Kiri Industries: Loan reduction and demand surge


(aashish2137) #123

Well well well… Kiri didn’t mention the discounting due to minority shareholding before this. Why would their stake be discounted?
Also, re counterclaims, I think the court already settled it at SGD 10m, why is there an uncertainty now?


(Wolf) #124

i personally doubt their stake will be discounted. Any idea if longsheng is going to appeal?


(Amit Mehta) #125

In big buyout transaction a buyer would be willing to pay more for a controlling stake vs a minority stake. The delta could be as high as 30%. Now this completely depends on their negotiations and and how court sees it


(phreak) #126

Senda has filed an appeal


(Wolf) #127

Yes, but the market has taken it well. Kiri hit upper circuit today. The management is also doing an investor called with a new York based fund. Results on 10th and management conference meeting in Singapore on 16th. All factors look very positive for Kiri.


(Satyamtaneja) #128

Management mentioned on CNBC that they expect $1.5 Billion valuation for Dystar, which should mean ~3500 crores for them, against mcap of 1750 crores.

What are we missing?


(Gaurav Agarwal) #129

You are missing nothing. The questions here are

  1. This is the assessment of management. Will the court in Singapore agree with this assessment?
  2. Have Senda exhausted all options of appeals? If no, where all Senda can appeal? How much time will it take?
  3. When Kiri receive money, how kind majority shareholder will be towards minority?

(Marathondreams) #130

Senda has already appealed. Please see BSE notice above


(aashish2137) #131

Valid questions but I think we can see through the blur here.

  1. Singapore court order was heavily in favour of Kiri. A lot of things are clearly laid out in the order, including closure of cross appeals. In addition, the court also went after patent exploitation and compensation. This is a complex area but often deals with big numbers due to their annuity value. VPers had estimated Dystar stake value only on PE basis; patent compensation is a cherry on the top. So yes, management assessment is not off the mark I’d say.

  2. Senda can and has appealed but the trial will began only if the court admits the appeal. Again, if you read the current order, things mostly revolve around the fact that both parties agreed to have a written framework to manage the JV but none did due to paucity of time. Ergo, the court will look into the intention of the parties. In this scenario, are the actions (minority oppression) of Senda justified. The appellate authority is an specialized international court for cross border commerce and will look objectively towards trade arrangements. I personally believe Senda is on thin ice with this one.

  3. This is a tricky one. The management has not shared its vision around this windfall gain (despite this being an overhang for many years now). Although I can understand their point of view because there is no certainty on the timeline or amount of compensation. Assuming Kiri distributes a part of it as dividend and uses the rest to re-invest in new JVs or creating environment friendly technologies, it gives the stock a healthy re-rating which the market is currently afraid to bet on.

These tailwinds will play out in parts.

  1. Q1 result on 10 August will guide us if the current stock price without Dystar windfall can be justified.
  2. CMC on 18 August to determine the process of calculating value of Dystar stake. Best case scenario would be court appointed third party valuers.
  3. Appellate authority’s take on Senda appeal (no idea about the timeline).
  4. Depending on #3, appellate authority’s order or payout by Senda

This will be a 12-18 month journey starting next week.

Disc: Views are personal, don’t treat these as investment advice.
Disc: Invested


(Wolf) #132

Awesome Analysis Ashish!
I think Manish Kiri was being conservative with his valuation and not adding in patent values etc.
The company for the first time will present consolidated results and standalone as a footnote. Mr.Market should appreciate this and start giving a high PE multiple to Kiri.
I don’t think there is any doubt now that the money will not come in. And we cant blame the management for their optimistic commentary after receiving such a strong verdict overwhelmingly in their favour by the international court of Singapore. Yesterday, SP Tulsiani gave some negative commentary on Kiri however that has not stopped the share from moving up 3 percent today.


(Anubhav4anubhav) #133

Stay order by SICC; next hearing on September 7
7fe0607b-798a-4c43-b89b-8242b2d6e1a6.pdf (447.5 KB)


(Wolf) #134

next hearing is 31 August. If the appeal is dismissed, the CMC will be held on sept 7.


(aashish2137) #135

Hi all, any update on today’s hearing?


(phreak) #136

It was listed for hearing today at 2:30 PM.

The judgement isn’t uploaded yet. It should come up at

I think they may take some time to draft and upload.


(hazariwalapu) #137

hi

Update is on BSE. In favour of Kiri

Thanks


(onlish2014) #138

Excerpt below:
We write to update on the outcome of the hearing on 31st August, 2018 of Senda’s application for stay of execution of the SICC Judgment pending its appeal of the same (“Stay Application”). The SICC refused to grant a stay of the valuation of Kiri’s shares in DyStar pending Senda’s Appeal in CA 122/2018, and only ordered a stay of the order for Senda to buy out Kiri’s shares in DyStar pending the appeal. In light of the SICC’s foregoing decision on the Stay Application, Senda made an oral application for an interim stay of execution of the orders made by the SICC in the Stay Application pending their application to the Court of Appeal for the same orders sought in the Stay Application. However, the SICC dismissed Send a’s oral application for the interim stay. Going forward, a CMC (Case Management Conference) hearing has been fixed at Friday, 7 September 2018, at 2 PM before the SICC for directions on the valuation process.0649d187-f597-48ea-83f9-dc2c037ea5a1.pdf (467.1 KB)


(Gaurav Agarwal) #139

I will be great help, if any member closely monitoring this company interpret the latest judgment. And also put up light on what will happen on 7/Sep/18.

And further what will happen after that?

Thanks


(Harish Assudani) #140

Annual report for 2017-18 has been uploaded on https://www.bseindia.com/bseplus/AnnualReport/532967/5329670318.pdf
But the point is that the reason given by management for skipping dividends of this year appear to be vague; they have continuously skipped dividend this year they have given reason to meet envisaged capital expenditure and repayment of debt.Neither they are adjusting carried over losses nor they are paying any dividends.
It is not understood this company whose earning per share is over and above of Rs 73/- per share,why they are not sharing Rs 10-20 per share to shareholders who are waiting since 2011 kindly read para 3 on page 11 under the heading of Directors’s Report


(ASG) #141

Their consolidated EPS is over Rs. 70… The majority of that figure accrues to Dystar, which is not sharing any dividends with KIL so that figure is not very meaningful for dividend purposes… I believe looking at the standalone eps of Rs. 22.33 will give a clearer picture…


(phreak) #142

@Gaurav_Agarwal - We are back to where we were before the appeal which means that the judgement stands and the Case management conference will happen on 7th of September where it will be decided how DyStar will be valued. So on 7th we won’t know what DyStar will be valued but the modalities of how Kiri will benefit and if LongSheng will buy Kiri’s stake or if some other arrangement will be made etc might be known. I think its only a matter of time from here but there are risks which is why the market is not yet taking notice considerably.

  1. Valuation not to Kiri’s benefit - There could be a discount to total value due to the substantial amount of stake.
  2. Timeline for payments and if/when Kiri will bring that money back to India
  3. The biggest problem of course is how the money will be used - Will they plan some capex/diversification or distribute as dividend - Past record doesn’t reassure the moves will be shareholder friendly.

The good part is we won’t have to wait too long because the case seems to be moving quite swiftly as the proceedings are in Singapore. The best case scenario for shareholders is very beneficial but we have to take into account the odds for that playing out. Let’s see.

Disc: Invested recently to play the special situation