LEEL is a “Big Dussera Gift” from me to novices: SP Tulsian
Normally, stocks recommended on auspicious days like Diwali, Dussera, Christmas etc surge like rockets and delight investors.
SP Tulsian, the veteran stock market advisor, religiously follows the hallowed tradition and recommends high-quality stocks to us on all auspicious occasions.
In 2017, he recommended LEEL (alias Lloyd Electricals).
“You have a big Dussehra gift for our viewers?” Latha Venkatesh asked SP Tulsian.
“Yes I have one Dussehra gift for the viewers that is Leel Electricals,” SP Tulsian replied.
The stock was also described as a “Pataka” by Varinder Bansal owing to its potent firepower.
SP TULSIAN – PATAKA STOCKS
Dalmia Bharat Sugar Target 245
Eon Electric Target 130
Leel Electricals Target 440
Indian Toners Target 400
— Varinder Bansal (@varinder_bansal) October 13, 2017
Porinju Veliyath buys LEEL aggressively & also recommends it
It is well known that Porinju Veliyath only recommends those stocks where he has high conviction and ‘skin in the game’.
LEEL was one of Porinju’s high conviction stocks and he bought it aggressively as if there is no tomorrow.
Leel Electricals in focus@porinju Equity Intelligence India stake in Leel Electricals has been increasing
Feb 2018 7.35%
Dec 2017 5.52%
Sep 2017 4.92%@CNBCTV18Live
— Nigel D'Souza (@Nigel__DSouza) February 2, 2018
Keep an eye on LEEL Electricals@porinju Equity intelligence now holds 5.4% in the co https://t.co/q2kaPym9Pc
— Nigel D'Souza (@Nigel__DSouza) September 29, 2017
BSE disclosure says @porinju 's EQ takes his stake to 2.1 million shares (5.36%) in LEEL electricals. Woah!! pic.twitter.com/OTAZLww2UD
— Kush Katakia (@kushkatakia) September 29, 2017
#BudgetWithETNOW | #Budget2018 | Here are the top #BudgetPicks by ace investor Porinju Veliyath (@porinju). Keep an eye on these stocks & stay tuned to ET NOW to catch Porinju LIVE with his market analysis of the Big Budget at 10:00 am today! @nikunjdalmia @AyeshaFaridi1 pic.twitter.com/Gpg1w2n1Ke
— ET NOW (@ETNOWlive) February 1, 2018
When the stock price slumped, Porinju hinted that one should average.
If you were rationally bullish on a stock at 120 in January, it's a screaming buy today at 95!
— Porinju Veliyath (@porinju) May 23, 2018
Trusting Chor promoters with large sums of money is an act of naivety?
Generally speaking, trusting alleged chor promoters to turn a new leaf and work for the welfare of minority investors is naive.
Even if one wants to bet on reformation, one should invest small sums of money and watch one’s back.
One never knows when the chors will stab us in the back and bolt with our hard-earned money.
Porinju himself realized this fact and advised us to stay away from chor companies.
“My strategy of betting big on improving corporate governance in a structurally changing Indian economy looks backfired because chor promoters still find loopholes“, he lamented.
A Rule-Based Economy cannot be built overnight! Change is a painful and time-consuming process. It is true that many chor promoters still find loopholes during the transition period.
— Porinju Veliyath (@porinju) June 28, 2018
Unfortunately, the realisation came too late in the day.
In just the last 12 months, LEEL has slumped from 300 to Rs. 48 and lost a colossal 84% of its market capitalization.
In #LEEL Electricals, Porinju’s EQ India Fund PMS holds a staggering quantity of 33L shares as of 31st March 2018, comprising 8.19% of the equity capital. The investment lost 50% on a YoY basis.
Now it will have to rise 100% for 0% returns in CY 2018.
— MacroMan (@WithRitesh) June 28, 2018
LEEL Ltd where porinju's EQ India Fund holds 33L+ shares (more than 8% stake) has posted disaster Q4
— Himanshu Gupta (@Tradersschoice) May 31, 2018
LEEL was a costly misjudgment which caused permanent loss of capital: Porinju to PMS clients
Porinju has now addressed a detailed letter to the distinguished clients of his Equity Intelligence PMS in which he has explained the LEEL fiasco.
The letter is marked “strictly private and confidential. The communication is exclusively for our clients’ information”.
However, the sleuths of CNBC TV18 and some vigilantes on twitter accessed the letter and made it public.
“Our investment in LEEL has witnessed a significant capital erosion and I admit that in hindsight it looks a mistake,” Porinju said in a mournful tone.
“My assumption that siphoning off in a changing environment would be difficult appears faulty,” he added.
“LEEL share price is nearly 80 percent low from the cost in most of the accounts. While we cannot rule out a possibility of eventual recovery in the share price, the damage has already been done,” he continued.
“Rare but costly misjudgements like LEEL resulting in permanent loss of capital are humbling and thought provoking for us in our pursuit to create wealth for our investors through long term value investing,” it was further stated.
