Yes vivekbothra,
Your calculation is correct. Suven has raised these 200 crores last year thru QIP route only for this purpose. And most probably, considering the accounting policy they follow, they will charge it in PandL only in next two years. Say 100 crores per year. And surely profit will go down to that extent. That’s how it normally works. If successful, it will give multifold gains, else again at normal profit of 125-150 crores from years thereafter.
But the best and most important part, which I liked the most is they raised capital for it and didn’t go for debt route. They diluted some 10% capital for raising 200 crore, so effectively if the project fails, we all shareholders will lose 10% of our value. Had they taken debt, there would have been burden repay the same with interest and that could have spoilt balance sheet structure. In event of success, it will be multi fold profits and again we will be parting 10% of that profit to QIP shareholders. But that’s ok. Right??
Happy investing.
Disclosure – Invested from level of Rs. 30 and with price appreciation, its nearly 30% of my portfolio.
Wont sell single share till final outcome of SUVN-502.
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