![]() I find the case quite interesting! Possibly (repeat possibly) a pointer to the lack of capital allocation discipline, information dissemination and corporate governance ethics so acutely lacking in many cases in Indian corporates.ĭisclosure: Author is a SEBI Registered Investment Adviser and runs advisory firm. So, even though the core business may do well and high operative leverage is present in the business, can we comfortably invest here? Lastly, no discussion whatsoever has been made in the AR about what the subsidiaries are proposed to do except an one liner that one of the companies has an Iron Ore mine in Brazil. What type of plant and Machinery can embed these types of values in it? 668 Cr Gross block worth Plant and Machinery can be further revalued to add another Rs. Interest charged to the loans given by company are much below market rate and no definite repayment period is stipulated.Ī separate point, revaluation of the plant, machinery, land and building were done in Standalone but the rationale of the same were not very apparent. Loans and advances given to Subsidiary / Associate / JV totals Rs. and it’s continuing in the book for last few years. The amount is more than present market cap of the company.īalance receivable from Subsidiary / Associate and JV companies are Rs. 2250 Cr worth of guarantee and collateral security provided by the standalone entity for raising loan for subsidiary, associate and JV companies. Also, shares of one subsidiary pledged for providing loan to an associate) ![]() Total Mutual Fund pledged for availing loan is Rs. 265 Cr of unquoted investment (a large part of this is again in Mutual fund but that is pledged for loans taken by an associate company). 551 Cr of quoted investments in liquid mutual funds. 7 cr whereas Consolidated book has Short Term loan of Rs. Standalone business which does all the business has Short term loan of Rs. All subsidiaries and associates together able to erode profit of good quality standalone business substantially by generating meagre revenue, bloating balance sheet and even debilitating the main business numbers.Īs on, Standalone steel pipe business is debt free whereas Consolidated books have Rs. So, it is seen that all the subsidiaries are bleeding, hardly generating any revenue. 1355 in FY 15) and consolidated profit was Rs. ![]() The Consolidated revenue for FY 16 was Rs. ![]() It completely halted the activity of companies like this. The fall in revenue and profit is understandable due to lower commodity and energy prices. 1019 Cr in FY 16 (Rs.1355 Cr in FY 15) and profit of Rs. It has 2 JV, 3 subsidiary, 1 step down subsidiary and 3 associate companies. However, on going through past 3 years AR I doubt if we can be comfortable about the corporate governance standard and capital allocation ability of the company? Here are few pointers … Unfortunately, they didn’t provide the consolidated numbers with Q2 results. The results which came today for Q2 17 (standalone only) is good, which actually raised my interest to study the company. Actually one plant of 200000 T capacity is shut down for lack of demand and would be operational soon as Anti Dumping duty on China would hopefully continue beyond Feb 17. Presently out or total capacity of 550,000 T, only 35% capacity is utilized. Maharashtra Seamless of D P Jindal Group could have been a great play in the theme of rising crude price, gradual higher deployment of rigs around the world and a very high operating leverage. My understanding is that with the fundamentals being strong there are good chances of a surge from here.There is a good chance of overriding the withdrawal happening sooner than later.This has happened in case of opal glassware.At a current CMP of 274 it looks like a very good value buy.ĭisc:I am invested here.Also I have been following all your posts and have learnt a lot.This is a basic level analysis i have put forward and any feedback is most welcome. Margins have come down because the anti-dumping duty has been is facing very good competition with China. #The last bull rally is always speared by cyclicals/commodities and steel is one of the rulers.A rally is round the corner.Should be buying steel when GDP forecast is very less. #Company has been steadily growing since last 10 yrs. #quoting at less than 10 times PE Of Welspun a market leader. This is the first stock for which I would like to put my case forward.
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