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Déjà Vu?? Reliance Power (2008) & NTPC (2013)

As soon as we read this, we had a feeling of Déjà vu…


Déjà vu, according to Wikipedia, is the phenomenon of having the strong sensation that an event or experience currently being experienced had been experienced in the past.

You must be wondering why? The reason is…
2008 – Reliance Power’s IPO – About 2 Billion Dollars – Sensex near All Time High

2013 – NTPC’s Offer For Sale – About 2 Billion Dollars – Sensex near All Time High
Power Stocks : Deja Vu??
Striking similarities, isn’t it? Both companies belong to power sector, both are coming out with almost equal offer sizes and markets in both cases are trading near all time highs.
But similarities end here and there are some marked differences too:
  • In 2008 (Jan-Feb), Sensex was trading at multiples of 24x. As of today (Jan-Feb 2013), Sensex is closer to 19x.
  • Reliance Power did not have any assets at the time of IPO (2008). On the other hand, NTPC (2013) has an installed capacity of about 40,000 MWs.

We should pray that similarities end here itself. This is because if what happened after Reliance Power’s IPO (Great Crash of 2008-09) gets repeated in 2013, once again there would be massive erosion of investor’s wealth and confidence.


Disclosures: No positions in Reliance Power or NTPC.

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Dividend Analysis of stocks in Dead Monk’s Portfolio

We highlighted in an earlier postthat DMP would be built, primarily around dividend investing.  The core of DMP is made up of 5 stocks, namely ONGC, Clariant Chemicals (I) Ltd., Balmer Lawrie & Company, Graphite India, Tata Investment Corp Ltd. And let us confess. We did receive a few brickbats about our stock selection for forming the core of DMP. So here we would like to offer a few thoughts –
  • These 5 stocks are selected on basis of our (not your) risk appetite.
  • These stocks have been selected for long term (10+ years) and not for trading on daily or even monthly basis.
  • We do not expect these to be multibaggers. Though we would love them if they become one.
  • Selecting these 5 stocks in core does not rule out any further addition to core in future.
  • These stocks do not disturb our sleep at night.
  • We may or may not be comfortable with stocks current price.
  • We are comfortable and very happy with present dividend policy and consistency of these 5 stocks.


As you can see in above table, all 5 stocks have been consistent dividend payers for last 5 and 10 years.

But at present, multiples at which Clariant Chemicals (I) Ltd is trading are not cheap. A P/E of 17.5 is much above our liking and so is P/BV of 3.3 (Read a good analysis on Clariant at SN). As far as we are concerned, we would start accumulating once the stock comes down on these parameters. Tata Investments is primarily an investor in famous Tata companies which include cyclicals like Tata Motors and Tata Steel. Current P/E of 15.4 is not to our liking and we would rather wait before further buying.

Part from these 5, we also proposed 7 large cap stocks in DMP. Though we picked these stocks for their stability, a good and regular dividend payout can be an added advantage.


BHEL, NTPC, BOB and NHPC have quite tempting dividend yields considering the fact that initially, we picked them for their large capitalization and stability 
(Note- NHPC has not been as stable as we would have liked and has been consistently falling after its IPO. But we feel that at CMP of 18, it can be a decent bet for long term.)

As far as growth stocks are concerned (Yes Bank, Cairn India, GSPL & Sterlite Industries), we don’t expect such stocks to pay dividends (consistent or not) for a few years as they are in growth phases and would be reinvesting money in their own businesses.


Dead Monk’s Disclaimer – No matter how careful we are, as an investor, we will never be able to eliminate the risk of being wrong.

PS – Please do check ‘Stock Screenersin widget area on right side. These can be good starting points for shortlisting good stocks.

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