Don't believe that in the long term everything will be fine!
Even if Porinju likes the stock
2004 – Stock was Rs. 40
2017 – Rs. 340 (Porinju buys!)
2019 – Rs. 40
Porinju on why he bought this stock
Bought more and owned 8% of the co
and What went wrong!https://t.co/UMgyl37wFQ
— Nagpal Manoj (@NagpalManoj) January 12, 2019
Promoters diverted Rs. 340 crore to their own entities
Porinju further explained how the shenanigans of the chor promoters have wrecked havoc with the fortunes of the stock.
“On 30th May 2018, to the shock of entire minority shareholders, including us, the company arbitrarily wrote back the profit from sale of CD division in FY18 annual results to Rs. 663 cr, triggering a selloff in the stock.
Company also diverted nearly Rs. 340 crore to promoter entities including the listed debt laden entity Fedders Electric Ltd as capex and loans for buying land and factories of their own plants.
The stock fell from Rs. 215 to Rs. 127 in 5 days and the liquidity in the counter dried up,” he stated.
Porinju pleads with the promoters not to rip off minority shareholders …
Porinju turned on his persuasive charm and pleaded with the promoters to show mercy to hapless minority shareholders and to not rip them off in such a savage manner.
“Taken aback by such an unexpected development in the company, we reached out to the management for clarification, seeking more transparency and motivating to share wealth with minority shareholders. Given the value in company’s operations and assets, illiquidity in the counter, our significant holding hoping for a better exit eventually we continue to hold the stock“.
… Management is unmoved & stays defiant
Naturally, the promoters have tasted blood and are in no mood to relent despite Porinju’s entreaties.
They are determined to tear the minority shareholders apart and throw them to the wolves.
“However despite our best efforts to engage the management, they declined to share more details including the reconciliation of CD division sales proceeds and refused to reverse the malicious related party transactions,” Porinju lamented.
Porinju engages top law firm and files complaint with SEBI
It is well known that Porinju was himself a top corporate lawyer before he came to Dalal Street in the quest for mega multibaggers.
He knows all the statutory provisions and is well versed with the law.
Porinju has decided that he will not take the alleged fraudulent activities of the chor promoters lying down and will instead teach them a lesson that they will not forget in a hurry.
He has engaged a top law firm and also pleaded with SEBI to direct a forensic audit of LEEL’s accounts.
“Losing hope on the management after months long attempt, we decided to take up the issue with the authorities and engaged a leading Corporate law firm in Mumbai to explore various legal remedies available and subsequently filed a complaint with SEBI – seeking of forensic audit of books of accounts LEEL Electricals, without which the suspected fraudulent actions of the promoters and senior management to siphon off company’s wealth for personal enrichment cannot be proven legally,” he stated.
SEBI will bail out investors?
In the past, we have seen that SEBI has been adopting a proactive stance and is coming to the rescue of investors.
The latest instance is of SEBI busting a nefarious ‘circular trading’ scam (see SEBI Busts Circular Trading Scam By Operators In Dubious Multibagger Stock).
SEBI is also going hammer and tongs at some unnamed PMS Fund managers for offering stock recommendations while secretly dumping the stock (see SEBI To Nail PMS Fund Managers For Duping Public With Bogus Buy Recommendations).
Even Rakesh Jhunjhunwala, the Badshah of Dalal Street, came in the cross hairs of SEBI though he received a clean chit thereafter (see
Rakesh Jhunjhunwala Gets Reprieve From SEBI Over Insider Trading Allegation In ‘Disaster’ Stock).
Porinju expressed hope that SEBI will rise to the occasion this time as well and bring the alleged unscrupulous promoters of LEEL to book.
“We are hopeful given the circumstantial evidence of fraud involved, the regulator would act judiciously, protecting interests of the entire minority shareholder community of the company and set an exemplary precedent in the corporate governance history of Indian listed companies and empower the minority shareholder community to raise their voices against lapses and criminal negligence committed by promoters, and thereby raise the overall bar corporate governance standards in India.”
Complaint spooks top brass of LEEL, they desert the sinking ship
Porinju pointed out that his complaint with SEBI is having the desired effect because the top brass is resigning from Company the way rats abandon a sinking ship.
“In the last two months after our complaint with SEBI, there have been several high level exits from the company including many from senior management like the Group CFO, Company Secretary and VP Finance, Operations Director etc” he said.
The best is that even the auditors are cracking the whip and demanding accountability.
“The auditors of the company in 2019 results review report have asked the company management to review the receivables shown in the books. Act of these events or of the regulator reaction, if any, cannot be predicted,” it was added.
We have seen in the past that auditors wield enormous influence and are able to tame unruly managements.
3rd listed co in a row where Auditors have resigned-Vakrangee, Manpasand & now Atlanta Ltd.
Underlines very little tolerance for even the slightest whiff of doubt. Take no risk-no chances approach! @BTVI @Geetu_Moza @stockgurupiyush @ShailDamania @SEBI_India @theicai @PwC_IN pic.twitter.com/00pnIBlf6W
— Siddharth Zarabi (@szarabi) May 30, 2018
Has this ever happened? Rarely
It is uncommon for auditors in India to resign halfway through an audit.
