What do we make of resignation of CEO .
Posts tagged Value Pickr
Cupid Ltd – Helping the world play safe! (16-03-2024)
Hi everyone! Been a while since i tracked valuepickr, its nice to see that the old timers have created good wealth by being patient with cupid.
A lot has been said about the valuation that its trading at and i have a viewpoint on it too… please share your thoughts if anyone has looked at the valuation with this perspective.
As we all might agree that the company was quite undervalued while mr. Garg was at the helm(though i am a fan) with 12 -15 kinda multiple. So getting in fresh management who is putting his own money on the line should definitely rerate the company… question is how much… so in a market like India with decent growth,roe, margins etc a multiple of 30 to 40 can be justified.
The kicker comes in with the fund raising… as i understand by raising 400cr, historically cupids roce has been 25%+ … lets say they are able to generate 20% on this 400cr conservatively which is around 80cr.
As they are already making 40 to 50cr steady state business. So a few years out( may be 2) we could see a 130 140 cr kinda bottom line… and hence the 3000cr market cap.
This is just my understanding as to why the market might value it in a certain way… its more in the art territory than science now, but as there are no revenues from ivd , nothing from usfda , nothing from Singapore tie ups, there are multiple optionalities attached.
Im not making a bull case, but only trying to understand why this valuation is justified and fiis are willing to invest.
IBC referred Cases: Value investing or Value trap? (16-03-2024)
Some correction:
While previous mechanism like CDR and restructuring did provided for moratorium and debt repayment to align with Cashflow, as per IBC act, just on default (not even on being NPA, i.e. 90 days overdue payment), lender/operational creditor/employee/service provider can refer the company to NCLT. So there is no requirement theoritically for B to negotiate settlement with A. That is being change from previous regime.
The SME portfolio (16-03-2024)
I had called up Chaman metallics day before. They are adding almost 3x capacity in comparison to their existing one, which would take approx 1 year to add to the topline.
IBC referred Cases: Value investing or Value trap? (16-03-2024)
I would like to continue writing on this topic while slightly digressing away from the initial objective of valuations and maybe more towards the business/process aspect, and post that creating a set of factors/observations that repeat in successful playouts.
It should be done by moving a bit backwards and understanding the whole process of CIRP/IBC along with several case studies, with the motive of explaining everyone as to how one can play this style.
I am myself discovering my way through this style as a new entrant, and unable to come in contact with people who do this in depth and can teach me, so my knowledge should be very rough around the edges ofcourse.
The previous replies in the topic got very stock specific and thus not insightful in terms of understanding this process/style, i would like to get more truer to the primary topic of IBC/CIRP, started by @dd1474. Ofcourse there would be company names, but only with the motive of synthesizing the key pointers from it that need to be followed while following this style of investing, and maybe take up the business in its own individual topic if needed rather than discussing in detail on it in this topic.
So first of all what is CIRP/IBC/Insolvency
Basically firm A took some debt from firm B to grow its operations, for any and every reason these funds couldnt be used in the best way and yielded nothing for A. As A didnt make any money off of the borrowed amount, they couldnt pay the interest costs to firm B.
Now B first tries to settle the amount through OTS (one time settlement)/any other way at a reduced amount and gives more time to A (this may not happen every time, and A can directly go under insolvency before these other measures), but A still hasnt been able to payback B.
Finally B goes to NCLT to lodge a case, A is then declared under insolvency.
While being declared as insolvent most of the firms are loss making and some even do not have any sales. So no need to get alarmed by seeing that, as these firms do now have access to funds (wc), they are unable to carry on operations.
The next thing that happens is that the NCLT in unison with B brings in a resolution professional (RP) to helm the ongoing operations (while the previous management loses control over the company) and come to a solution.
The solution the RP can come to is to either liquidate the firm or bring in a new management (resolution applicant/RA) who infuses funds to pay back B and revive the operations.
Now if there is no resolution applicant, the firm goes under liquidation, we investors dont even need to look at it as it does no benefit us in any way.
The game is to be played if a decent/capable RA comes in.
The steps
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B lodges a case in NCLT against A
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Appointment of RP
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Meeting of committee of creditors (B and other entities like B)
- Mind it, there are several meetings before they come to a decision, and this whole process is very long
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Announcements in newspapers and other mediums by A, in order to invite bids (expression of interest- EOIs) from RAs
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Then EOIs comes in from RAs
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Then few more meetings of committee of creditors (coc) takes place in order to select a SRA (successful resolution applicant) and their rp (resolution plan) submitted by the SRA
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Finally after a RA is approved from coc, it then needs approval from the NCLT
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Post approval an implementation and monitoring committee (IMC) is formed, consisting of the RP and the RA, who take over the board and keep watch on the progress of the rp submittee by the RA.
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Finally after some time IMC leaves and the whole control is given to the RA, and the RA starts bringing in new board members
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While submitting the rp, there is also a clause of reduction in capital.
- This means that majorly (90%+ usually) of the shareholding is diluted and the whole control is given to the new management.
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Now since 90%+ shareholding is with the new mgmt, according to the sebi rules they need to bring it to 75% ans below, now to do this they either get in an investor or OFS it to the public.
Thats the basic summary of the whole process.
If anyone uses this style extensively please share the granular points and learnings.
Will share case studies soon, the idea behind sharing case studies would be to understand the space better along with achieving the ability to gauging the future outcomes more accurately.
The Anup Engineering Ltd – Can it scale up? (16-03-2024)
Bonus announcement
The Anup Engineering Ltd – Can it scale up? (16-03-2024)
Acquisition , 0.7x sales
Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains! (16-03-2024)
Disclosure: I had only investments in one company Uttam Sugar. Had shifted to it from Renuka in Mar/April 2023 after holding for a year plus there. Have fully exited Uttam Sugar post Q3 results. Our field reports suggest there is some trouble ahead this year for Uttam Sugar in its mill areas. crushing/yield will be affected. Anyone invested in Uttam Sugar, please do your own diligence.
Every time I think I have understood the variables somewhat to like 60% competency levels, something our of the ordinary comes – this time the Govt policy intervention totally spoiled the sentiment curve. And actual production is not bad in KA, TN
just to complete the sugar-cycle experience in this cycle (for myself) – I have thought of getting into Triveni Engg – as it’s a better risk-adjusted bet – but haven’t yet taken action on that front. Will update if I do. My sugar expert friends invested in Triveni Engg have stayed invested.
Great articles to read on the web (16-03-2024)
The impact was already priced in on Friday. Now its just a matter of public perception if the oppn. IT cell can paint it as a scam to sway the minds of voters, which could potentially make the markets nervous,
anything to do with election results
some chronology
Ratio manipulation by Companies (16-03-2024)
Its possible to reduce outstanding float using Buybacks, which artificially increases EPS.
ROCE can be manipulated by capitalizing the operating expenses and then depreciating it over extended periods.