Neo Corp-Growth Machine in Technical Textiles(CAGR 45%)!

Hello @manishinlucknow : Yes current debt level is high, current long term debt is around 190cr….actually company had reduced the debt in 2nd Q of FY2014-2014 but they have recently acquired Bangalore based IPC packaging Pvt. Limited and that is why taken additional debt again——–

Regarding : “the rise in debt is more than the rise in sales which is a clear negative for me.”——as u know that the company’s sales are growing at more than 35%(its 45% on consolidated level) whereas the long term debt has risen by 18% last year(from 160cr. to 190 cr). But yes, I agree that increasing debt is not good in all situation…..

Regarding issue of warrants: the main fact to see here is what will be the floor price of warrants—as per the shareholder approval , last time it was (INR 65, although it got postponed later due to technical reason)—–so for a stock trading at 40, why some big institution will buy the warrants at almost doubled price than market price(at that time the stock price was around 33-35)——two positives from here—

1)This premium says that company’s intrinsic value is more than the CMP which will give confidence to the shareholders.
2)With 70L warrants at 65 , it will be around 45 cr., if company reduces the debt with that, then profitability will increase heavily.

Regarding “My question is – if the business is doing well and the profits are real then the debt is increasing.”——–This is mainly happening due to the growth aspirations of the company, company is growing at brisk pace and recently entered to the South America and made a good base there—–so constant capital expenditure for new expansion, recent acquisition and delay in getting the payment from customers etc.

So what we can do is that, keep tracking this company and if they reduce the debt(which I expect if no more acquisition) and Promoters increases the holding and releases the shares(if the reduce debt and stock price goes up, % pledge will come down automatically) , then we can that the company is improving———

Actually I am also monitoring the company closely, I have invested in this company does not mean I will have to hold the share if the company does not improve its business operations, financials.

Thanks all for the views.