Long term stock warrants could be big multibaggers
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Identifying Multibaggers
Forum Discription: Discuss specific attributes that investors could look at while choosing multibaggers. Also point out certain factors that investors tend to overlook while finding multibaggers.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=511
Printed Date: 06/May/2025 at 10:29am
Topic: Long term stock warrants could be big multibaggers
Posted By: basant
Subject: Long term stock warrants could be big multibaggers
Date Posted: 18/Oct/2006 at 11:29pm
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Long term stock warrants could be big multibaggers As part of http://www.theequitydesk.com/forum/forum_posts.asp?TID=177 - my investing strategy one thing that I keep a close vigil on is to be on a look out long term warrants that any of the companies that I hold issues. Typically 4-5 year equity warrants are multibaggers in their own ways. I would explain this concept with the help of an example relating to the http://www.theequitydesk.com/forum/forum_posts.asp?TID=103 - Now this specific warrant states that in 2010 (or earlier in case of rights issue) the warrant holders shall have the right to convert their warrants into equity for Rs 650 per share. This warrant trades very thinly and I did buy quite a few in July and August near to Rs 210 levels. The trading was and continues to remain very thin and I had to put in several days to get some decent quantity. Now assuming that
Now I have assumed a 35% EPS growth for
Key Highlights: 1) The warrant acts as leverage and multiplies the wealth by more then 3 times compared to the original stock. 2) Higher the company growth higher the gains from the warrant 3) In this case the warrants are covered in case the company comes out with Bonus/Splits. 4) The only threat is if the company comes out with a very liberal Rights issue at a very cheap price (nearer to face value). This will reduce the market price of the share (Ex-Rights) without affecting the warrant conversion price. 5) In case of (4) above warrant holders have the right to exercise premature conversion of warrant into equity share. 6) In case of (4) above the returns could be affected to some extent. 7) Warrant holders will not get any dividends which we will ignore since the yield is not that high for 8) The promoters hold warrants in their capacity so they would not do anything to adversely jeopardize the interest of the warrant holders. 9) Most importantly one has to be bullish on the original stock.Higher the intrinsic value (Price of Stock - Rs 650) in the price of the warrant higher would be the margin of safety. Overall all companies do keep issuing warrants from time to time and serious long term investors should make a bid for those warrants and pick them up. Some years back Tata Motors issued some warrants and at that time I did not know that these warrants were could be such significant instruments of wealth creation. Conclusion: In Therefore the easiest way to see whether the price on the screen makes sense is to deduct Rs 500 from the market price. For instance if the market price is Rs 880 the price of the warrant should be Rs 880 – Rs 500 = Rs 380. The margin of safety is the discount to this price that the warrant is bought at finally. The present Rights issue announced by the company should set the price back by Rs 50 so we may deduct that from Rs 380. That leaves us with Rs 330 as the fair value of the warrant as on date. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: Equity Buff
Date Posted: 18/Oct/2006 at 9:26am
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Basantjee,
Very interesting write up on warrants. I if wanted to buy these Trent warrants can I buy it through by broker ? Which exchange are they traded in and what is the price of the warrant today?
Anyprice below Rs. 330 per warrant will be a gooid price ? The lower this price the better as more margin of safety ?
Would like to buy these warrants can you inform how to go about it.
Thanks.
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Posted By: basant
Date Posted: 18/Oct/2006 at 9:39am
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You could buy these from your broket at NSE and BSE. AT the NSE they are traded under the symbol of Trent series W1. The spreads are very very big so you need to be patient and just buy a few each day since there is no point jumping in.Try and get it around Rs 300 and lower. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 18/Oct/2006 at 10:51am
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Hmm! Very very interesting indeed Basant ji. Query? I just want to clear up one thing again. If the conversion price is 650 bucks(in cae of Trent), then there is no downside risk. Meaning if I invested at let us say 380 bucks today, even if the market crashes and let's say the equity share price in the market in 2010 is a 440 bucks, even then I would get a price of 650 bucks on each of my Trent warrant. So there is no downside risk. I would get 650 bucks a piece no matter what, in 2010.
2nd question: When I convert the warrants in 2010, is that fully tax free. I mean does it come under the "no long-term capital gains tax" bracket. I am thinking of this as a good replacement for any FD, if it is tax-free.
