Aksh Optifibre- A Technical and Fundamental Analysis


(Mehnazfatima) #1

DISCLOSURE: I hold quite a good quantity of Aksh Optifibre as a long term holding. The fundamental analysis of Aksh is from the blog of Mukesh Bhatia while the full write up of the problem area of Aksh i.e its share holding pattern and issue of GDR and FCCB is by me.

The two key raw materials, optical fibre and FRP rod, constituting 70% of cost of optical fibre cables are manufactured in-house. This makes Aksh as one of the most cost effective optical fibre cable manufacturer. Also, Aksh is now the largest FRP rod producer, supplying to all optical fibre cable manufacturers in 56 countries across six continents.

Manufacturing units: AKSH has two plants at Bhiwadi, Rajasthan for Fibre & Optical Fibre Cables. And one plant at Reengus, Rajasthan for Fibre Reinforced Plastic Rods (FRP).

Future Outlook: India today is at the threshold of breaking into the big league of digitized nations. With investments upward of Rs 450,000crores being announced in the recently conducted Digital India Summit and continued support from the State and Central Government, the optical fibre cable industry is looking for a bright future ahead.

Special initiatives such as the Digital India Campaign, Smart Cities, National Optical Fibre Network and renewed faith in the deployment of large scale Optical Fibre backbone networks by private telecom companies have upped the morale of the entire industry. The spread of technology through various channels will ultimately lead to the building of an efficient national network . In addition next generation technologies such as LTE and FTTx, which require last mile connectivity, would also propel the demand for optical fibre cables in the coming years.

Considering the huge demand for Optical Fibre Cables Company has approved an expansion plan that will see capacity expansion in its Optical Fibre and Optical Fibre Cable business at its existing manufacturing facilities in India. The FRP business is also set for expansion through its wholly owned subsidiary AOL FZE, Dubai. The Company will be investing around Rs.95 Crores for the expansion and setting up of additional manufacturing lines across all the facilities. The expansion is proposed to be funded out of debt and internal accruals.

Financial Performance:

As per the below financial performance of last 5 years company has performed well in last 4 years and maintained profitability as well.
2016 2015 2014 2013 2012 2011
Total Income 448.8 354.13 227.49 240.21 194.02 12.36
Interest -11.56 -10.26 -7.06 -3.73 -5.35 -2.32
Net Profit 33.52 32.11 26.02 25.94 10.69 -47.81
EPS 2.14 2.18 1.75 1.77 0.75 -4.37

In the financial year 2014-15 there was a surge in demand of OFC, largely fuelled by introduction of next generation technologies and up gradation of existing 2G networks to make them 3G and 4 G compatible. A trend which is set to increase further in the coming year, with several Greenfield sites are being rolled out and more in the pipeline with operators preparing to launch 4G services, OFC network deployment is likely to gain momentum over the next few years making India one of the fastest growing markets in this segment.

India optical fibre cables (OFC) market is expected to grow robustly due to expansion of telecom infrastructure throughout the country over the next five years. Being the second largest telecom market worldwide, India exhibits high data traffic owing to increasing penetration of smartphones and growing demand for broadband services, thereby creating significant demand for OFC installations. Consumers are increasingly shifting towards internet driven applications like HDTV, video on demand and high-speed file sharing. To address the soaring demand for high speed data transmission, the government of India along with telecom giants is investing substantial capital in upgrading the country’s telecom infrastructure. The existing network of copper cables is being over hauled by using advanced fibre optic technology. All these factors are consequently providing a considerable thrust to the OFC market in India.

The demand of company product is truly reflecting in the company’s financial performance. The 2014-15 revenue increased by more than 50% and in FY-2015-16 the revenue increased by approx. 26% and net profit too increased.

Share price valuation: Share is available at CMP of Rs 18 at a PE multiple of 8.4 .Technically stock had created highs of Rs 22.50 in the past and it can easily surpass the same in short run.
Fundamentally with continuous increase in demand of product the performance of company is set to improve year on year from here on.

SHARE HOLDING PATTERN – THE MAIN PROBLEM AREA IN AKSH OPTIFIBRE

GDR and FCCB CONVERSION OVERHANG IN AKSH OPTIFIBRE

About 1165750 GDR ( equal to 5.82 crore shares) were issued in Sept 2010.
And as reported in the Annual Report, as on June 2015 all the GDRs were converted into equity shares.And hence as of now there is no overhang of the issue of any GDRs

With regards to the FCCBs, Aksh raised 3.792 million USD in Feb 2014 by issuing 5 year duration FCCBs. On conversion, these FCCBs would amount to 1.41 crore shares. But the process of conversion of FCCBs into equity shares was started with in 4 months…when between June and Sept 2014 29.7 lakh equity shares were issued. The remaining FCCBs were converted into 1.11 crore equity shares between August 2015 and December 2015. The final conversion was effected on 7th Dec, 2015 and now there are no more FCCBs pending for conversion into equity shares.
Thus the issue of overhang of GDRs and FCCB conversion in Aksh is over.

