Heer’s another article from a lawyer from Shardul Amarchand Mangaldas. The last point here is…
Q) What about the non promoters’ equity ?
A) That remains. It’s only the promoters equity that goes out.
News article says the deal has been finalized. Details of what I understood are
Equity before IBC
Promoters - 25.27%
Financial Institutions - 50.1%
Others - 24.63%
Equity after IBC
JSW - Aion consortium - 75%
Lenders - 18%
Existing Promoters - 3%
Remaining - 4%
Cash Infusion
Payment to lenders - 2,450 crores
Equity infusion in company - 1,050 crores
Some more news from Bloombergquint
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Does this mean 4% of the equity is for the current minority investors??? This is totally confusing, SEBI must give a clarification on this, if the total minority shares will be write down,then what’s the meaning of allowing trading in them after the cases r referred to nclt.
Will nclt referred cases being considered at par with liquidation then most pbbly we can expect a write down of minority shares.should have invested only after receiving clarification.now that the sale by indusind bank also points in the direction
Disc: holding JP infra…
What I understand from the article of Bloomberg is there is also covertible component in form of Preference share which would be converted into equity over a period.
“The equity and quasi equity amount of Rs 875 crore includes Rs 398 crore as equity, Rs 277 crore via compulsorily convertible preference shares and Rs 200 crore in the form of quasi-equity to acquire optionally convertible preference shares.”
Now the missing pieces is terms at what price this convetible can be converted into ? it is can be converted at par, then almost 477 Cr can be potentially converted into equity capital which can further reduce the existing minority shareholder stake value from current level. Further, one shall except constant supply from the new investor in equity market, as same can not increase its holding above 75%. Hence, over next 18 months, I would expect constant selling and conversion would continue which shall keep price of Monnet under check. In my limited understanding, the minority shareholder are unlikely to gain majoly in the excercise which I was highlighting again and again on this thread. In case my understanding is wrong, please let me have counter viewpoint.
Discl: No investment.
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An excellent article by CapitalMind where they explain why existing shareholders will get massively diluted under the Monnet Ispat resolution plan https://capitalmind.in/2018/03/bankrupt-companies-nclt-may-revive-still-lose-monnet-ispat-edition/?utm_source=wysija&utm_medium=email&utm_campaign=Daily+Digest+Email
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@andy161161
Thanks for sharing this article. I agree broadly with artcile except that issue of equity at ~ Rs 3 per share. Since the figure is back calculated from stake avaiable to new shareholder, it is the best estimate with given public information, however, would still wait to get more detail about same. Excellent stuff in view of limited available information.
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What happens to existing shareholders if company is sold to new owner? like in case of Ruchi Soya.
As per Hindu and Mint news reports there are more 20+ bidders for assets of RS. Today there is a news about Godrej Agrovat also interested in Palm Oil asset of RS.
Is it possible to expect a positive outcome if holding?
I have been holding this company from past 5 years and last year increased the stake.
Thanks
There is no simple answer to question. The bid are generally for Enterprise value of business. So distribution of EV among debt holder and equity holder is first moving part. Second moving part, distribution of equity value among existing investor (minority shareholder, pomoters, lender if excerised pledge) and new investor. In my limited understanding, except case like Binani Industries, the exepected value realisation for existing minority sharheolder would be low/negligible. However, this is generic assumption and very signficiantly from case to case. So it would be worhwhile to get bidding details, structure and new investor intention to share wealth with existing shareholder to get specific answer for Ruchi Soya.
Hey Anandh, Can you please tell me how did the author arrive at 3.27% fully diluted holding for public after NCLT. Is that number in the public domain for monnet?
In the Bhushan case the following might be a possibility:
Present equity structure:
Pledged equity- creditors- 43% (75% of 58% i.e promoter shares)
Promoter-15%
Public- 42%
After resolution:
Tata- 75%
Creditors-12%
Promoter-4%
Public-9%
The present public equity around 400cr
Equity infusion to be atleast 5000cr to derive present value of public equity . I think the equity infusion might be more around 9000cr which might in turn benefit minority shareholders, let’s wait and watch.
PS: Not sure if my calculations are right , not sure if any of the numbers are right, I’m no expert, open to scrutiny and debate and corrections.Thank you
Also, Bhushan has managed annualised sales of around Rs 16500cr this year that too without any working capital (assuming since it was marked npa), I see an annualised sales possibility of Rs 20000 crores next year and an operating profit of Rs 3000 crores which after interest depreciation and tax refunds due to carry forward of losses on books net profit can be around Rs 1500crores , and with around 200crores shares in the market (after dilution) EPS may come upto around 7. With a PE of 15 share prices should quote around 105 just saying, calculations are very broad and through common sense I’m no number expert.
PS: very risky bet with possibility of lower equity infusions, please don’t take my estimates seriously I might be very very wrong.
Similarly evaluating Monnet ispat in the same fashion:
Present equity structure:
Promoter-25%
Lender-49%
Public-26%
After resolution:
Acquirer-75%
Lender- 18%
Public-3.5%
Promoter-3.5%
Present public equity valued at around 100cr and equity infusion should have been around 2800cr to derive similar value to the public but equity infusion seems to be around 800cr which brings down the public equity to around 30cr which might end up with share value of around 6-7
Also, performance of Monnet ispat is difficult to predict, anyway assuming around Rs 600cr of operating profit (simply say 20%increase from previous year figures) slashing around 350cr of depreciation leading to net profit of around 250cr and with 149cr shares in the mkt EPS will turn out to be around 1.7 and with 15pe the share price might be around the same as today 20-21! With a lot of value addition from the acquirer gains may be seen.
PS: again remember all these are guesses and broad estimations and heresays and I’m no expert, very risky bet, I might actually not be sure of anything I write, just jotted down what came to my mind with no much analysis and deep number crunching.
Looks like the first case is out for Analysis!
I do not think that terms and condition of resolution plan are in public domain. Lacking them no analysis is possible.
NCLT process is turning out to be quite a nightmare. JP Infra seems like a loot… Monnet approved, but no details on minority shareholders. Bhushan steel reserved
I think the resolution plan for Electrosteel is out:
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Existing shares = 240.92 crores
Existing shareholders to get 10% of post resolution plan equity
Shares post resolution plan = 2409.2
Assuming value 6,500 crore/ million ton
Value of plant = 9,750 crore
Debt infusion by Vedanta = 3,515 crore
Value of 2409.2 crore equity share = 6,235 crore
Value/share = Rs. 2.59
Disclosure - Assumption can change, could be wrong. Do not rely on these calculation for anything. Assume calculation is complete wrong.
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I thought that a promoter can hold a maximum of 74% stake in a listed company.
Yep, that’s true. Quite surprising that Vedanta has announced 90%. Though there are discussion going on to relax this criteria.
I think the minimum public holding to be at 75% stays for now though sebi is looking to change it and provide a 2 year timeframe to implement the same. Right now only a 1 year timeframe for the same exists , I think even if the public holding is brought below 25% as in electrosteel case it has to someday soon comply with this fact, only thing to be seen is how would they propose to do it. One will have to wait and see what conditions would sebi put to approve the said transaction.