3rd question: Can I exercise the warrant anytime between when I purchase them and 2010? What would the conversion price be when let's say I buy at 380 now and have an urgent need and want to convert a few warrants 1 year from now?
4th question: Usually what kind of annual yields does warrants bring with them? What has been the maximum annual warrant yield that a company has issued a warrant at and which was that company(of all the warrants that you have knowledge of)?
5th question: In case Trent issues bonus shares of 1:1, then would my warrant purchase price also become half and number of warrants double?
6th question: In case Trent splits its stock, would by warrant numbers also double?
Last question: Why do companies come out with such warrants and are the warrants usually priced at a premium to the share market price and what how much of a premium usuallly?
Thanks a bunch for bringing to our knowledge such a tool of wealth! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 18/Oct/2006 at 10:54am
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even if the market crashes and let's say the equity share price in the market in 2010 is a 440 bucks, even then I would get a price of 650 bucks on each of my Trent warrant. So there is no downside risk. I would get 650 bucks a piece no matter what, in 2010.
_____________________________________________________________
You will not get Rs 650 per warrant but the warrant on payment of Rs 650 will become a share. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 18/Oct/2006 at 11:26am
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I think I got it(re-read your 1st post again many times over). I still have one small doubt. I am not able to understand how a bonus affects the warrant price. If bonus of 1;1 is issued(1 for every 1 share), then will my warrant numbers also double?
Nowadays lots of companies issue bonuses, so that is a major worry. Also, if Pantaloon comes out with a warrant now, is it advisable to take it(cnsidering it is doing for a split)? ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 18/Oct/2006 at 11:35am
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This is what I wrote "warrants are covered in case the company comes out with Bonus/Splits"
So split/bonus will not affect the warrant since the number of warrants will go up.. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 18/Oct/2006 at 11:40am
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Allright! Excellent Basant ji.warrants seem an xcellent idea. How do we get to know what are the warrnts issue sas of now on NSE and can we buy the straight off from our NSE online thru our broker(HDFC for instance)? ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 18/Oct/2006 at 11:46am
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No the online brokers do not have the warrant series turned on since it is very illiquid. You need a broket for that.
We can discuss and inform each other about the warrants listed . The warrants that are outstanding is difficult to know the best way is to look at the ET stock quotes and if we find the warrants listed there then the original holding could be swapped for the warrant. See warrants should be bought only when you are bullish on that particular stock. Now why this differential pricing you could say so there the answer is that there is a severe lack of liquidity which prevents a clear pricing to emerge. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 18/Oct/2006 at 11:57am
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Just a little technical question. Has the total outgo to be 280(CMP of the warrant) + Rs. 650(that we need to pay on conversion). or the outgo has to be just Rs. 280 which will translate into that the current holder has already exercised his option.
In case, the first case is true, the total sum payable will be Rs. 650+280=930 which is slighly higher than the Current market price of Trent.
This may be a silly question but am asking just for information.
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Posted By: omshivaya
Date Posted: 19/Oct/2006 at 12:00pm
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Thanks Basant ji. So, for warrants, one has to go physically to buy it? Did I get it right? ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 19/Oct/2006 at 12:00pm
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In case, the first case is true, the total sum payable will be Rs. 650+280=930 which is slighly higher than the Cyrrent market price of Trent. => You pay higher for the leverage and the time value of saving on that initial investment. With warrants you could buy Trent for Rs 330 and not Rs 880 so that differential money is saved. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 19/Oct/2006 at 12:02pm
Yes and please do not rush in buy it in small quantity. In fact it took me about a month to get some quantity in July. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 19/Oct/2006 at 12:04pm
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Om Shivaya: They are not physical. they come in demat form just that online trading platforms do not have that option to buy warrants. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 19/Oct/2006 at 12:05pm
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Another simple question..... just want to know how have you arrived at this figure of 330. Is is the Net Present Value of something? If that is the case, then kindly tell shall we discount ot by what figyre
Also kindly let us know whether we have to pay just 280 or 930.
Basant, my knowledge about stock option and convertible warrants is not good , so I am asking such silly questions.
