From $ 33 billion to $ 200 million networth – Eike Batista’s fascinating story

Brazilian businessman Eike Batista’s story is as fascinating as it can get. Batista heads the Rio de Janerio based conglomerate EBX which in turn has holdings in the 5 operating companies; MMX (mining), MPX (energy), OGX (Exploration & Production), LLX (logistics) and OSX (offshore shipbuilding industry).

According to wikipedia this metallurgical engineer started off with selling insurance policies and then swtiched to mining. His first venture apparently was a mechanized gold mining plant in Brazil which marked the beginning of his mining conglomerate EBX.

He regularly featured as one of the most powerful and influential Brazilians. By 2009 he was the richest Brazilian and by 2011 he became the richest South American and 8th richest in the world. He even claimed that he would overtake Mexico’s telecom tycoon Carlos Slim to be the world’s richest man by 2015. However, Batista’s wealth has fallen off the cliff decreasing from a peak net worth of $32 Billion to $200 million between Mar 2012 to July 2013, i.e a fall of 99%.

Although the fall is in line with the fall in the broad Brazlian benchmark index, the BOVESPA has fallen 20%+ this year, however Batista’s companies occupy top three positions in the index amongst the losers led by OGX (-) 88%, MMX (-) 68% and LLX (-) 67%. His oil&gas exploration company seems to have been the worst hit what with crude oil production @ 0.015 mbpd against initial estimates of 0.7 mbpd by 2015. There were media reports of him selling upto 40% stake in one of his oil blocks to the Malaysian Petronas. Another of his companies, LLX, is building a port, Acu Superport. It is facing labour troubles and some structural problems with the port design.

Forbes describes his persona here calling him humble and philanthropic, also helping to bring the Olympics to Brazil (2016 summer olympics are to be held in Rio).

With valuations of his commodity driven companies crashing down, Batista regrets listing his companies on the stock markets, and says that in retrospect a private equity model of financing his ventures would have been more suitable.

Found this quote useful to describe the situation “people were basically investing in a PowerPoint presentation. He’s very charismatic. I’ve seen him on road shows and he definitely lights up a room when he walks in. But he doesn’t have the credibility he used to.” Running businesses is not about PPT, there are such Indian examples too. That would be the topic of another of MidnightBreakfast posts.

There’s stil hope in the form of General Elections – 2014

MJ Akbar presents this excellent analysis of voter behaviour here and what it implies for the general elections scheduled for May 2014.

The ball comes in ‘the people’s court’ every 5 years, a form of appraisal of the governments performance. As in the corporate world, non performing employees are given the boot, so are non – performing governments. There’s stil hope for the country !

Transfer Window – Club Footbal

Windows have always held a very special place in lover’s hearts. They are most watched with hope of seeing their love interest there. In this article the window is the football transfer window which is closely watched and followed by millions of football lovers across the globe and the love interest are their football clubs and players.

Let us have a look at some of the clubs worldwide and their transfer business this window.

Surprisingly newly promoted French club Monaco has done big spendings in buying marquee players like Falcao, Moutinho and Rodriguez. They have also made shrewd signings like Carvalho and Ebidal. In total they have spent around €150 million till now.

Manchester City with backing of Arab money power have spent €100 million in signing Negrado, Fernandinho, Jovetic and Navas.

Real Madrid have got on board Isco.

Barcelona has got on board the Brazilian Neymar and paired him with Messi.

Bayern has signed Gotze from Dortmund and also signed young sensation Thiago from Barcelona.

Paris Saint Germain (PSG) has also made a big signing in Cavani from Napoli.

Chelsea, Arsenal and Liverpool havee also done swift business in this transfer window.

Among the top clubs only Manchester United has not been active in this window. They have been linked to many players like Thiago, Isco, Fabregas, Bale etc but have not made any signings. Instead their marquee player Rooney has been rumoured to be unhappy in the club and wants his way out with Chelsea in hot pursuit.
This transfer window has been in news not only for players but also for managers.

After Sir Alex’s retirement, Moyes has been appointed as the new United manager. Mourinho has replaced Benitez at Chelsea from Real Madrid. Benitez has taken over the role at Napoli. Mancini was sacked at City who was replaced by Pelligrini. Guardiola is new manager at Bayern Munich and Matino is new Barcelona manager.
This coming season seems to be very exciting with new players and managers at helm of new clubs. Only time will tell what the remaining transfer window and coming season will unfold.