On Apr. 27, Price Waterhouse & Co resigned as auditor of Vakrangee Ltd.
On May 26, Deloitte Haskins & Sells resigned as auditor of Manpasand Beverages Ltd.
— #RenukaJain, FCA ?? (@RenukaJain6) June 30, 2018
Trapped due to illiquidity in the stock
Porinju pointed out that one of the perils of investing in low liquidity stocks like LEEL is that the exit doors are welded shut and one cannot escape.
One is doomed to go down with the sinking ship because any attempt to sell the stock will only cause it to plunge further.
“Value of LEEL, in most of the accounts have fallen below 3% of the account NAV. Attempting to liquidate the investment at a time without liquidity in the counter will only lower the realisable value and this would not make any material positive impact to NAVs,” Porinju advised his distinguished clients.
It is obvious that if even astute fund managers like Porinju Veliyath can be taken for a ride by alleged chor promoters, novice investors like you and me stand no chance. We are better off punting with blue-chip mid-cap stocks and eking out a living rather than take a risk with chor stocks and losing all of our already meager capital!
Lot of Gulf based NRIs who got on board with PMS of PV got a big jolt. With lot of difficulty, they turned towards the markets and with this shock, am afraid they are off permanently. Lot of them are unable to come out of PMS as there is no liquidity in many of the stocks. Very badly stuck.
Even the basics of fund management not followed (risk mgmt). Unfortunately going with big image and zero ability guys, consequences for the followers are devastating.
Majority of promoters,especially in small cap space are fraud as regulators cant do anything regarding the same .this is the no1 risk for investors.
Newbies without market knowledge could get in to small caps but wonder what happened to the big shot PMS.
I have been warning small investors here not to go after such third grade small caps.Small investors should only remain with market leader of their differet fields and even if they want to benefit from small cap,go for small cap mutual funds.
Is it third grade small caps or third grade PMS managers who choose such third grade small caps from their investors’ money/funds.
I wonder how can some fund manager just go such gung-ho on such small caps and invest such a vast colossal money – more than 8% equity capital of the company into it.
It only reaffirms that there was no systematic approach of stock evaluation, sectoral weightage in the PMS Fund, overall PMS Fund’s PE and other evaluation criteria and it just rode the market sentiments created by market punters. Very bad of Porinju.
agree. even child start jumping in bull markets. with some sudden success they think they have mastered the market. useless PMS managers and useless advices.
I have my worst experience from ANGEL BROKING PMS in 2008.
guys run away as far as possible from these guys. they are useless
It is well known that Porinju was himself a top corporate lawyer before he came to Dalal Street in the quest for mega multibaggers.
NEVER HEARD THAT PORINJU AS YOU CLAIMS A WELL KNOWN CORPORATE LAWYER !!!!
astute fund managers like Porinju Veliyath ???? IF HE IS ASTUTE FUND MANAGER HE NEVER HAD TO FACE SUCH A SITUATION
Leel guys who siphoned funds must not be allowed to go scot-free. Porinju has done the right thing by taking up the matter to SEBI. I sincerely hope that action will be taken against the rogue promoters for duping scores of retail investors.
porinju escaped after implicating other shareholders in sunil hitech. its APAY BACK TIME FOR HIS DEEDS AND KARMA.
Yes, I also fell the same. Not only Sunil Hitech, Samtex also…..
I see many other such companies where Porinju bought and later went down. Khaithan Chemical, Samtex Fashions, Cimmco ……. Many more. Don’t blindly follow anyone. Do your own research and take decision.
Some analysts on CNBC did raise doubts and said exit on any rally after the deal to sell division
Shahina Mukadam, Independent Market Expert told CNBC-TV18, “Lloyd Electric is going to consolidate at current levels. I don’t see too much upside till the money comes in and basically what the management has said is that they will use it to repay debt. I would have been happier if they had said that we would be giving it out as a large dividend or something to the investors. At the same time I think the debt that is there is half what is the sale value that we are hearing for the consumer durable business. So, I would believe that once the money comes in there has to be some sort of a return to the investors.”
“Now what that return will be, will drive the stock price either up or let it consolidate at current levels. If they are to give a large dividend which is very possible with the type of money that is likely to come in then it would be a positive and we would see this stock rallying. Otherwise, I think they are going to go in for a buyback, the management just has about 56 percent equity stake, then I think this stock will consolidate at current levels only. I don’t see too much upside simply because the profitability and revenues is going to go down by two-third, so I would just say that hold and look to exit at any bounce,” she added.
First Published on Feb 22, 2017 04:18 pm
There are many more companies like this. Bhoruka Aluminium sold their core business to YKK for 150 crores. They moved the assets of the company to their private firm Bhoruka Extrusions and then merged the company with YKK. This is done at the cost of hard earned money of public/ minority investors. SEBI please investigate.