UINQUE HOLDING ARRANGEMENT BETWEEN OFFICIAL PROMOTERS AND D.K.JAIN FAMILY OF LUXOR GROUP

With regards to the promoters group, Aksh shows a very special pattern. The company was started by Dr Kailash Choudhari in association with two very well established business families - the Fulchand family and the D.K Jain. While Fulchand who are well established garment makers ad exporters having the status of 5 star export house and interests in various other business joined Chaudhris as the co promoters; the other group headed by Davinder Kumar Jain who are the owners of the Luxor group (makers of Luxor pens) now style themselves as among non promoter investors (although in March 2002 D K Jain & Luxour Infotech Pvt Ltd are shown as part of promoters group along with Fulchands).

After the death of D.K Jain on 19th March 2014, through a convoluted method involving a proxy - Sunidhi capital Pvt Ltd, Usha Jain - wife of D.K.Jain (and now Chairperson of Luxor Group) stepped in place of her late husband D.K.Jain. This arrangement continues even now.

In Sept 2010, Aksh issued massive amount of GDRs (equivalent to around 6 crore shares) which caused the official promoters holding to fall by more than 50%. The holders of these GDRs were Bank of New York and Deutche Bank. Thereafter, from 2011 onwards, the Chaudhris and the Fulchands started increasing their holding in Aksh. And the increased holdings percentage of the two official promoters coincided with the reduction in the GDRs. Finally, in Dec 2012 Aksh came out with an open offer for 3 crore shares @ rs 7 per share and consequently the two official promoters acquired 2.84 crore shares (through open offer alone) from the GDR holders and the percentage holding of the official promoters again rose to around 30%. After, the open offer the share of the promoters was further increased on conversion of GDRs held by Dr Chaudhri into 62.5 lakh equity shares in June 2015.

On the other hand, the non official promoter - D.K. Jain started increasing his share in Aksh mainly from 2014 onwards. This period again coincided with the conversion of FCCbs into equity shares and also selling by GDR holders ( quantity remaining after open offer). BY end of June 2015, the unofficial promter Usha Jain was holding 2.4 crore shares.

SALE OF SHARES BY DR CHAUDHRI

In June 2014, 62.5 lakh equity shares were alloted to Dr Chaudhri on conversion of GDRs held by him. As a consequence, the shares held by Dr Chaudhri & family rose to 3.31 crores. And in Sept 2015, the Chaudhri family sold off around 30lakh shares. Coincidentally, during the same period, the number of shares held by Usha jain rose exactly by 30 lakhs…indicating that it was not a sell off by the promoters but a transfer from the official promoter to the unofficial one-Usha Jain.

Thus from the above, we can conclude that:

  1. There is no dilution of the shares held by the promoters and allies. Their combined total holding is around 45%.

  2. The whole purpose of issue of FCCBs of around 1.4 crore shares was to enable the promoters circle to accumulate shares through their benamis and to profit from a pump and dump sort of scheme.

  3. Now that the overhang of GDR and FCCB is gone and the promoters / operators have picked up their required quantity of shares…and the results too have been good…it is a matter of time before the process of jacking up the share price starts.


(Mehnazfatima) #2


(Mehnazfatima) #3


(Meetesh) #4

Hope this thread on aksh opti leads to a similar surge like the one you started on the sugar sector a year back.


(aashish2137) #5

Did the company change its business recently? The stock was listed in 2000 and touched a high of ~175 and has since been lackluster for 16 years. Yet from what it appears, it is an actively traded stock.

Also, any idea on the order book and customer list? For a Company with 380 cr in sales, there in no mention of customers anywhere in the AR 2015.

Other top of the head comments that I’ve:

  1. Company has bank charges of 3 cr during the year. Unusually high?
  2. The Company has given significant loans/ advances to related parties and have also converted them into investments.
  3. Lastly, although insignificant, the Company also has a loss making segment - e-governance services. This appears to be a foray in completely new territory for the Company.

EDIT: This is what the website said

With leading Indian market share AKSH boasts of strong customer base comprising state owned companies in India like BSNL, VSNL, MTNL, Railways, Defence etc. AKSH exports to a host of diversified destinations in USA, South America, Europe, CIS, Africa, and Middle East & Asia. And has won two major international tenders.

AKSH has a track record of building successful, long-term partnerships with high-profile, blue-chip
companies in the different verticals: Telecommunications, Utilities, Railways, Buildings, Industrial

EDIT 2: I’m confused. AR says ~64% income comes from manufacturing and ~35% from traded goods. 1% is e-gov services. Yet the site says:

Our products include optical fibres, optical fibre cables, cable reinforcement solutions while we also deliver some of the exemplary services that include iControl (IPTV), Pigeon (VoIP) and Fibre to the Home.

AKSH efficaciously entered into IPTV services in the name of iControl. With a seamless coverage, wide range of television channels and disruption free services iControl embraces the largest brand name of IPTV services within India in alliance with Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) and holds its presence in 20 major cities in India, including Delhi and Mumbai.

