SEBI BARS 3 MERCHANT BANKERS AND 7 COMPANIES FOR IPO VIOLATIONS.

At last the watch dog has taken some action. First Choice IPO has been warning the investors about the nexus of Issuers and Merchant Bankers for the last 3 years. We have been repeatedly advising to stay away from such IPOs. Price rigging on listing day and dumping of the shares subsequent days was regular pattern adopted by these fraudulent promoters and merchant bankers. The seven companies that have been banned are:

Name of the company	Issue price	CMP	First Choice IPO recommendations	Reasons for our recommendations
Bharatiya global	82	9	AVOID	Tainted promoters
Tijaria Polypipes	60	10	AVOID	Irrationally pricing
Taksheel	150	15	AVOID	Fraud IPO
RDB Rasayans	79	9	AVOID	Irrational pricing
One Life Capital	110	243	AVOID	Irrational pricing
Brooks lab	100	15	AVOID	Irrational pricing
PG Electroplast	210	183	AVOID	Irrational pricing

The merchant banker who have banned are PNB Investment Services, Almondz Global and Artherstone Capital.

IPO ANALYSIS: GOODWILL HOSPITAL AND RESEARCH CENTER LIMITED : INFLATED MARGINS,QUESTIONABLE INTEGRITY, HOPELESS MERCHANT BANKER - AVOID.

ISSUE OPENS / CLOSES ON 30-12-11 / 09-01-12

IPO GRADE : GRADE 3 BY CARE.

PRICE BAND RS 165-175

Goodwill Hospital, which runs a multi specialty hospital of 220 beds in Noida under the brand Ojjus Medicare, is planning an IPO to mobilize Rs 62Cr for expansion. Each equity share carries one detachable warrant.

SPA Merchant Bankers Limited are the book running lead managers to the issue.

Goodwill Hospital focuses on core areas such as neurology and neuro surgery, cardiology and cardiac surgery with emphasis on joint replacements and sports injuries. It also provides other services like pediatrics’, diagnostic, critical care medicine, oncology and dermatology.

Goodwill Hospital was established in 2000. In Dec 2007, Ojjus Medicare Pvt Ltd took over the management and it was reorganized as a multi specialty hospital. Currently, Ojjus holds entire 100% stake in the company.

As of November 2011, the hospital has a team of 40 full time doctors, 94 nurses and 47 other medical personnel.

The hospital has installed ‘Perfexion’ – Gamma knife machine - for non invasive treatment. Goodwill is one of the few centers in South and South East Asia to install Gamma Knife machine also called fifth generation machine, which uses robotic technology to deliver precise radiation for treatment.

The Company intends to use issue proceeds for setting up of diagnostic center at Faridabad (Rs 16.22 crore), establishment of six polyclinics (Rs 33.97 crore) and repayment of loans (of Rs 10 crore).

Goodwill Hospital reported a net profit of Rs 4.33 crore on total income of Rs 16.08 crore in the quarter ended June 30, 2011. For the financial year ended on March 31, 2011 - company posted a net profit of Rs 15.72 crore and total income of Rs 53.58 crore, an increase of 471.6% and 134% over previous year, respectively.

RISK FACTORS:

1. Hopeless merchant banker. In the last 2 years, SPA has managed 4 IPOs and the current statuses are as follows:

NAME OF THE COMPANY	ISSUE PRICE	CURRENT PRICE
INFINITE COMPUTERS	165	61
PARABOLIC DRUGS	75	31
CANTABIL	135	15
SRS LIMITED	58	35

2. Funds requirements have not been apprised by any bank / FI, there are no definite plans as the company is yet to receive many approvals. Properties where they are planning polyclinics are not yet identified.

3. The project has already been delayed.

4. Very high debt equity at 3:1.

5. The company had earlier defaulted in payment of lease rental to a group company and there are corporate governance issues.

6. The promoters are non doctors and inexperienced.

VALUATION AND RECOMMENDATIONS:

As IPO was envisaged, the company in the last 3-4 quarters has reported robust numbers. However payment to suppliers and consultant doctors has been delayed which raises doubt on the revenue numbers and margins reported. An expert in the health industry opines, margins reported by the company are not sustainable.

More over the IPO is only to mobilize funds with no definitive plans.

IPOs from health care segment have not rewarded the investors in the past. Some companies like Noida Medicare and Malar hospitals have gone into oblivion. Fortis Health, Indraprastha and Birla pacific Medspa all have disappointed the investors.

INVESTORS CAN GIVE A MISS TO THE IPO.

SHORT COVERING PUSHES SENSEX BY 500 POINTS

Strange but true. Both the FIIs and DIIs are net sellers in cash market today. In spite of this Sensex was up by more than 500 points, largely due to short covering of positions by operators.

