Wednesday, April 26, 2006

An arbitrage opportunity?

I was reading a news about IPCL planning to merge with itself 6 Reliance companies and these are Apollo Fibres, Central India Polyester, India Polyfibres, Orissa Polyfibres, Recron Synthetics and Silvassa Industries. And the swap ratios are as follows - one equity share of IPCL for every 25 shares of AFL, 23 equity shares of CIPL, 28 equity shares of IPL, 28 equity shares of OPL, 34 equity shares of RSL and 38 equity shares of SIPL. I checked in iccidirect and out of these companies, I could find only 2 listed – Central India Polyester with a CMP of 10.73 and Recron Synthetics with a CMP of 2.45.

That means, if we purchase 23 shares of CIPL at 10.43 - a purchase price of 246.79 rupees, we will get one share of IPCL with a CMP of 266 – a gain of 19.21 rupees.

Now lets look at Recron Synthetics. If we purchase 34 shares of RSL at 2.45 – a purchase of 83.3 rupees, we will get one share of IPCL with a CMP of 266 – an amazing gain of 182.7 rupees !!!. Does this really compute or have I made a mistake somewhere? I'm not sure.

Sunday, April 02, 2006

India's first "value" oriented fund?

There are lots of existing mutual funds which claim that they follow value investing philosophy in India but very few actually do so. But, i think slowly value investing is gaining traction in India and we are starting to see emergence of funds which explictly state upfront that they are "value funds" and the first of them seems to be Quantum Mutual Fund from Quantum Asset Management, who also own Check out the fund at

What got my attention was their tag line "Warning - Quantum Long Term equity Fund is ideal for long term value investors. It is not for investors looking to make short term gains".

In order to keep the costs low, they have not appointed any distributors for the fund and one can only invest either online or by calling their call center.

Also, the exit loads are structred in a way so as to discourage early exits.

Good beginning. Wish them luck.