Pakistani Stock market indices gain 40%+ YTD

Pakistan’s stock markets have been on a roll. Their stock market indices, KSE 100, being one of them, have gained 40%+ YTD. Ofcourse, general elections held in May 2013 there saw a democratically elected Nawaz Sharif taking charge and this has surely helped the markets there. Another factor has to be the amnesty scheme for stock investments put in place since last year.

Under the scheme, unaccounted for money invested in the stock markets for a period of 4 months (120 days running) is be exemted from tax. The revenue departement (FBR) doesnt question the source. Now, Pakistan, like India, has a parallel economy with a projected size of ~ $ 34 billion, according to Sustainable Development Policy Institute (based in Islamabad) and UNODC.

Anyone who wants to whiten his unaccounted for wealth would simply invest in the market for the requisite period and since he wont be questioned regarding its source by the taxmen, it would thereby become legal. Considering the size of the parallel economy (20 % of the size of the legitimate economy), no wonder markets rising higher as the scheme seems to be attracting decent inflows.

With Indian market in deep coma, may b its time, such a scheme is started in India too. Markets would be boosted and and the billions in unaccounted for money would also be brought back. Killing two birds with one stone !!

Buffet heads for the exit door outta India along with LNM and the Koreans

Warren Buffet led Berkshire Hathaway has decided to call it quits on its India online insurance distribution venture after just two years of being in the market along with BajajAllianz. Dilly dallying on the aspect of FDI in insurance by the government has finally seemed to have exasperated the Oracle. It is a known fact that Warren Buffet likes control of the businesses he runs. Foreign insurers are presently restricted to upto only 26% of equity of the Insurance JV’s in India.  

Almost on cue, POSCO’s Rs 30000 Cr steel project in Karnataka and ArcelorMittal’s Rs 50000 Cr steel project have been withdrawn by the respective companies. The reason cited is inordinate delays in receiving clearances, hurdles land acquisitions etc.

Although, IKEA’s ~ Rs 10500 Cr proposal to set up their furniture stores along with cafeteria’s was approved, there isn’t anything else on this front after so much hype over the ‘big bang FDI reforms’ announced last September.

William Pesek of Bloomberg nicely sums up

All this is bad news for India at a time when it tries to desperately attract foreign capital, both FDI & FII. FDI flows (the more preferred of the foreign flows) in 2012 – 2013 fell 38% YoY to ~ $ 22 billion. This is crucial to plug the yawning gap in current account. The more the government dilly dallies the more bad press India going to receive on foreign investments front. 

England place one hand over the Urn

England won the second Ashes test at the Lords stadium to take a 2-0 lead with 3 matches remaining.

Midnight Breakfast had predicted at the start of the series that Australia would have a tough time in the series due to their inexperience and lack of cohesion.

This prediction came true along with the off field issues like the Mickey Arthur revelations to haunt them and in the end they had to taste a massive defeat and are on the verge of losing the Ashes again.

On the other end England played very well as a team with their young players coming to party.

Joe Root uprooted the Aussie confidence with a Man of the Match performance and Ian Bell silenced his critics with his 3rd consecutive Ashes century to ring the death knell for the Aussies.

Now it an uphill task for the Aussies to win all the remaining 3 matches if they are garnering any hopes of regaining the Ashes.

National Investigation Agency (NIA) files chargesheet in Bodh Gaya Blasts

  • On 17th July 2013, the NIA filed chargesheet against 5 operatives of the Indian Mujahideen, a proscribed terrorist organisation under the UA (P) Act.
  • Found this bit interesting after seeing how our politicians had cried foul alleging conspiracy when this particular organisation’s name had initially cropped up after the blasts ripped apart the historic buddhist temple at Bodh Gaya. Curiously, i didnt notice any breathless debates when these people have officially been named 
  • The target is interesting since terrorists rely on signalling effect, its the first time in recent & distant memory that a buddhist place of worship has been target, after the Bamiyan statues of Gautam Buddha were bombed by the crazed Taliban.