PigeonVoIP, (voice over internet protocol) services provided by AKSH in association with MTNL, enables the subscribers to connect to more than 100 countries (including US, UK, Australia etc.) at very low prices with supreme voice quality.

These 2 services that Aksh is providing and supposedly the only brands that it is building, they are nowhere featured in its turnover/ AR, or am I missing something?

EDIT 3: Looks like the website hasn’t been updated in years. Latest qualitative data on site pertains to 2010.


(Tolaha) #6

On Googling found this news article regarding Aksh Optifibre seeking shareholder’s approval for diversification:

Optical fibre firm Aksh Optifibre today sought shareholders nod to diversify its business in the field of eyewear, lighting, solar products and financial technologies.

Seems like a lot! :slight_smile:


(Mehnazfatima) #7

Aksh is basically a play on fiber optics, digital india, smart cities, 4g broadband and internet sevvices themes.

The other verticals of Aksh presently contribute very little to the topline and bottom line of Aksh…now and for the next 2-3 years…their only use will be to justify high valuations for Aksh when it enters bubble territory…in next 1-2 years…

Till that time, inveztors need to focus just on fiber optics and FRP RODS verticals

Look at Aksh as growth / momentum play with growing top line and bottom line in a sunrise sector…low debt and the stock in hands of operators


(Mehnazfatima) #8

Today, Aksh has displayed strong bullish divergence on daily rsi indicator. If the stock closes in the green tomorrow, then we can be hopeful of a good rally in Aksh optifibre…it all depends on tomorrows closing price.


(Sunny) #9

Hope you have heard of a term called divorsification. It is the twin sister of diversification. Diversification ensures multiple revenue streams but divorsification ensures that you lose your focus and aren’t worth doing anything good. Can’t comment on the company as haven’t studied it but came across this news today only and was a big turn off for me. At the same time I liked sterlite tech who is trying to focus on the task ahead and gearing up to utilize the untapped market opportunity.

Sunny


(vamsi21) #10

I researched about Aksh Optifibre a long time back, however i couldn’t appreciate the promoters trading in their own company.(Read the last 3 paragraphs)

Their presentation of financials of subsidaries is a joke(check their annual report 2015) and their is no proper explanation.

Disc: Will never hold positions and my views are open to debate


(Meetesh) #11

The closing price the next day was in green and yet the stock corrected today and has come back into the weakness zone. Why is that Mehnaz ? What is your take now on its movement in the short term ?


(devansh_god) #12

Aksh is firmly in uptrend IMHO. But, it seems it’s heading to touch the strong, unbroken trendline (tested, and bounced 4 times!!) on the daily charts at 15-15.25 zones. I’m waiting for this correction to add more.
Counter views invited.
DISC: Invested.


(Mehnazfatima) #13

If you put dynamic supports of 30 day ema and 50 day ema, then perhaps you would notice that the downside is liimited to 16( 50 day ema).and stock is showing turnaround signs after touching 30 day ema…


(devansh_god) #14

Mehnaz Ji,
Do you see volatility compression in Aksh too?
Could you teach us how to spot volatility compression?


(Mehnazfatima) #15

No. There is no volatility compression in Aksh as of now…as discussed earler, the stock has found support @ 50 day exponential moving average…if this support holds, then Aksh may start trending upwards in the next week.


(yembee) #16

Ten years data in a nutshell


(Mehnazfatima) #17


(prabhakarpandey) #18

this is how i see the chart of this stock. it is always a good idea to have a chart with long term data. i am putting below a monthly chart with 10 years of data ( i wish i had more, but my charting platform gives only 10 years ).

as i see this is far from a breakout - have a look at the red trendlines at the bottom. it is in a choppy traffic with no space for price to break out, it can continue here for a long time, we need to see how the two trendline squeeze the price range and there it will give sign of breakout.

that’s my personal view - not any recommendation or advise.

disclosure - not invested.


(Mehnazfatima) #19

Prabhakarji: pl see the first chart which i have posted…that too is a monthly charts…and see how Aksh is hovering just below the long term resistance line…

I think the difference between your chart and my chart is that all the charts that i have posted are on log scale (percentage charts)…whereas your charts are normall charts ( i think)…

For drawing trendlines, resistance, support and channels lines, the best results are obtained when log charts are used…

Thats what i am given to understand…atleast the long term charts should invariably be log charts…while in short term charts, the difference between the two types of charts may not be much…


(Mehnazfatima) #20

And thr second reason for my bullishness on Aksh is that the momentum indicator on monthly charts has turned up, that too after bullish divergence…

Long term investors cannot ignore such signals…but since we are dealing with loong term charts, the effects wil be noticed only after a few months…

But there is a definite turnaround… atleast i believe so and as already disclosed I have put my money in what i believe…the rest only time will tell.

The more i keep looking at the charts, the more i feel that its only a matter of few weeks (or maybe a few months) before the Aksh jaggernaut starts rolling…delivery percentage is above 50%… Weak hands are almost all out…even as fundamentals are improving…heavy accumulation is going on…shares pledged by promoters are released…

…Its slow investing at its best…