Scheme of Arrangement between Jagran Prakasan & Mid - Day

Midday has sold its print business to Jagran Prakashan. The pay off is in form of Shares of Jagran prakshan. The Ratio of Shares to be issued is 2 shares of Jagran for every 7 Shares of Mid - Day. Along with that the share holder will own shares of Mid -day which will have is Radio business & License.

There is an opportunity to be made in this deal. The shares holders of Miday will get 2 shares of Jagran for every 7 shares along with shareholding in midday. The residual value of Midday after demerger of it Print business should be between 8 - 10 Rs. It is worthy to buy midday at this price for a better gain.

The valuation of the deal is as follows

CMP of Mid day             30.35        cost of 7sh   = 212.45

CMP of Jagran              111.40        cost of 2sh   = 222.80

Net pay off                                                              -10.80

Residual value of Midday   8.00         Price of 7sh = -56.00   

Total Pay off                                                            -66.80

It means if we buy Mid day today , the net payoff is Rs 66.80 if we value residual share of Miday at Rs 8/-.

If you are bullish on jagran buy Mid-day. Also there is a natural hedge in case of fall in price of Jagran.

The Caveats to this opportunity are

a) The Deal may take up to 6 months to conclude because of getting different approvals from government agencies.

b) There is a risk that price of Jagran will fall, as well as opportunity that it will go up.

c) Radio business of Midday is loss making and it requires huge capex.

Postponment in Introduction of Gold BEES Futures & Option

NSE has deffered the introduction of GoldBees Futures & Options, as Queries were raised and Clarifications were sought by market participants.

We do not have privy to this inference, but it may revolve round the queries raised by us in previous articles. 

Introduction of Futures on GOLD BEES

NSE is introducing Futures & Option on GOLD BEES (Gold Bees is an ETF with underlying as gold) from 30th April, 2010.

It is a good step on the part on NSE & It will increase volumes in the market. The traders will be able to take position on gold using Equity market.

The Option to be introduced will be European option; FUTETF will be for the Futures. It will open plethora of Arbitrage opportunities between Futures, Spot, ETF , NCDEX, MCX & International Gold Prices.

It is a clever move by NSE to increase volumes, and also cross selling of its IISL products.

But Does it also mean that NSE is creating an indirect business for benchmark mutual fund,  as there are other gold ETF in India (Including Reliance, Kotak & SBI) which are not introduced in F&O segment. Also because of this Benchmark will be able to sell its other ETF and Mutual funds products.

Also it is an indirect entry of Option in Commodity trading which is still not prevalent in commodities market,  Also FMC & MCX may cry foul. Also it would mean there can be ETF on all other underlying commodities (Silver, Crude, Zinc etc) where there is huge speculative interest in MCX & NCDEX or it should be seen as a precursor of introduction of Options in commodities market..

Also one critical issue will be valuation of its Expiration price, The exchange say that all contracts will be settled at NAV declared by Benchmark. But Benchmark's process of valuation is not precise and there can be probability of mis-pricing , as they carry physical gold and  value it on LMBA price. Also current spot prices in Indian market are not considered which often quotes at premium or discount to International prices. Also the NAV is declared by Benchmark late in evening and not at the close of our market. Does that mean we carry a blind risk of settlement price for almost 4 hours after the closing price.

Introduction of Options in Currency Market.

RBI has given permission to Exchange to introduce Rupee/ Dollar options. With this matter of time , introduction of Currency option seems imminent.

NCDEX & MCX have recently introduce other currency for trading (EURO, YEN & Pound) making these market very liquid. In fact the volumes on these exchange are more than Equity cash market.

It is worth looking at this market, because

a) Volumes are huge.

b) The   trading is volatile & spreads are very narrow

c) The trading cost is very low

d) With introduction of Options, Many other players will enter the market

e) Volumes will move from OTC market to this market

f) These operations are part of many bank treasuries

g) There wont be any STT in these markets

Considering the above reason,

a) Scalping is possible, by giving both bid - ask rates

b) These market cannot be manipulated hence we can trade on Macros

c) Arbitrage can be big business with many players, Depth & Lesser Costs.

         It can include i) Normal carrying of underlying ii) Calendar Spreads iii) Delta strategies

         iv) Arb between NSE FX & MCX SX v) Abr between FX in Indian market & NDF in Singapore

d) Algorithm trading is possible & could give better results

    

But It would be like pitching against Goliath's which are banks who have the might of Money, Infrastructure & also better access to orders in spot markets. But they are better equipped to trade on Phone rather than Machine

Demerger in Kalyani Steel, Kirloskar Oil & Enkei Alloy.

The record date of these 3 companies have corporate action on 21st & 22nd April. All companies are demerging their Investment in different company. All the stocks have move up before record date leaving no room for abnormal returns hence none of the looks impressive to bet for demerger story.