I am furnishing below relevant information having bearing on the valuation of the stock:
1. Promoter increasing their stake continuously (37.89% in March 2010 to 53.39 in Sept 2013) at all price levels buying in the open market over the years evident from SEBI SAST disclosures and quarterly SHP changes.
2. FIIs have been consistently holding substantial equity with intermittent increase/decrease quarter to quarter----Current holding 35.60% in Sept 2013, which is an increase from 23.64% in March 2010.
3. Retail holding (Individual) has declined from 15.31% in March 2010 to 5.14% in Sept 2013.
4. As at Sept 2013, the aggregate holding of Promoter/FII combine is about 89%. If one were to add the Bodies Corporate holdings under Public category, as these can be entities indirectly under promoter control, Promoters exercise control over almost 95% of the equity.
5. Equity of the company has been expanded in 2010/11 by way of Rights and GDR issues at Premium of 18.50 per equity share of Rs.1 face value. About 15% of right shares were subscribed by FIIs by way of rights renouncement.
6.There are outstanding FCCBs whose position is as follows as per AR of 2012-13:
“5.5% Unsecured Foreign Currency Convertible Bonds: The Company issued on 13.11.2009, 5.5% 105000 Foreign Currency Convertible Bonds (FCCB) of US $ 1000 each aggregating US $105 million [ ` 493.71 Crores] at par. The bonds are redeemable on 13th November, 2014 unless previously converted; these bonds are convertible into equity shares at an initial conversion price of ` 46.70 per equity share with existing fixed rate of exchange on conversion @ ` 47.02 = US $ 1.00 at the option of the bond holder at any time on or after 22nd December, 2009 and prior to the close of business on 13th November, 2014. The outstanding 104,650 bonds when fully converted would result in issue of additional 105,367,088 equity shares of ` 1/-each. Apart from this, FCCB holders retain the right to subscribe in Equity Shares to the extent of 210,734,176 Equity Shares of the Company as per Letter of Offer issued by the Company for Issue of Right Equity Shares in the ratio of 2:1 at a price of ` 19.50 (Including Share Premium of Rs. 18.50 per share) at the time of conversion into Equity Shares on or before 13th November, 2014.”
Due to rupee depreciation the amount to be paid to the FCCB holders, as on 31st March 2013, was Rs.569.18 Cr, as against the initial borrowed amount of 493.71 Cr and the redemption amount will increase/decrease depending on the exchange rate at the time of redemption in November 2014 or earlier as per redemption stipulations. In the event of conversion into equity and exercise of RIGHTS reserved in their favour , FCCB holders would have subscribed to 28.41% in the expanded equity(from the present 95.80 Cr. to 127.41 Cr) resulting in corresponding changes in the Promoter holding to 40.14% and FII holding to 51.57%, based on holding as per Q2 2013-14 SHP. As per SEBI SAST disclosure dt 19th July 2013,BlackRock Global Allocation Fund ,Inc. has acquired 88715000 Convertible Warrants on 3rd July 2013 which represents 8.34% w.r.t expanded equity capital of the company in the event of conversion.
6. REI has embarked on a capacity expansion programme in the recent past with considerable Capex .There is appreciable improvement in its top and bottom line and the operating cash flow since the last three years and the significant thing is that a major part of the REVENUE and PROFITS are contributed by its overseas subsidiaries.
CONSOLIDATED FINANCIALS
Particulars-------2012-13--2011-12----Change
Total Revenue-----9,548-----5,411-----76.4%
EBIDTA----------- 1,490-----1,025------45.3%
PBT---------------- 763-------446------71.2%
PAT---------------- 701-------398------76.1%
STANDALONE FINANCIALS
Particulars-------- 2012-13----2011-12---Change
Total Revenue------5,101-------4,255----19.9%
EBIDTA--------------933---------862-----8.2%
Borrowing Cost--------609--------540----- 12.9%
PAT------------------211------- 226------6.7%
The EPS for 2012-13 was Rs.2.18 on Standalone basis and Rs.7.30 on Consolidated basis (Equity Share FV Rs. 1). The company is highly geared on debt reported to be due to working capital intensive nature of the Basmati Rice industry requiring ageing of Rice for 18-24 months after procurement. The company’s increasing debt year after year and huge inventory are negative factors though financing cost as a percentage of Revenues has not increased implying that the company has been able to generate revenues to cover such increases. The performance during Q1 of 2013-14 is also good and the Basmati rice industry as a whole is doing well. The company has paid a dividend of 50 %(50 paisa) for FY 2012-13 on 30/10/2013.
7. The stock is in downtrend after reaching Rs. 15 levels in May/June 2013 and is now making new lows almost every alternate day .The CMP is 6.35.It is widely believed that the movement of the stock is manipulated and is totally under the control of the promoters, who continue to buy the stock at current level too, as seen from a recent SEBI SAST disclosure dt29/10/2013. There is no rational explanation for the stock to be trading at the present level given its consistent growth in top and bottom line, good performance numbers, dividend track record, strong SHP, visible brand building through media ads for its Rain Drop basmati rice and the Basmati Rice industry itself doing pretty well currently with good export earnings due to rupee devaluation and higher price in the domestic market as well. It is also surprising, however, that no DII/Mutual fund has evinced interest in the stock.
Can anybody throw light on the drastic decline in stock price which defies logic in the light of the details furnished above?