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Posted By: basant
Date Posted: 19/Oct/2006 at 12:11pm
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Another simple question..... just want to know how have you arrived at this figure of 330. Is is the Net Present Value of something? If that is the case, then kindly tell shall we discount ot by what figyre
The Net present value of RS 650 payable after 3 years is Rs 500. I have deducted Rs 500 from Rs 880 which is the CMP. We get Rs 380. Now Trent is making a rights issue the exrights price should bring down the MP by Rs 50 since warrant holders will not get rights shares the price is further reduced by Rs 50 so we get Rs 380 - Rs 50 = Rs 330
Also kindly let us know whether we have to pay just 280 or 930.
Rs 280 or Rs 330 whatever be the price of the warrant is payable now Rs 650 is payable in early 2010.If Trent falls to 0 you lose only Rs 280/330 price of warrant if it goes to Rs 3000 then you make a killing since you have full upside, warrant will be converted in shares in 2010!
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 19/Oct/2006 at 12:23pm
| Basant, I beleive we need to do some complex mathematics.I beleive we need to tamper the expected price on P/E basis with the equity dilution as well. I beleive we should discount Rs. 650 and not 880. When we are calculating returns we should have the outflow inflow approach. Our outflow is Rs. 650. Also, If warrants are not be given rights, the calculations will change. Also Rs. 50 should be treated differently. |
Posted By: basant
Date Posted: 19/Oct/2006 at 12:32pm
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Warrants will never qualify for rights. I am discounting Rs 650 not 880. Equity dilution will happen mostly at near market price except for the rights at Rs 500 so with constant RoE over a period of time should not be EPS negative to a very large extent. I am also taking a 40% growth whereas Trent will grow at more then 50% for the next 2 years at least. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 19/Oct/2006 at 12:38pm
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Basant, Can you throw some light on the following things:
Proportion of Rights issue:
Price of Rights:
Terminating EPS on the post-rights basis:This will help us in arriving at the expected price on P/Ebasis.
I want to model it out mathematically, thats why I am asking this question.
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Posted By: Vivek Sukhani
Date Posted: 19/Oct/2006 at 12:46pm
| Also, One more question, are warrants eligible for dividends?In my opinion, they are not, as they are not yet shares and will become one on conversion. However, just an academic question. |
Posted By: chic_1978
Date Posted: 19/Oct/2006 at 3:36pm
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Hi Basantjee
Excellent explainations on long term warrants. Something new to learn from you SIR..
Can you please list the warrants that are traded in market, infact I am personally interested in buying warrants of your Equity XI stocks..
Please advice which one to buy & at what price in detail.
------------- happy & wise investing |
Posted By: basant
Date Posted: 19/Oct/2006 at 3:51pm
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Out of our cricket X! only Trent is traded as far as I can recall try and but it below Rs 300 or thereabouts but you would fiund it very difficult to get any meaningful quantity. I did buy a few but it took me more then a month to get a fill and also there I was the only person buying in both the exchanges NSE/BSE.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 19/Oct/2006 at 5:32pm
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BasantJi, from now on we will have huge compedition to buy the Warrants of Trent....on NSE and BSE ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 19/Oct/2006 at 5:36pm
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Ha Ha Ha! But if we bid up the price too high we will lose all charm. It looked like a steal to me a couple of months back and I was fortunate enough to get quite a few at Rs 225 - Rs 210. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 19/Oct/2006 at 5:38pm
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And since I was not able to do it online I had a lot of trouble because every one at the broker's office wanted to buy since I was interested but when they were told that one would have to wait for 3 years they said "No Thank you". ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 19/Oct/2006 at 5:45pm
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....means they were all http://theequitydesk.com/forum/forum_posts.asp?TID=359 - Mungerilal's.... Great. You need to bring them to kulman and your website...i Guess it will be fun...If that happens, please infrom me i would like to be a witness... ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 19/Oct/2006 at 5:49pm
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You know no Mungerilal would like to visit theequitydesk.com. They are all busy at 9.55am.com
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: sanjay3
Date Posted: 19/Oct/2006 at 6:00pm
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dear basantji can i buy trent warrants throu icicidirect dot com |
Posted By: basant
Date Posted: 19/Oct/2006 at 6:09pm
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I do not think that they allow you to trade warrants. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: sanjay3
Date Posted: 19/Oct/2006 at 6:22pm
| kindly explain from where rather the exsiting proceedure to buy |
Posted By: basant
Date Posted: 19/Oct/2006 at 6:24pm
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Any broker would buy them for you ask them to look for Trent under the W1 series. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: sanjay3
Date Posted: 19/Oct/2006 at 6:27pm
| thankyou |
Posted By: chic_1978
Date Posted: 19/Oct/2006 at 6:30pm
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Basantjee
I think its gonna be "Warrants Phobia"
& trust me, moment some Mungerilal reads this article, there will be drastic demand tommorow for Trent warrants.