Moody's up graded the India's sovereign debt to stable. First up grade in the last 7 years. This news came after the closure of the markets. Expect some big ticket buying by FIIs in the coming days in the back drop of debt up gradation and softening of dollars.

EXPECT 100 POINTS GAP UP OPENING IN NIFTY

Sentiment across the globe has changed for better. Stocks in U S and European countries closed higher. Asian markets are expected to open and close in green. NIFTY may stage a 100 points rally today and another 150 points rally in the next 2-3 days. RIL, SBI, L&T, HERO, HINDALCO, ICICI, HDFC BANK, AXIS, Maruti, Tata Motors and Tech Stocks, among others would see renewed buying interest.

RELIANCE, TATA MOTORS AND CAIRN LEADS THE FIGHT BACK

NIFTY recovered more than 60 points from the intra day low, to close at 4623, still down by 39 points. Reliance which has the highest weight-age among the NIFTY stocks, lead the fight back rally with 2% gain. Tata Motors and Cairn were up by more than 4% each. Banks, Infra and the metals were the hardest hit. Axis, ICICI, SBI, L&T, PNB, RCOM and Tata Power - all touched yearly lows, before recovering a little. Turnover, in cash segment was more than the average turn over witnessed in the last two weeks.

L&T INFRA BONDS ISSUE CLOSES ON 24-12-11 : INVEST

L&T Infra, for the second year running has come out with the long term Infrastructure Bonds. This tax-saving bond facilitates to invest indirectly on a long term basis, in infrastructure projects across the country. By investing in L&T Infra 2011B Bond Series, investors can save tax and earn an annual interest rate of 9%.

The 2011B series provides investors buyback options at the end of 5 years and 7 years. In addition to this, 2011B Bond Series provides investors the option of holding the bonds in Physical or Demat form.

The bonds has been rated AA+ by ICRA AND CARE.

BUY L&T, ICICI AND TATA STEEL

The negativism on the euro zone crisis and expected GDP growth has been over done. The bears have taken advantage of both the external and internal factors and have created fear psychosis in the market. The coalition completion is making it difficult for UPA-2 to take major reform initiatives. The retract of retail FDI, the 2G scam and Lokpal logjam have added fuel to the fire. The market is driven by sentiments, news flow rather than the fundamentals. The situation locally or in the euro zone is not as bad as is perceived. RBI is likely to cut CRR rates in Jan 2012. Major policy decisions are likely to be cleared in the next 3-4 weeks. Markets have almost bottomed out. Stay invested in quality stocks.

In this series, First Choice IPO recommends to buy Tata Steel (Rs 364), ICICI Bank (Rs 673) and L&T (Rs 1061).

NEW GUIDELINES FOR ANCHOR INVESTORS

SEBI has modified and tightened the norms for allotment of shares to Anchor Investors, in an IPO. Hither to merchant bankers were using their discretionary powers to allot shares to favorite institutional entities as part of anchor investor(AI) mechanism. As per the new guidelines there should be minimum of 2 and maximum of 15 AIs for an allotment tranche above Rs 10Cr and up to Rs 250Cr, subject to a minimum allotment of Rs 5Cr per AI. In case of an allotment in excess of Rs 250Cr, a minimum of 5 and maximum of 25 AIs has been proposed. Shares to AIs are allotted just a day before the issue opens and are subject to 30 days lock in period.

The unscrupulous merchant bankers and the issuers were using this route sell the poor quality issues and rig the share price post listing. We have seen this happen in many recent IPOs.

GLOBAL CUES MAY HELP THE MARKET TO STAGE A SMART RALLY

The possibility of finding some solution to the crisis in euro zone, coupled with positive economic data from U S may help the Sensex stage a smart rally this week.

CONTRARY OPINION : SENSEX TO GROW IN EXCESS OF 20% IN 2012.

Leading FIIs including Citi, BofA-Merill Lynch, UBS Securities, Macuarie and Nomura predicts a gloomy picture for Sensex and NIFTY and they expect the bench mark index to fall another 20% from the current level. First Choice IPO differs with their prediction and expects the indices to to grow in excess of 20% in 2012. Global crisis is just a 'blip' says Prof Levitt, the author of the best selling book Freakonomics. And that is not without reason. Economies around the world have grown so much since World War II, unless there is something horrific on the horizon, which he does not see, people will look back these days as nothing more than a 'blip'. There is no doomsday looming on the horizon. It is only the extreme reaction to the markets by the so called biggies, that makes the problem look bigger than it actually is. And if one analyses the earlier prediction made by these FIIs, one can safely conclude that the market is headed in the opposite direction than what these experts think. There could be some slow down in parts of the world, but the India growth story remains in tact. Stay invested in top indices stocks.