Yash Pakka – (Previously Yash Paper) – Rising from ash

Dec Results were great. I mainly have three Key concerns/Red Flags regarding the company (in Bold)-

• Despite repeated intimations from the company during the Sept and December quarter and also during the AGM, there seems to be no changes on revoke of Pledged Shares. The latest Shareholding pattern of December 2022 Quarter shows 84.99% of promoter shares pledged even though company has provided SBI letter regarding the Revoke. In AGM also they have mentioned that pledge has been revoked but there are no changes on the BSE shareholding Pattern. Seems a bit fishy to me and I want to know what the actually situation is.

• The company has approved Project Jagruti in UP where it will invest 550cr for expansion of its Ayodhya plant. In June 22 presentations they have given outright sales and profit guidance regarding the expansion plan and how it will become a 200cr PBT company.
  

My main question is that how will it get the funds for this expansion since 550cr over two years leads to a hefty 225cr per year investment and with the Paper cycle peaking out soon (In my Opinion), how will it manage to raise these funds. Promoter holding is around 49% which will have to be significantly diluted and even at current market cap of 350cr, it will be hard. As for borrowings, getting a a loan of more than 200cr will probably screw the balance sheet and also put a heavy burden on the P/L Statement.

• Last is that, despite going on and about for this major capex for the last two years, management has declared almost 20% average dividend for FY20, FY21, FY22. I think this money as little as it might seem, could go a long way in being reinvested into the core business. This would be one of my Key Concern going forward.
  

Disclosure – I am just pointing out realities in the business, not demotivating anyone invested or to anyone who plans to invest. I like the plans of the company but I feel it would be a miracle to pull it off. I was invested for quite a few quarters and finally decided to exit last quarter but I still do track this because of its potential.