%? If the recent buyback was at Rs 220, can anyone else (other market maker) offer a better deal than Rs 270? There are two blocks: the guy wanting over Rs 220 and the broker wanting a higher spread. any idea if they are planning to list anytime in near future?
Thanks
ICICI Pru does not have liquidity like RBL where the normal public also had a lot of equity (RBL had nearly 10000 shareholders ICICI Pru has only 300). The spread is around 5%. ICICI did a buyback just to ensure that the employees can get into cash (if they want to). They did not do a forced buyback (which I have seen in a lot of companies like Nirma, Tata Technologies) . For the spread you should ask your market maker his buy price (incase you want to buy) and his sell price incase you want to sell.
There listing IMO is still 2 years away.
Thanks Anant.
How does HDFC Standard, ICICI Lombard stand with the spread and valuations? Would I get a chance to buy after say 5-6 months (or a different time frame) at a better/same price.
HDFC Standard and ICICI Lombard are worse off in terms of liquidity. Regarding price I cannot predict anything just like normal markets. Have seen ICICI Pru vary from 450 to 160 and currently at roughly the price your market maker has quoted. Just think of these as less liquid scrips in the markets and how they behave and how will they fluctuate if someone puts up a huge buy/sell order.
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Thanks Anant. That market maker will not say how much is the spread for the stocks he is doing service. First he asks how does it matter and second time around didn’t even care to reply. Seems shady to me though I am interested in owning ICICI Pru Life.
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Hi Anant,
Thanks for the presentation. I wondered about your views on INDIAN WOOD PRODUCTS-listed in Kolkata Stock exchange but not quoted regularly(last trade happened in 2013). Would you know anyone interested to buy these shares at Rs 60, and what are the safeguards you would advise for the seller while transferring shares?
Anant
One of my acquaintances is in possession of Lux Hosiery shares. The brokers are offering a sum of Rs. 1700 per share. Can u please advise if its a good deal and that whether he should take it. A few months back they were offering Rs. 1400. Why the sudden spurt, no idea.
Regards
I cannot advice you on hold or exit it is a call that your acquaintance have to take. The valuations can be compared to the listed Rupa & Co or Maxwell Industries (make sure you understand their balance sheets and cash flows). The sudden spurt is due to promoters plans of getting listed on BSE/NSE they gave an interview to ET Now in which they said the same (second hand info). Personally I do not like their balance sheet, ocfs, debt, again this is a sectoral structural issue and the same applies to Rupa, Maxwell and the other player Dollar (unlisted). Incase of Lux the majority of last year’s EPS increase has happened due to a write back of depreciation.
Shares of unlisted companies beat returns delivered by listed equities
By Shailesh Menon, ET Bureau | 24 Jul, 2015, 06.52AM IST
MUMBAI: Priced a little over Rs 60,000 each, shares of Tata Sons are the most coveted in the informal market for unlisted shares. Avid investors like Indra Bagri of Kolkata — he owns shares in over 300 unlisted companies, but not a single Tata Sons share — are willing to pay a small premium for it. “It’s almost impossible to get it as the supply is so limited… Individual shareholders do not want to let go of Tata shares,” he said.
Tata Sons is among several unlisted companies that have seen a surge in demand and a resultant rise in share prices over the past one year. Shares of unlisted companies such as Tata Technologies, RBL Bank (Ratnakar Bank), Tamil Nadu Mercantile Bank and ICICI Prudential Life and Lux Industries to name a few, have appreciated 50-60% over the past one year, clearly beating listed equities which yielded about 10% at index levels.
Shares of unlisted companies beat returns delivered by listed equities(See table for share prices) No formal market exists for trading shares of companies not listed on stock exchanges. But low volumes of such shares are occasionally traded through an informal network of mainstream stock brokers. A few specialised brokers also deal only in unlisted shares. Occasionally, institutions like public sector insurance companies issue ads to sell such shares. “There’s demand for quality unlisted companies in the market. Companies with good fundamentals are changing hands at high prices,” said Neeraj Kajaria, managing director of Kajaria Securities. “The supply of unlisted shares has gone up from institutional side.”
Most of the time, savvy investors like Bagri buy unlisted shares for their high dividend payouts. Companies like Tata Technologies (a Tata Motors subsidiary), according to investors, pays dividend in the range of Rs 40 -Rs 45 per share during years of good profit. “Most unlisted companies pay good dividend; it’s always much more than dividends paid out by listed companies,” Bagri said. Institutions such as RBL Bank, ICICI Prudential Life, UTI Asset Management and HDFC Standard Life are amassed by investors in hopes that these companies would go for listing in the future.
For example, Kudremukh Iron Ore Company, a public sector undertaking, is riding high on account of government’s disinvestment programme. Shares of bourses — Madras Stock Exchange, Delhi Stock Exchange and Calcutta Stock Exchange — are bought keeping in mind their large real estate assets. Shareholders in these exchanges expect huge profits when these exchanges get disbanded. “Share price is dependent on company fundamentals, demand for the stock and available supply. If the company is well-managed and pays good dividend, prices would always be very high,” said Manish Mittal, MD of Mittal Securities.
State-run insurance companies and banks are the biggest suppliers of unlisted shares in the market. Unlisted shares also enter trading circles when employees dilute their stock options prior to their company getting listed on the bourses. Private placement of shares (to individual investors, especially HNIs) also increases the float of unlisted shares in market.
“There are several ROC-listed companies that have issued shares to outsiders. Some of these are very strong companies, well-managed and highly profitable. There’s lot of value if you manage to pick the right company,” said Sandip Ginodia, owner of Abhishek Securities, which specialises in delisted and unlisted shares.
Disc : Hold some RBL shares
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How do we buy these?
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Have few shares of RBL which I wish to exit. Can you please pass me contacts of few market makers you deal with so that I can connect with them. Thanks
Hello All,
I was researching on a few unlisted companies recently. I am getting stuck on one aspect which is valuations. Say for example, a particular unlisted co. is planning for an IPO in near future, then the current shareholders’ holding will get diluted. So in such a case, how do we calculate the relative reduction in dilution and its effect on the current shareholders return?
Thanks in advance. Posted this here as I did find some discussion on it. Administrator can remove the post if needed.
@jigar_punamiya, dilution in shareholding via an IPO or any other manner does not impact the returns of the older shareholders, because the company also gets cash in return for the new shares being issued, causing a rise in the company’s valuation to that extent. Or in other words, 100/10 is same as 120/12 
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I also have a few RBL shares and want to exit them. Please let me know if you find any reliable Market maker.
Hello Anant, have u tried any of above online broker?