------------- happy & wise investing |
Posted By: manishdave
Date Posted: 20/Oct/2006 at 6:08am
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Isn't warrent like call option but for longer term?
Other advantage of having option is if for some reason stock price goes down(not that it will) your downside is capped.
Kulman is Warren Fan.
Basant is Warrant Fan.
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Posted By: BubbleVision
Date Posted: 21/Oct/2006 at 12:39pm
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very well said Manish ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
....Posted By: Vivek Sukhani
Date Posted: 21/Oct/2006 at 2:16pm
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i will add something to what manish has said....
warrants are long term deep-in-the-money call options available at a price of just in the money call option...
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Posted By: manishdave
Date Posted: 21/Oct/2006 at 1:58am
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Basant,
I agree with your basic idea that option of good companies give better return than stock itself.
I dont mean to say that warrents are bad for investor and only for speculators. It is basically long term leveraged position. 90% Options expire because strike price of most traded options is way above current price and they expire in 3-6 months so time decay is fast. There are also some options traded where strike price is below current price, but then option price is higher too so it is just like warrents.
I have also invested in warrants but no more as it is not practicle for me to do paperwork of exercising.
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Posted By: manishdave
Date Posted: 21/Oct/2006 at 2:54am
| I would add one more point on warrents. I will use Trent as an example but it could be for any company's warrants. Dont treat current option price for allocation. Lets say you are willing to invest 5 lacs in Trent(or any company), don't put whole 5 lacs in warrants. Apply you risk management rules on full value. Otherwise at the time of conversion one may need to come out with lot of money and warrant being illiquid in nature could become difficult. For example in case of Trent one may need additional 10 lacs at the time of conversion. |
Posted By: basant
Date Posted: 21/Oct/2006 at 9:17am
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Originally posted by manishdave
Isn't warrent like call option but for longer term? Other advantage of having option is if for some reason stock price goes down(not that it will) your downside is capped.
Kulman is Warren Fan.
Basant is Warrant Fan.
_________________________________________________________
Jim Rogers says that 90% of all call options expire worthless and they do because the probability of making money is dependent upon
a) the price of the option (that is decided by the writer)
b) There is very little time for any fundamental news to change the price of the stock.
In the case of warrants as I have discussed above
a) the warrant price is determined by the company so the company need not set the price too high (they would not squeeze shareholders)also it is not a zero sum game (our gains are not company losses). In the market most of the institutions do not spend time on warrants since it is highly illiquid leading to price anamolies.
b) 3 years and more is enough time for a company to show its true worth.
I am not sure if someone has done a study but over a period of time 90% of warrants would be profitable otherwise the original shareholder does not lose (warrants are generally issued free with shares) and the company loses (when no one opts for conversion).
I made decent money buying TV 18 warrants a couple of years back. The warrants were free with the rights and I bought significant Rights form from the market and sold off the shares on listing SO the warrants were free. They were later converted last year at Rs 234 per share.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: ashwin.adsouza
Date Posted: 22/Oct/2006 at 5:34pm
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Wow. This is an interesting segment of the market that u have introduced to us, Basant. I think many of us would not be knowing abt this traded segment and the scrips/stock series that might be trading in this.
Can other Forum members post details of other stocks/stock series that r traded like this? This will be really helpful.
Thanks.
