Time Technoplast Ltd
Management talking about restructuring overseas business. They have not yet provided sufficient information to investor which I think they should have…
from my limited understanding they are talking about letting go majority stake in overseas business.
Why would they do it?
They expect huge orders in near future for composite products like LPG Cylinders & CNG cascades/onboards etc, for that they need money to increase production capacity. As they are already debt laden with high interest rate( I don’t understand why don’t they restructure debt first), there is limited scope of increasing debt for new capex. So they will bring in money by selling part of overseas business and use it for bringing down debt & new capex.
Is this a rational thing to do? is it good for minority shareholders?
I think Yes.
Overseas business is mainly packaging business & some IBC’s ( from my understanding) so packaging business has no real moat and pressure on margins only increasing since last many years, so letting go of this business in exchange for money is anyway a rational move.
IBC which is a value added business will also go with it as they will have to sell by clubbing these assets, can’t separate. ( anyway it must be a small part overseas).
How much does overseas business worth?
Approx 30% of revenue come from overseas business, so I think 30% assets, 30% WC, 30% debt & 30% profits belong to that business.
I think it is worth around 1200Cr to 1500Cr.
How much money will it bring?
If they sell 51% of stake in that business, they may get 600cr to 700cr in exchange.
It will be sufficient to solve their short to medium term problems.
With this restructuring their 15% revenue will decrease and Operating margins will go up, this may rerate the stock as revenue portion of value added products will go up, debts levels and so interest payouts will go down and future capex is towards value added products.
Disc : invested and for my future reference.
Let’s see what management has to say in todays concall
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