L&T is dead, long live L&T

protrade

Well-Known Member
#11
As an aside, I've wondered why there's so much discrepancy between the brothers. Both got equal opportunities, right? Honestly, I'm not making light of somebody's misfortune. Could this be an explanation for traders' performance, too?
To a very large extent, Mukesh Ambani is responsible for Anil Ambani’s fate in 2 ways.

ADAG had a deal with RIL, to supply gas at cheaper rate from KG-D6 to Reliance Natural Resources. But Mukesh used his connections in government to scuttle his obligations to Anil, and did not give the gas to Anil. Anil filed a case against this, saying, if there was a loss to government, RIL should bear it. Which was a strong case. But SC ruled in a weird judgement that the Production Sharing Contract RIL signed with the government would rule the private agreement between RIL and RNR also!

Just imagine - PSC says give X% to government, rest is yours. SC said that even if the rest is yours, you can’t do anything with it as per your choice. You have to sell it at government mandated price of $4.2/MBTU only.

This judgement screwed ADAG badly, as almost 30% of the family settlement was struck in the gas deal.

When ADAG was in shock, Mukesh did his second move. The 2006 family settlement did not allow Mukesh to enter Telecom for 5 years. But the BWA auctions in July 2010 were his only chance to enter. Mukesh could not afford to miss that.

When ADAG was under pressure, he offered them a “deal” - end the non-compete, and I will arrange the gas for you. ADAG had no choice, they agreed to end non-compete.

RIL bid for BWA spectrum through Nahata’s of HFCL. And Jio was born.

When it came to honoring the promise to deliver gas, RIL tried to gold plate the expenses in KG-D6, to generate the money for this. But government saw through this, and refused to allow it.

Ultimately, KG-D6 production was reduced, as RIL tried to pressure the government. But government didn’t budge. RIL stopped exploration, etc. But to no avail.

Even today, the largest asset of RIL, even bigger than Jio, is actually KG-D6. But it is floundering as a result of this wrangling.

But in a queer twist of fate, Mukesh Ambani decision to not invest in KG-D6 at a time when gas was valuable, turned out to be prescient. In 2020, gas has become so cheap, it is being sold at negative rates!!

Mukesh has navigated the world of oil and gas extremely well, and also that of telecom. But his brother became collateral damage in this!

Of course, Anil Ambani has also hurt himself quite badly by his political choices, hobnobbing with Amar Singh, at a time when Amar Singh himself was irrelevant at best and damaging at worst.

Anil also paid the price for the technology choice made by Mukesh to go with CDMA originally, for RCOM. The royalty squeeze by Qualcomm, forced RCOM to run 2 parallel networks - which would never be possible in the hyper-competitive Telecom industry.

A lot of the financial overleverage that eventually tripped up Anil, can be traced back to these 2 events that eventually destroyed Reliance Natural Resources (and hence Reliance Energy), and Reliance Communications.

But there is a bigger lesson. These businesses were cash guzzling, high gestation period businesses. With RIL printing the cash, they could survive - without RIL, they didn’t stand much of a chance.

Jio and RRetail have this advantage - and they have used it to the hilt.
 

newtrader101

Well-Known Member
#12
To a very large extent, Mukesh Ambani is responsible for Anil Ambani’s fate in 2 ways.

ADAG had a deal with RIL, to supply gas at cheaper rate from KG-D6 to Reliance Natural Resources. But Mukesh used his connections in government to scuttle his obligations to Anil, and did not give the gas to Anil. Anil filed a case against this, saying, if there was a loss to government, RIL should bear it. Which was a strong case. But SC ruled in a weird judgement that the Production Sharing Contract RIL signed with the government would rule the private agreement between RIL and RNR also!

Just imagine - PSC says give X% to government, rest is yours. SC said that even if the rest is yours, you can’t do anything with it as per your choice. You have to sell it at government mandated price of $4.2/MBTU only.

This judgement screwed ADAG badly, as almost 30% of the family settlement was struck in the gas deal.

When ADAG was in shock, Mukesh did his second move. The 2006 family settlement did not allow Mukesh to enter Telecom for 5 years. But the BWA auctions in July 2010 were his only chance to enter. Mukesh could not afford to miss that.

When ADAG was under pressure, he offered them a “deal” - end the non-compete, and I will arrange the gas for you. ADAG had no choice, they agreed to end non-compete.

RIL bid for BWA spectrum through Nahata’s of HFCL. And Jio was born.

When it came to honoring the promise to deliver gas, RIL tried to gold plate the expenses in KG-D6, to generate the money for this. But government saw through this, and refused to allow it.

Ultimately, KG-D6 production was reduced, as RIL tried to pressure the government. But government didn’t budge. RIL stopped exploration, etc. But to no avail.

Even today, the largest asset of RIL, even bigger than Jio, is actually KG-D6. But it is floundering as a result of this wrangling.

