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Adventures of a risk arbitrageur ii


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Adventures of a risk arbitrageur ii

  1. 1. Adventures of a Risk Arbitrageur-II
  2. 2. Orient PaperPresentation # 1
  3. 3. Nifty Has gone NOWHERE in 5 YearsHow to make money in a market like THAT?
  4. 4. Special Situation Example Absolute ReturnsMerger Arbitrage Siscol- JSW Steel 93%Capital Structure Network 18 PCCPS 23%ArbitrageGoing Private Essar Steel 14%Transactions Blue Dart 18% Nagarjuna Fertilizer 187%Bankruptcy Workouts JVSL 273%Asset Sales Smartlink 43%Holding Companies Nalwa Sons 487%Spinoffs GE Shipping 79%Buybacks MICO 175% SSI 10%Tender Offers Alfa laval 17%
  5. 5. Sold @ 82 Bought @ 55Captured 49% Absolute Return in 4 months Annualized Return: 147%
  6. 6. Stock up 49% Market up: 17% Significant Outperformance Returns Un-correlated to Market Volatility Spinoffs as a themeWe KNEW the break up value is more than market valueThere was a PLAN to spinoff the cement businessBreak up values were several times current market priceThere was a risk from CCI but we KNEW it will take several years to resolveand market will ignore it and will instead focus on underlying results whichwe KNEW would be greatA LOW Risk High Return TradeSpinoffs as a theme - Focus, Stock as a currency, Access to capital markets,Stock Options as incentivesElimination of cross subsidies - elimination of conglomerate discounts.
  7. 7. A Pipeline of IdeasTransaction IRRs not same as portfolio IRRs. We have a pipeline.Explosion in transactionsLow competitionSignificant InefficienciesDespite the zero return in India over 5 years, can you afford to lose on such opportunities?Can you afford to ignore India?
  8. 8. Orient PaperPresentation # 2
  9. 9. How would it not?
  10. 10. Scene from Benjamin Button
  11. 11. Competition (Commission) is hazardous to Investors’ Wealth
  12. 12. No Deal Yet Parallel Universes, Alternate Histories, Role of Luck Market Ignored CCIConsequences of Shorting Orient paperRestructuring - Alternate History A Value Trap Before? Process vs. Outcome
  13. 13. Thank You