@kushal @gurjota The logic of 1:25 bonus is not palatable. If increasing liquidity was the objective of bonus, then why not 1:1 or 2:1? how does 4% increase in number of shares going to help liquidity or any other cause?
I think the 1:25 bonus is an alternative to dividends in order to save on the dividend taxation. We can expect more companies to adopt similar approach.
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@akbarkhan Bonus and dividends are chalk and cheese. Not comparable at all. Bonus does not cost the company anything. Dividend is hard cash outlowâŚâŚ
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Bonus is nothing but stock dividend. It will not attract dividend distribution tax, retain cash for the company and also increase liquidity. The investors who need cash can sell the extra shares to generate cash. If shares are held for more than 1 year it does not attract capital gains tax as well. So effectively a tax saving measure. The impact on share price due to additional shares will be similar to dividend payment.
On the other side, the cash dividends have a signalling effect that cash earned by company is real. It is a negative if the management is suspect.
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@akbarkhan, first of all, your do not need to issue bonus to enable shareholders to sell a fraction of their holdings to raise cash in lieu of dividends. They can still do it by selling a fraction of their holding. If by Increasing number of shares from 25 to 26, you think shareholders can sell one share, they can do it even otherwise by selling one share and holding 24. it hardly matters. If the objective of the bonus is to reduce per share price so that even smaller fraction can be sold, then why not give 1:1 or 2:1 or even 10:1 bonus? why stop at 1:25? Now you may say, the company is doing this by stock split. If stock split can do the job, why do a paltry bonus of 1:25 at all?
I agree with you sir
why 2 board meetings in less then 10 days
Akbar,
I believe your views could explain the management thinking. And thanks for sharing âbonus as a stock dividendâ concept - interesting - keep on learning new things everyday 
But I just re-looked at the FY16 results and theyâve declared a Re 1/share dividend as well - down from Rs. 3.5/share last year. Also mentioned in the results is the fact that theyâll consider a bonus issue in the near term as they have decent reserves - Iâm assuming the thought process is to use the reserves to reward minority shareholders.
But then why also payout a token Re 1 dividend? Doesnât make any sense - just give a bonus.
Also when you say that the bonus will retain cash for the company - are you referring to the saved amount by not paying DDT? I assume the bonus issue is from the existing reserves of the company which will use up cash?
Shobha,
Please call me by my name i.e. Gurjot
@gurjota The reduced dividend that has been announced is what could partly explain the paltry bonus. Cash dividend could be a signal that cash is real, which could be concern if no cash dividends were paid.
What I mean by retain cash is that a bonus issue does not involve any cash outflow for the company. The same cash can be used for operations or capex, Saving of DDT is additional benefit.
I think what they mean by reserves is the reserves and surplus on the balance sheet. Not cash reserves. By a bonus issue, the number of shares increase and there is dilution of equity. The reserves will decrease to the extent of increase in share capital. Again I do not know how a small change in capital would actually matter.
A split does not cause dilution. The number of shares increase, but share capital remains the same.
A buyback is another option to pay out cash. This will cause reduction in cash as well as equity.
@Ishank You have very valid questions. What I presented on the matter of dividends and bonus issue are my thoughts only. Was trying to think on the aspects which could explain the management decisions.
Disclosure: Though I am interested I am not invested in the stock.
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KMLL seems to be operational nicely and operating around 20% - 30% capacity as of now. Its looking good.
From Q2 or Q3, it will pick up dramatically.
Also, they have started doing some initial paper work at Kakinada. (It will be similar to KTIL business model at Kakinada).
S.I
How do you know that KMLL is operating at 20-30% capacity?
there was some talk about Kesar Terminals selling fully/partly its stake in the liquid terminal business to Aegis Logistics. I havenât seen this report so I cannot say how true this is.
however latest Annual Report indicates that the core business is facing competitive pressure as many facilities are coming up around Mundra where KTILâs liquid terminals are put up. It says clients are resisting price increases.
this is a worrisome sign which indicates that the moat in the core business is evaporating.
The macro picture also indicates that too many ports coming up could be making life difficult for those in the business.
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Seems like tomorrow is AGM for KTIL.
Possible for anyone to attend at such a short notice?
Hi,
I will be attending AGM tomorrow.
Questionnaire by Abhishek Bhai:
1). Clarity on the sale of bulk liquid businessâŚ
2). Sustainable level EBITDA margins for the KML businessâŚ
3). Topline at 100% capacity.
Just feel free to add
Regards,
Samkit
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Thatâs great Samkit.
I would like to get more info on KMLL revenue breakup, debt repayment and plans for next 2-3 years.
Here are some topics I can come up with
-
KMLL revenue split into PFT revenue and warehousing revenue (current and at full capacity)
-
KMLL OPM and NPM
-
interest rate on loans (annual / quarterly interest payment figure)
-
plans to reduce debt
-
plans for QIP, aegis logistics deal rumor, KMLL stage 2, other plans
KTIL has posted standalone results and no consolidated results. This may dampen the investor sentiment.
