Great job. Some of us, learn lessons the hard way only 
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the case of binani industries looks very interesting . Binani cement is 98 % owned by binani industries. Binani cement has an installed capacity of 11.2 million tons per annum ( 6.25 - India , rest in China & Dubai) pf which they were able to sell only 3 million MT in 2017. ( the figures of FY18 not available as the AR is not released). Given this poor performance no doubt Binani cement is in vey bad condition reporting Revenues of 1526 cr in FY 17, and PBT losses of -427 cr. Binani cement is under NCLT currently with liabilities of 4579 cr as on March 17 ( including trade payables, borrowing, other liabilites etc.) The total liabilties of Binani industries outstanding is 8470 cr. Now comes the interesting trigger for the company. Ultra tech and Dalmia industries are in a court battle for buying out the company Binani Cement which is under NCLT. Dalmia Bharat had already bid for 6500 cr but Ultra tech came later and increased their bid to 7900 cr. Attaching an article explaining this war bettween the two companies. Status of the case is not so clear to me and the timelines seem unpredictable. But the interesting part is that this deal can lead to massive value unlocking for the Binani Indsutries shareholders. BI can they focus on its other businesses which generated a revenue of 2350 cr by themselves. Glass fibre forms a very important part of the group contributing 1500 cr to the topline . The market cap for the Binani Industries itself is just 300 cr!
How would Binani Industry balance sheet look after the clean up and how the other businesses would do seems to be seen. Need to understand how much of a value unlocking this sale of cement division would bring about. Also need to understand the structure of the deal , what will Binani Cement shareholders( that is Binani industry ) get in the whole deal as the company is under NCLT.
Views invited.binani.xlsx (14.6 KB)
Disc- Not invested
the capex required per ton of cement plant is roughly 12-140 dollar per ton . Hence for 11.2 million ton it would roughly workout to be 9000 cr . From Ultr Techs point of view it makes sense to bid 7900 cr for the BCL capacity. Also it cleans up mess for Binani Industries which is win win for both.
Are you aware of the value assigned to existing Binani Cement shareholders in the resolution plans submitted by Ultratech and Dalmia Bharat ?
no unfortunately not. dont have much data to work on. but the clean up of Binanis industries balance sheet to some extent is generating my interest in the stock.
Ibc cases will not give any significant value to share holders
In case of Binani, since enterprise value is higher than total financial and operational debt, the excess value would flow to equity shareholder of Binani Industries in my opinion. However, cement assets would sold to successful bidder and Binani Industries would left with non cement business. There would another issue about management try to do with money they receive from cement sale. They may not part this cashflow with shareholder and utilise for some capex etc.
the management may use the excess cash to part away with some of the debt from the non cement business. that would make it break even or generate positive PAT. This can lead to re rating of the company. But I am struggling to estimate how much of an excess cash will flow to the company , can we try doing a rough estimation assuming 7900 cr as the bid amount by ultra tech.
The hearing seems to have ended yesterday . 4th September has been reserved for final judgement . In most probability Ultratechs bid of 7900 Cr will be accepted and binani cement debt is 6500cr ,balance of 1400crs which will passed to binani industries with present mcap of 300crs . Senior forum members awaiting your comments on the whole event and resultant effect on binani inds
In my opinion, whatever excess (we also need to consider operational creditor amount) would be passed on to Binani Industries. However, since the conduct of management was not great, particularly sharing wealth with minorty shareholder, I would curious whether the incremental cashflow would directly flow into market capitalisation. There would also be some leakage for tax liablity. If managment decide to undertake capex / expansion/acquisition, then market price may not react to news, There are too many moving parts in equiation and hence would like to see development, partiuclar Binani Management view about excess cashflow which it would receive, to make any meaningful forecast in my limited opinion.
Discl: Not having any exposure to Binani Industries/Dalmia/Ultretech. Investor shall do their own due diligence before investing. While on successful turnaround, the company share price moves up singificantly, the proability of failure is generally high in turnaround opportunities.
