my worry is that when a promoter pledges shares and borrows at 200-300 bps from a private financier above bank rate of interest, it’s typically a sign of drying liquidity. A fact that is corroborated further by:
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Omkar capitalizing interest (this is typically done only for ultra long gestation projects like refinery, oil drilling ). typically projects that require 4-5 years for completion
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at 13 % on Rs. 175 Cr. of debt, it’s almost Rs. 22-24 Cr. of interest payment. can this go up further and slide further is my big worry.
Look at ROIC – its about Rs. 38 Cr. ebitda at say tax rate of 30 % which is about Rs. 28 Cr. or so. which is about 13-14 % on total capital invested of Rs. 270 Cr. odd – just above cost of debt and certainly nowhere close to being above cost of equity.
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