But in a queer twist of fate, Mukesh Ambani decision to not invest in KG-D6 at a time when gas was valuable, turned out to be prescient. In 2020, gas has become so cheap, it is being sold at negative rates!!

Mukesh has navigated the world of oil and gas extremely well, and also that of telecom. But his brother became collateral damage in this!

Of course, Anil Ambani has also hurt himself quite badly by his political choices, hobnobbing with Amar Singh, at a time when Amar Singh himself was irrelevant at best and damaging at worst.

Anil also paid the price for the technology choice made by Mukesh to go with CDMA originally, for RCOM. The royalty squeeze by Qualcomm, forced RCOM to run 2 parallel networks - which would never be possible in the hyper-competitive Telecom industry.

A lot of the financial overleverage that eventually tripped up Anil, can be traced back to these 2 events that eventually destroyed Reliance Natural Resources (and hence Reliance Energy), and Reliance Communications.

But there is a bigger lesson. These businesses were cash guzzling, high gestation period businesses. With RIL printing the cash, they could survive - without RIL, they didn’t stand much of a chance.

Jio and RRetail have this advantage - and they have used it to the hilt.
:up: Analysis.
Though earlier I was biased against Anil for his flamboyant style and the high handed customer care of RCOM when they were booming, this gives a different picture altogether.
But again, at the time of division, Anil got all the sunrise sectors, while Mukesh got the old sectors. Anil was just 1 billion less than Mukesh and was the 6th richest in the world.
 
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#13
This is what Anilbhai says about himself now .

Simple man of simple tastes, leads disciplined not lavish lifestyle: Anil Ambani
2 min read . Updated: 26 Sep 2020, 12:41 PM ISTBloomberg
Former billionaire Anil Ambani rejected a judge’s comment that he lived a 'lavish lifestyle' as he faced questions about his assets from lawyers acting for a trio of Chinese banks

https://www.livemint.com/companies/...ish-lifestyle-anil-ambani-11601103098906.html
 

protrade

Well-Known Member
#14
I hope now you don’t have complaint about my L&T call. Stock moved in downtrend from 1020 to 850, I made the buy call at 857, now it is at 895.

But even more crucially, Oct 1st is the government deadline to declare at the Supreme Court on interest rate policy for various sectors.

And if any sector should benefit, Infrastructure and Real Estate would be primary beneficiaries as per Kamath Committee recommendations.
 

siddhant4u

Well-Unknown Member
#15
I might have misunderstood your call about L&T. I thought you were talking from long term perspective and that's why said stay away from the stock. If I knew it was short term swing call it would be different story.

in grand scheme of things, I will still consider current upmove as pullback unless it moves past 1000 again. I would also think of investing in it. Until then to me its' still in downturn.

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protrade

Well-Known Member
#16
I might have misunderstood your call about L&T. I thought you were talking from long term perspective and that's why said stay away from the stock. If I knew it was short term swing call it would be different story.

in grand scheme of things, I will still consider current upmove as pullback unless it moves past 1000 again. I would also think of investing in it. Until then to me its' still in downturn.

View attachment 44378
There isn’t any such thing as long term in markets today. That philosophy is over and just waiting to be buried. Disruption is happening at such a rapid pace in so many industries, that we can’t predict how business will be even 1 year down the road.

My calls are based on 3 factors.

- Valuation relative to historical valuations of the stock.

- Stock specific factors that market may be not factoring in, or giving too much weight to

- my anticipation around how the market or world will evolve.

almost as a pattern, I am a contrarian thinker. And that’s sometimes very dicey!

I don’t really use or understand technicals much - these are more fundamental calls. The way I see it, I provide full rationale - after that it’s up to each person, whether they agree with rationale or not. My rationale may be wrong, of course.
 

protrade

Well-Known Member
#17
Govt affidavit doesn’t contain details of relief for 26 sectors as suggested by Kamath committee. SC asks government to submit concrete proposal by Oct 13th in this regard.

Market sees this as negative for L&T. But I don’t think it is negative. As they say, “Court mein dher hai, andher nahin”. This sort of thing doesn’t matter whether it happens today or next week!

I suggest buy L&T on weakness - there is no way government can back out on implementing Kamath committee recommendations - not with this level of activism shown by the Supreme Court.
 

protrade

Well-Known Member
#20
The Kamath recommendations have been pushed out to 2nd November - which is disappointing for holders of L&T - but I don’t think there is any indication of either RBI or Government backtracking from those recommendations.

Which means the positive story for L&T is still in place.

We have to understand that at the core, this company depends on Capex by government and other large corporates. And with government hard strapped for cash, and Capex being least priority for corporates, L&T was bound to be hit. And it was hit.

However, there are redeeming aspects to this situation as well - their Order book protects them from immediate pain, any big stimulus will invariably start with infrastructure, etc. Plus the immediate trigger of Kamath committee related loan restructuring.

I believe the chances of a turnaround in L&T fortunes are very high, and imminent. In any case, it’s trading at a low enough level that it makes lot of sense to continue to hold it.
 

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