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What about the existing business other than cement of binani industries. What is the EBITDA of other businesses?
I would suggest you can try to work on the company if interested and write on a Binani Industries thread on enclosed link. This thread let us try to keep on IBC only.
I tried to join the dots . Moneycontrol shows annual data till mar.18 which shows book value of 720rs , I donāt find it reliable, on bse I found last annual report for 2016-17 .BI balance sheet shows investment of 4200cr which I think is investment in binani cement . If excess of 1400 crs 7900 crs recād from ultratech out of which debt of 6500cr settled) . So it will be a loss in BI so no tax outflow( and I can be wrong in this assessment). Roughly Current liabilities and borrowings stand at 500crs at the same time current assets are more to the tune of 620 crs ( not very sure of this figure pls verify). Even if we assume all the current assets are falsified and are not realised that still leaves us with 900crs(1400crs excess from BC - 500crs all liabilities paid of BI) . Since the promoter aināt good in management and reputation we dicount the same to 35% which still leaves BI with surplus of 300 crs which can reflect in mcap appreciation . This are my rough calculation and not a recommendation to buy/sell .
PS : The AR mentions company is involved in many segments like packaging,media,logistics,publication services,export of goods and services ,trading is shares and securities( seems a skillfull guy)
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Ultratech bid accepted and upheld by Supreme Court at 7950 crores.
It seems binani ind will now be a nearly debt free company with annual revenue of 2350 crores.
The mkt Cap is less than 300 crores.
Monnet Ispat case can be the first case of resolution where it creates value for all the stakeholders and also put idle assets to profitable use. It seems small shareholders were short charged as they are being categorised along with the promotersā shareholders even though they had no role in the mess created by the promotorāsā shareholders and secured lenders.
Link to the details of the Monnet Ispat resolution - Monnet Ispat gets a new life lease
@nirajshah85
When the company has debt of Rs 11,000 Cr (as per link) and lenders are given ~ Rs 2800, which mean the lender to the company has taken hit, had been Propertiership firm, the owners would be liable for deficit of Rs 8200 Cr to the lender. Since the corporate limited liablity to equity capital, the lowest value equity share can be nil and note negative. Had it been unlimited liablity company, equity share would have been trading at negative value, which mean that the equity shareholder would pay amount to new investor for negative book value.
Since there is haircut at lender level, where is question of value for equity? Do you expect banks and lenders to take writedown so that the minority shareholder can get value? I feel there is unusal expectation from lenders to sacrifice is benefit to equity shareholder. Nowhere in globe, the equity shareholder get divine right. Time and again I have tried to explain same point that equity shareholder are last to get paid in case of insolvency, but for strange reasons, investors refuse to believe this !!! Even the article come to wrong conclusion and creat confusion. Rather than complimenting the new management to leave something to equityshareholder some value as against nil which they otherwise entitle, the writer blame the IBC process for short charging the minority shareholder. Only party which can complaint in this case could be the minority shareholder of the Banks which allowed value to be passed on the equity investor of Monnet when the company is not paying full debt to the lenders, in my understanding. Please understand risk of investing in equity.
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You are right, Sir. I was thinking in terms that if one is minority shareholders of the company which has been dragged into insolvency proceedings which means that the value of the company will be at the lowest at that point and only way to get value would be a resolution plan where the company has a chance of reviving the company with a less burden of the debt.
You are also right in saying that the minority shareholders of the lenders company are one who are really at a loss. But I think that, in cases of no resolution lenders tend to write it off completely, which hopefully changes and lenders (financial or operational) get to write off a percentage of the total amount.
Overall, loss of value is absolutely there, but resolution might help first to cut those losses as much as possible and if lucky revival/turnaround of the company can start to bring the value back to the all the stakeholders.
Also came across this article which lists some of the concerns, sir mentions - IBC triggers M&A deals for distressed assets
Came across this of a more detailed view of the resolution of one of the landmark decision - Binani Cement in UltraTech Cementās Shelf
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Some more interesting articles related to Insolvency & Bankruptcy Code Resolutions