Devil Advocate: I found this company very interesting but few problems that I found while reading about this company. I am not invested in this company, so my views could be biased. Please do your due diligence. I am putting the counterpoints, please feel free to counter and question without getting personal.
- First point is that management does not look focused and honest because of inter-party transactions mentioned in their AR. Mr. Unnikrishnan Nair P M, the Managing Director of Anlon is running Anlon IPS Engineering Private Limited which is supplying spares to this limited company. I don’t understand this kind of arrangement in such a small company with sale of hardly 35 Crore. Mrs. Beena Unnikrishnan, the Whole-time Director of Anlon, is the wife of Mr. Unnikrishnan Nair P M, the Managing Director of Anlon. She is running an another company Kaleo Technology Solutions Private Limited with Mrs. Veena Praveen, a Non-Executive Director of Anlon. And these were interparty transaction of previous year, which inspite of standard disclaimer cast serious doubt on this kind of interparty transaction.
- Kaleo Technology Solutions Private Limited :
- Technical/Professional Fees: 46.90 Lakhs
- Rent: 13.26 Lakhs
- Purchase of Goods: 6.39 Lakhs
- Sale of Services: 176.54 Lakhs
- Total: 243.09 Lakhs(SME_AR_22087_ANLON_2022…)
- Anlon IPS Engineering Private Limited :
- Purchase of Spares: 47.36 Lakhs (Vendors Advance)(SME_AR_22087_ANLON_2022…)
All transactions are carried out at prevailing market rates and based on purchase orders. The transactions were entered into in the ordinary course of business and at arm’s length basis, thus requiring no specific approvals from the Board or General Meeting. However, all related party transactions are approved by the Audit Committee as part of good corporate governance(SME_AR_22087_ANLON_2022…).
- Second, The advertisement and narrative that promoter is trying to build around this company looks quite doubtful. IPO has come on the price of 90 INR in Jan 23 and QIB was done on 03 June 24 at the price of 372.46 INR. During this time sales has been shown to increase from 19 to 32 cr, however after this sale has been able to jump from 32 to 35 cr. Prior to IPO company has borrowed 5 cr and just after IPO company has repaid 3 cr. First time in history in FY-24 company has invested around 5 cr in fixed asset.
My assessment is that promoter is trying to build the company with investor money. He is not having any technology or competitive edge. He is having long experience and now trying to sale his experience as a product by branding and advertisement. I will wait till the time company will start generating some cash flow. It is not generative even the cash flow to fund its investing and debt repayment. Little bit delay in realization of payment and they will again come asking for fresh money.
- My personal view (I reserve the right to be wrong) is that in bull market this type of companies will come and sale the story. And out of these 1 or 2 will become successful also. Investors who understand the risk involved with execution and probability of real free cash flow coming in the future should only invest. The opportunity size is also very small, however it is enough to make this company profitable and give good return to the minority shareholders if promoter is not going to flick money through his private limited companies , so people should understand the execution risk and don’t get caught in story and branding.
Thanks!
Subscribe To Our Free Newsletter |