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Posted By: basant
Date Posted: 22/Oct/2006 at 8:26pm
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An Investor will get only a few companies and probably just one out of those that he may like but in case he gets one it should be stuck with full blow. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 23/Oct/2006 at 1:03pm
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TISCO may be coming out with a Warrant next year. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 23/Oct/2006 at 1:25pm
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That should be very interesting but my sense is that this was for the promoters Tisco is the best stock to play through a warrant if the Corus merger integrates well shareholders could make decent money and if it does not the warrants will cap the downside. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: investor
Date Posted: 23/Oct/2006 at 3:06pm
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very interesting, i never knew about all this. But Basant, going by what you have written it seems to be a win-win situation for investors? So then shouldnt it be more popular? What is the catch/cons of such a scheme? And also, what does a company gain by offering a warrants scheme - i am not able to get that. Kindly explain. Thanks. |
Posted By: basant
Date Posted: 23/Oct/2006 at 4:23pm
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Most of the time investors never look at warrants because
1) Generally they are unaware.2) It is a classic case of longe term investing 2-4 years.
3) It is very difficult to get a big quantity and that keeps an FII/MF away.
4) The liquidity is very very thin.
Now some companies may need the money in parts say Rs 100 crores now and the balance Rs 100 crores after 2 years. The warrant act as a sweetener and with a Rights issue priced very close to the market price the company could allot detachable warrants with the same. Now the investor thinks that warrant is FREE and sells it for what ever he gets and there lies our opportunuty. For the company equity will increase after conversion and the warrant acts as a sweetener in getting a rights issue subscribed also since equity increases after conversion the company is not saddled with excess cash which would adversely affect the EPS and RoE. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: akash
Date Posted: 24/Oct/2006 at 5:54pm
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Basantji,
Could you plz post the BSE code under the Trent warrants are traded? I know the nse code but was not able to locate the BSE code,so if you could provide woth that information it would be of great help.
------------- Akash Bedi |
Posted By: basant
Date Posted: 24/Oct/2006 at 7:24pm
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: akash
Date Posted: 26/Oct/2006 at 1:09pm
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Basantji, Could you plz tell what are the risk associated with buying warrants? Ans what are the concerns with Trent warrants if any there?
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Posted By: basant
Date Posted: 26/Oct/2006 at 1:51pm
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The downside is the same with the Trent stock if the stock tanks after 3 years the warrants will expire worthless. just that the downside in absolute value is limited. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 26/Oct/2006 at 1:51pm
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The returns can be huge with warrants of performing companies but I havent really looked at their quotes on the terminal. ------------- Ajith |
Posted By: akash
Date Posted: 26/Oct/2006 at 2:07pm
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Sir can you tell me if i have ourchased 100 trent Warrants at average price of 310. What will be loss or profit per unit share at the time of conversion assuming the price of Trent remains same at 800 on conservative basis. It would be of great help if you could expalin with this assumption.
------------- Akash Bedi |
Posted By: basant
Date Posted: 26/Oct/2006 at 2:12pm
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At an average price of Rs 310 your warrant would be converted into stock at Rs 650 so the total outgo is Rs 650+Rs310 = Rs 960 and if Trent trades at Rs 800 in 2010 you would incure a loss of Rs 160 per share plus the opportunity cost of having the capital tied up.
I would think that Trent shuld be more then double the current price in 2010. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: akash
Date Posted: 26/Oct/2006 at 2:18pm
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but sir in one of ur message u have quoted that in case of warrants the loss is minmal but in the above case a loss of Rs 160 per share is a big loss plus we also lose the time value of money. So is ther any way the shreholder of warrants are protected in buying these warrants. ------------- Akash Bedi |
Posted By: basant
Date Posted: 26/Oct/2006 at 4:29pm
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Yes downside absolute loss is minimum you lose only Rs 300 in case of warrants if the company closes down in case of a stock you lose full Rs 800. - No way to protect against this loss except to first see where Trent would be after 3 years. That call is more important to take and if one is satisfied with that at first then he should buy warrants. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: akash
Date Posted: 26/Oct/2006 at 6:26pm
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Sir what is the procedure if anyone at the end of period wants to get the warrants converted into equity is it same like rights i.e. you pay the margin money and get it converted? Also, if you could clarify that is one warrant of Trent at the time of conversion will be eligible for 1 equity share or something else. Thanks in advance ------------- Akash Bedi |
Posted By: basant
Date Posted: 26/Oct/2006 at 6:59pm
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Same as rights company gives letter at time of conversion and it is 1:1 in this case and no procedure for additional application as in rights. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: akash
Date Posted: 26/Oct/2006 at 7:08pm
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thanks for all the information. ------------- Akash Bedi |
Posted By: ashwin.adsouza
Date Posted: 26/Oct/2006 at 10:57pm
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Warrants???