Any news from the AGM?
Question and Answer session:
KMLL
- 18th may commenced operations
- Phase 1 total cost 563 crore
- Phase 2 is 60-65 crore INR
- Doesnât mean that it will start after completion of Phase 1
- Based on actual utilization of phase 1 we will see cash flow than we will commence phase 2
Piparav:
- company after due consideration has taken the land half and purchase land half to do business in future
- Matter of priority since KML came board decided for KMLL to go.
- but business is still done
Aegis deal:
- No deal has been done fake news
- the business is working.
EBITDA margins:
- âNoâ they wont be able to answer
- 6-8 months to settle down they dont know
Loan of 3 crores has been paid off
Fixed deposits:
They had to pay fixed deposit one and a half year ago but they have made installment method (like When it will due they will pay)
Transfer on lease: That is from Kesar Ent. to Kesar Terminals
- Kandla port authorities wants to charge heavy amounts to them but Management says according to company law how much they have to pay and they will pay that much only
- they have pending litigation of total 3-4-5 cases
KML & KTIL (demerger plans)
- not permitted according to MANDI Board
KML
1st year initial revenue of 50 crores?
management told cant tell
Output of Soya Beans has reduced and wheat has increased ( commented on Foodgrains)
any specific amount how much we realize?
No comment due to confidential
key customers:
ITC Agro division
Kargil India
Sunvagia Agro
Hitachi Oil
21 crore of outstanding loan has to be deferred and negotiate to move it forward. out of two banks one agreed and second didnt
100 cr revenue from KMLL and excluding food grain as it s a premature business and no comments on profitability
In Kandla port, No expansion be made till lease issue is solved
Expansion in trucks:
two ways one is to change use of tanks and second is increase no of tanks customer are for longer term
Regarding Kandla competition:
- no direct competition
- they are not increasing / decreasing their prices so we are not doing anything
Capacity is 95% in KTIL
Revenue from KMLL in 3months is RS 1 crore because container approval is yet to come and will come by this month end
KTIL is doing same in terms of Revenue and profitability
Sales of scrap (an item in Annual report)
It is due to dis-mental of trucks and are sold
Qip plans : NO
Fixed cost is 15 lakhs per month for KMLL
Interest paid is 7 crore and is without principle
All in all liked the AGM but still need to do some Scuttle-Butt
Disc-- Booked profit completely two weeks ago
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Takeaways from the AGM:
KMML operations formally began from May this year. However progress has been slow and the Custom Bonded Warehouse is yet to become functional as the Customs Department is yet to post personnel at the venue. This is expected to happen by end of this month, according to Chairman Mr A S Ruia.
Much of the business is expected to be in the form of goods being shipped for imports and exports so without customs clearance business will be dull.
So far 21 rakes have been handled by KMML and revenues to the tune of just Rs 1 crore has been earned so far. However once the customs-related infrastructure is in place, company expects to earn Rs 50 cr by way of revenues in the first year. Management is not commenting on margins yet.
According to the management, business at KMML has got to a slow start with âsome clients holding the company to ransomâ. There were also some problems with the unions, which Mr Ruia says, has been resolved.
The management has cut dividend in order to conserve cash. Dividend will be One rupee per share this year. It will be a couple of years before it returns to high rate of dividend, he said.
The company has spent Rs 163 crore on the first phase of KMML till July 31 this year. Phase 2 will likely cost Rs 60-65 crore. But this will be taken up once cash flows stabilize.
So far three railway lines have been built since construction of rail lines would be difficult once movement of cargo begins. So expenses have been incurred ahead of schedule.
In response to a specific query Mr Ruia said the company is paying FDs as they mature. Rs 3 cr of loans have been paid back and another Rs 7 cr will be paid back this year.
Management is also negotiating with banks to defer payment of loans whose moratoriums have expired.
Mr Ruia denied reports that a slump sale of the oil tankage business was on the cards. âIt is a very profit making business which has given you good dividends, so why should we do a slump sale?,â he remarked. However he also added that the company would come to the share-holders if any sale was on the cards.
Management reps were speaking to analysts about the fees negotiated with various companies who have tied up with KMML. It could amount to several thousand rupees per container per train. I have not got these details and will wait for broker reports on this.
The positive news is that the company has tied up with big companies like ITC and Cargill for business.
Another big positive is the shifting of goods handling business by the railways from Itarsi railway station to KMMLâs yard. Already wheat which was handled at Itarsi is being handled at KMMLâs yard. Mr Ruia said gradually, the entire goods cargo business would be shifted to KMML.
Others who may have attended the AGM may please add updates.
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It is the merging of the subsidiary into the parent company that isnt allowed. KMML will have to remain a separate entity irrespective of ownership is what the management tried to say I think.
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per annum. They will be paying 10cr interest this year.