It would be an irony if after fighting long and hard for their own minority shareholder rights the promoters decide not to share the cash with their minority shareholders!! And we are not in Singapore either . Anyway, Its an interesting situation to watch and see how things unfold.
Was trying to value Kiri’s stake in Dystar… KIL attributed a PAT of INR 231.37cr to Dystar for their 37.57% stake in their 2017-18 AR. This translates to a total PAT of 615.84cr for Dystar. In 2015, KIL announced that Dystar had turned around with a PAT of $100 mil which should be around FY18’s reported PAT. I am unsure why their PAT hasn’t grown in 3 years while peers have outperformed… Anyway, would be great if fellow members could give their views on the following…
- A conservative P/E to value Dystar (I am thinking of 6-8 after looking at the market valuation of similar chemical firms globally)
- Typical minority discount in such transactions (Unsure)
Is this correct? SICC was requested to stay its own order which it refused to. So as long CA doesn’t admit Senda’s appeal, the case is still decided in favour of Kiri. The way I see it - SICC is confident of its own judgment staying afloat in CA and hence wants to advance the proceedings instead of reconsidering.
We discussed this before (infact Kiri brought it up in one of the filings). Check @phreakv6’s post of Aug 02. Personally, I don’t see any need to discount the value of holdings.
Since the court has mentioned about the possibility of a minority discount, this will be ascertained by the valuer which has to be appointed by the court to have no conflicts of interest.
Secondly, the valuer would probably rely only on relative valuations as DCF would require management inputs and be biased in favour of senda.
Typically minority discounts range from 15 to 25%. Which should be assumed as worst case scenario. However, the value of patents and loss due to oppression will be added back to Dystar so probably should negate the effects.
I look at this in very simple terms:
Dystars $100 mill PAT would mean 37 mill for kiri. Apply a 10x PE for 370 million or 2500 cr. Adjust this for 20% minority discount and you still get 2000 cr.
Now the question is when does kiri get this cash and when does the market start factoring this amount in the valuation.
The immediate concern is when Kiri will be out of ASM. Hopefully this would be this week.
Would advise members at VP to take a closer look at FCCB’s issued by the co. at throwaway strike prices and run all calculations on fully diluted shares outstanding.
Disc: Have looked at it in past, passed.
Is anyone aware of updates of September 7th meeting?
would appreciate if you could give us your calculations?
Most of us have invested on the grounds that kiri will utilise funds for expansion, and at cmp traded well below its intrinsic value (sum of parts of standalone + longsheng JV+cash from dystar)
Outcome of Case Management Conference on Sept 11th
"We are pleased to inform that after hearing the parties, the SICC has commenced the process of valuation of DyStar and ordered as follows:
Parties shall file written submissions within four weeks (Le. by 9th October, 2018) and
reply submissions within two weeks thereafter (Le. by 23rd October, 2018) on various
matters concerning valuation of Dystar.
Parties shall also file a List of Documents and Affidavit Verifying List of Documents
within 28· Days (Le. by 9th October, 2018), with inspection to take place within 7 Days
thereafter (Le. by 16th October, 2018).
Exchange the list of witnesses within 7 Days after inspection of documents (Le. by 23rd October 2018).
Exchange Affidavit of Evidence in Chief (“AEIC”) 28 Days after inspection of
documents (Le. by 13th November 2018).
Any objections to take place within 14 Days thereafter (Le. by 27th November 2018).
Further CMC hearing to be held after exchange of AEICs for taking of hearing dates."
One tiny observation - We have not accounted for tax implication from sale of stake… How much would Kiri be taxed on the proceeds ?
Agreed. Missed considering tax. Tiny observation but one of huge implications. IMO, Can assume tax to be 20 to 30%
Why would Kiri be taxed in India? The JV is based out of Singapore and the underlying asset is Indian either. As far as I know, Singapore doesn’t tax transfer of foreign assets. Isn’t this the reason the JV was formed in Singapore in the first place?
No tax in India, doesn’t it mean money stays in Singapore joint venture and then Kiri will not be able to use the money for distributing dividend or buyback benefiting retail share holder ? The only use left would be to go for another acquisition abroad!