Understood most of the stuff written here, but doea any know or understand the tax implications in terms of LTCG or STCG, business income, etc.
Will be very helpful if any can post info on this aspect?
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Posted By: prosperity
Date Posted: 27/Oct/2006 at 4:58pm
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http://www.nseindia.com/marketinfo/eod_information/warrant.jsp - http://www.nseindia.com/marketinfo/eod_information/warrant.jsp
Does this mean only 7 companies have tradable warrants ?
------------- |
Posted By: basant
Date Posted: 27/Oct/2006 at 5:35pm
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That was an interesting link. Yes that is what it appears to be. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 04/Nov/2006 at 11:53am
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Basantjee
What do you make of such news announcements:
....Authority to the Board to offer, issue and allot the following convertible warrants with an option to subscribe equity shares of the Company for cash on a preferential basis, in one or more tranches and on such terms and conditions as may be deemed appropriate by the Board...to the Promoters and/or strataegic foreign/local investor and/or private placement....
Then the news mentions that the company would issue convertible warrants to the Promoters/Promoter Groups/strategic Investors/FIIs etc...convertible at a price of Rs. xxx which is at a premium of Rs. xyz to the market price.....as per some SEBI guidelines.....
The pre-conditions for the above query is that the investor understands the biz, likes the management, & mgmt has proven track record. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 05/Nov/2006 at 12:13pm
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Does this indicate that the promoters/owners are very positive on the future business? Warrants is a right to buy they can refuse to exercise this at the predefined date so this is not as positive as buying shares from the open market/preferential allotment.
The convertible price: does it indicate something? A kind of floor for the market price?
No floor, just that the management feels that the price should not be less then that level .See this is a warrant finally with a right to refusal Equity allotment is a good floor unless the promoter is a dudd who could not evaluate his own company.
If such news is announced what should a small investor do in the cash market ...in case he does not have investments in this company, but wants to......
This news is not negative esxcept that it is against the minority shareholders (anti corp gov) why the promoters shpuld be alloted why not everyone? But all managements do it whether it is Tata or Bata.
 If you look at these things too carefully you will miss the bigger picture as long as the exercise price is not too less then the market price we should ignore it (even though it is against the norms of corp gov.)
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: PrashantS
Date Posted: 09/Dec/2006 at 4:09pm
| Can we still get these warrants or is it only for shareholders....can you throw some light on this |
Posted By: basant
Date Posted: 11/Dec/2006 at 3:23pm
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Sorry, I missed this question earlier. Yes, they are available on the NSE under the series W1. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 11/Dec/2006 at 9:06am
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Hi Basant & Kulman, I beleive that this step of preferiantial allotment to promoters or some financial institution ultimately is not a very good manner of capital sourcing. Even if the conversion price be more than the market price, in most of the cases it leads to terrible amount of equity dilution. I can recall at least, three such cases in recent times when such an allotment is going against the interests of the exisiting shareholders. Surya Roshni did it, and its price simply collapsed after that. Jk paper has given stake to IFC Washington, and yet even though IFC is a very long term player, JK Paper's price has simply moved southwards. Varun Shipping is also a case in point. Look at how this co.'s stock price is moving. We have companies like GE Shipping, whose promoters are mopping up shares from secondary market, the latest open market acquisition being as late as first week of december, and Varun is so happily diluting its share. In my opinion, until and unless the co's business nature is such that fixed assets which the cos. use with the money they raise, are of a nature that can be put to immediate use, we must not get into such plays. For , if the co. uses this to retire debt, the incremental effect on the EPS will be just the interest cost and that too will not be significant as the tax-saving will not be available. So, PBT may appear higher to the tune of interest savings but then you will have to pay tax on such savings. so, net-net, this step is something which doesnt go down well with the investors. Again, convertible warrants are also not so good for the same reason along with one more deficiency that the conversion is also uncertain. Look at Gujarat NRE Coke, where the promoters have bought shares at such a high price and look at the outcome. I apply a very simply yardstick in this regard for manufacturing companies, I beleive the P/L account total should be significantly higher than the Balance Sheet total, for that shows how the company is managing the stakeholders' position... for low B/S total will mean that the Co. is paying back the stakeholders in a very handsome manner. Share Issuances add to the B/S total and spoil the ratio I am talking about. So, if the cash such generated can be profitably used in not so long time, then such an infusion work else it becomes very difficult to inspire the results.