1. Promoter increasing their stake continuously (37.89% in March 2010 to 53.39 in Sept 2013) at all price levels buying in the open market over the years evident from SEBI SAST disclosures and quarterly SHP changes.
2. FIIs have been consistently holding substantial equity with intermittent increase/decrease quarter to quarter----Current holding 35.60% in Sept 2013, which is an increase from 23.64% in March 2010.
3. Retail holding (Individual) has declined from 15.31% in March 2010 to 5.14% in Sept 2013.
4. As at Sept 2013, the aggregate holding of Promoter/FII combine is about 89%. If one were to add the Bodies Corporate holdings under Public category, as these can be entities indirectly under promoter control, Promoters exercise control over almost 95% of the equity.
5. Equity of the company has been expanded in 2010/11 by way of Rights and GDR issues at Premium of 18.50 per equity share of Rs.1 face value. About 15% of right shares were subscribed by FIIs by way of rights renouncement.
6.There are outstanding FCCBs whose position is as follows as per AR of 2012-13:
“5.5% Unsecured Foreign Currency Convertible Bonds: The Company issued on 13.11.2009, 5.5% 105000 Foreign Currency Convertible Bonds (FCCB) of US $ 1000 each aggregating US $105 million [ ` 493.71 Crores] at par. The bonds are redeemable on 13th November, 2014 unless previously converted; these bonds are convertible into equity shares at an initial conversion price of ` 46.70 per equity share with existing fixed rate of exchange on conversion @ ` 47.02 = US $ 1.00 at the option of the bond holder at any time on or after 22nd December, 2009 and prior to the close of business on 13th November, 2014. The outstanding 104,650 bonds when fully converted would result in issue of additional 105,367,088 equity shares of ` 1/-each. Apart from this, FCCB holders retain the right to subscribe in Equity Shares to the extent of 210,734,176 Equity Shares of the Company as per Letter of Offer issued by the Company for Issue of Right Equity Shares in the ratio of 2:1 at a price of ` 19.50 (Including Share Premium of Rs. 18.50 per share) at the time of conversion into Equity Shares on or before 13th November, 2014.”
Due to rupee depreciation the amount to be paid to the FCCB holders, as on 31st March 2013, was Rs.569.18 Cr, as against the initial borrowed amount of 493.71 Cr and the redemption amount will increase/decrease depending on the exchange rate at the time of redemption in November 2014 or earlier as per redemption stipulations. In the event of conversion into equity and exercise of RIGHTS reserved in their favour , FCCB holders would have subscribed to 28.41% in the expanded equity(from the present 95.80 Cr. to 127.41 Cr) resulting in corresponding changes in the Promoter holding to 40.14% and FII holding to 51.57%, based on holding as per Q2 2013-14 SHP. As per SEBI SAST disclosure dt 19th July 2013,BlackRock Global Allocation Fund ,Inc. has acquired 88715000 Convertible Warrants on 3rd July 2013 which represents 8.34% w.r.t expanded equity capital of the company in the event of conversion.
6. REI has embarked on a capacity expansion programme in the recent past with considerable Capex .There is appreciable improvement in its top and bottom line and the operating cash flow since the last three years and the significant thing is that a major part of the REVENUE and PROFITS are contributed by its overseas subsidiaries.
CONSOLIDATED FINANCIALS
Particulars-------2012-13--2011-12----Change
Total Revenue-----9,548-----5,411-----76.4%
EBIDTA----------- 1,490-----1,025------45.3%
PBT---------------- 763-------446------71.2%
PAT---------------- 701-------398------76.1%
STANDALONE FINANCIALS
Particulars-------- 2012-13----2011-12---Change
Total Revenue------5,101-------4,255----19.9%
EBIDTA--------------933---------862-----8.2%
Borrowing Cost--------609--------540----- 12.9%
PAT------------------211------- 226------6.7%
The EPS for 2012-13 was Rs.2.18 on Standalone basis and Rs.7.30 on Consolidated basis (Equity Share FV Rs. 1). The company is highly geared on debt reported to be due to working capital intensive nature of the Basmati Rice industry requiring ageing of Rice for 18-24 months after procurement. The company’s increasing debt year after year and huge inventory are negative factors though financing cost as a percentage of Revenues has not increased implying that the company has been able to generate revenues to cover such increases. The performance during Q1 of 2013-14 is also good and the Basmati rice industry as a whole is doing well. The company has paid a dividend of 50 %(50 paisa) for FY 2012-13 on 30/10/2013.
7. The stock is in downtrend after reaching Rs. 15 levels in May/June 2013 and is now making new lows almost every alternate day .The CMP is 6.35.It is widely believed that the movement of the stock is manipulated and is totally under the control of the promoters, who continue to buy the stock at current level too, as seen from a recent SEBI SAST disclosure dt29/10/2013. There is no rational explanation for the stock to be trading at the present level given its consistent growth in top and bottom line, good performance numbers, dividend track record, strong SHP, visible brand building through media ads for its Rain Drop basmati rice and the Basmati Rice industry itself doing pretty well currently with good export earnings due to rupee devaluation and higher price in the domestic market as well. It is also surprising, however, that no DII/Mutual fund has evinced interest in the stock.
Can anybody throw light on the drastic decline in stock price which defies logic in the light of the details furnished above?