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Posted By: prosperity
Date Posted: 11/Dec/2006 at 11:37am
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Basantji,
If i want to purchase these warrants, how do i do ?
I think i cannot buy from icicidirect !
So do i have to go to a broker ... and open a broking account with him and demat account .. and get the warrants over couple of days (illiquid) into my new demat account and then transfer it into my icicidirect demat account ??
Ufffff... do i have to do that much ?
Or you know shortcuts !?!
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Posted By: basant
Date Posted: 12/Dec/2006 at 12:18pm
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So do i have to go to a broker ... and open a broking account with him and demat account .. and get the warrants over couple of days (illiquid) into my new demat account and then transfer it into my icicidirect demat account ??
Ufffff... do i have to do that much
____________________________________________________________
FOr everything else there is Matercard! (Sorry ICICI!!!) ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: prosperity
Date Posted: 16/Dec/2006 at 11:38pm
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For everything else there is Matercard! (Sorry ICICI!!!)
____________________________________________________________
Basantji,
I couldnot understand the reply to my question.
Did you meant to say that i have to do all that i specified in my earlier post to get warrants ? Can't i avoid the middleman (meddleman) broker and buy it directly ?
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Posted By: basant
Date Posted: 16/Dec/2006 at 11:55pm
Just that Trent warrants cannot be bought from ICICI direct all other stocks can be transacted there.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 19/Dec/2006 at 12:20pm
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Hey, I found a link on NSE for warrants, to keep check on any new warrants that may come up:
http://www.nseindia.com/content/equities/WARRANT.csv - http://www.nseindia.com/content/equities/WARRANT.csv
Maybe some of you already have the link. Nevertheless, hope it helps!! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: prosperity
Date Posted: 19/Dec/2006 at 9:04am
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Basantji,
Is it neccessary to have trading account to buy warrants - or just by giving my demat account and some transaction fee to a broker - can i buy warrants into my demat accout with another depository ?
Can you pls. explain how warrants exactly gets traded and what is needed from my side to get it - trading account, demat account, how is money given, brokerage etc....
I wanted to buy ICICI Bank warrants ..
Thanks ! ------------- |
Posted By: basant
Date Posted: 19/Dec/2006 at 9:14am
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You would need to get enrolled with a broker. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 25/Mar/2007 at 9:25pm
| Sir, any updates on warrants.... is it better to get some equity now or to get it through warrant.... and also how come warrants are still quoted so high when prices of the underlying has come down???? |
Posted By: basant
Date Posted: 25/Mar/2007 at 10:49pm
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There is no liquidity in the stock but Franklin bought some 100kplus shares a couple of weeks back but even if stock double from here to Rs 1300 then each of the warrants would be worth 1300-650(conversion price) = Rs 650.
FOr trent to double in 3 years is no big deal but a warrant holder will make a cool 3-4 bagger assuming he buys the warrant at Rs 175!
A small exposure to warrant makes sense and I am holding on to the warrants only - I do not have Trent shares anymore.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kaushalchawla
Date Posted: 25/Mar/2007 at 1:21am
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Basantji,
Currently Trent trades at around 685. What is the fair value of purchase of a warrant for the same. ------------- Warm Regards, Kaushal |
Posted By: basant
Date Posted: 25/Mar/2007 at 11:21am
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fair value should be slightly closer to Rs 180-200 but this does not require any analysis just apply a logic that a company that grows at 35% CAGR for 3 years should report a more then two times growth in stock price and that means that warrants should do well. But there is almost no liquidity and you should put only that money which you do not need for 3 years. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tigershark
Date Posted: 26/Mar/2007 at 12:00pm
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pl correct me if im wrong -i buy the warrant at lets say 170 then when time comes i exercise my right by paying 650 which means i have paid atotal of 650+170=820 but if i get the equity share at 685 why should i go thru this warrant route in 3 yrs 685 will become 1300 am i right or have missed something here ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 26/Mar/2007 at 12:09pm
In 3 years Rs 685 becomes Rs 1300
OR
In 3 years Rs 170 becomes Rs 1300-650 (this amount needs to be paid after 3 years)
SO clearly the returns are multifold in the warrant route.No one analyses this investing route because there is almost negliogible liquidity and it does not suit the institutions to wait for 3 years.
I expect Trent to do better then a double from these levels! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 26/Mar/2007 at 12:27pm
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In addition, does it (warrant) have any interest payable annually?
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 26/Mar/2007 at 12:30pm
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Warrants do not carry any div/ int they are like long term call options on a company. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: RAKESH
Date Posted: 10/Apr/2007 at 10:08pm
| sir should one buy trent warrants at this price |
Posted By: basant
Date Posted: 10/Apr/2007 at 10:18pm
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There is absolutely no volume. I keep tracking it on a daily basis but if you can get it then nothing like it. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Rinku
Date Posted: 10/Apr/2007 at 10:35pm
| Can we buy warrants on icici direct? I think not |
Posted By: basant
Date Posted: 10/Apr/2007 at 10:45pm
No, it can be bought only through a broker but as i mentioned there is just no liquidity. I mean you cannot buy even 50 warrants at a price.So this concept seems good only for academic interest now.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Rinku
Date Posted: 10/Apr/2007 at 10:52pm
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Very bad for icici direct fan
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Posted By: sbafin
Date Posted: 30/Apr/2007 at 11:28am
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Dear basantji,
Do not you think so that upon conversion of warrants into shares in 2010, there will be equity dilution and it will affect its share price in the market. ------------- http://www.sba.co.in/ |
Posted By: basant
Date Posted: 01/May/2007 at 12:01pm
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How much is what we need to ask and equity dilution will also bring some cash?Small companies do make dilutions. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: RAKESH
Date Posted: 17/May/2007 at 1:25pm
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IN APRIL ORBIT CORP LISTED ITS WARRANT WHICH R CURRENTLY TRADED AT RS 17. FROM MY POINT OF VIEW ITS A MULTIBAGGER CMP OF WARRANTS 17 CMP OF EQUITY 220 IF WE BUY NOW AT RS 17 PLUS 50% ON CONVERSION THAN OUR COST WILL BE 17+110=127 AT CMP ALL TED MEMBERS ARE INVITED FOR SUGGESTIONS |
Posted By: basant
Date Posted: 17/May/2007 at 1:32pm
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Looks interesting at first shot but how good is this company Orbit and when are the warrants due for conversion? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: RAKESH
Date Posted: 17/May/2007 at 1:43pm
| in three years time....warrants were listed at rs 3 at present is at 52 week high 17rs |
Posted By: RAKESH
Date Posted: 17/May/2007 at 1:46pm
| the main point here sir is that we r getting warrant for a very small amount so the risk is low and returns are definitely 50% |
Posted By: kaushalchawla
Date Posted: 17/May/2007 at 10:22pm
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Where can i find out On NSE what is the last traded price and volumes for the warrants. Need directions. Thank you. ------------- Warm Regards, Kaushal |
Posted By: RAKESH
Date Posted: 17/May/2007 at 9:27am
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the bse code is 961665 and in nse its traded in w1 as orbitcorp |
Posted By: kaushalchawla
Date Posted: 18/May/2007 at 7:40pm
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I was asking in terms of the navigation...i think NSE has this information but where to go on NSE website? ------------- Warm Regards, Kaushal |
Posted By: its_me
Date Posted: 16/Aug/2007 at 10:15am
| Basantji, Does issuing of warrants - increases the Authorised Capital of the company ? |
Posted By: basant
Date Posted: 17/Aug/2007 at 12:00pm
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No, it does not.Authorised capital is decided by the company's Board. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: its_me
Date Posted: 17/Aug/2007 at 12:17pm
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Does that mean that share capital of the company goes up when:
A) Warrants are converted into Equity
and not when B) Warrants are issued ?
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Posted By: paras
Date Posted: 17/Aug/2007 at 2:27pm
| Can that be baught from Reliance money too? I am unable to find that. Any idea how can we find that? |
Posted By: basant
Date Posted: 17/Aug/2007 at 2:59pm
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Generally throygh a offline broker. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 17/Aug/2007 at 3:02pm
Company has to increase authorised capital before warrants are converted into equity. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |