If anybody attended the EGM and had any Q&As/discussions about the business with mr.Omkar, request them to share here,. thanks
Q3 results, came post- market …tax credit comparison is making a serious difference
Looks like PAT was dressed up nicely in the last quarter to look better through the ‘Deferred Tax’ fudging. The company had a PBT of Rs.5.87 Cr but deferred a tax of Rs.3.98 Crores and somehow got the PAT figure to be Rs.8.66 Cr and the EPS figure to be Rs.3.79 when it was actually around Rs.1.80 or about half of what was reported!
The dressed up EPS figure let them offload nicely all through January. See this.
Dec 11th the results were released and then a big run up and Svaks biotech starts selling in first week of January at the peak. Looks like the deferring and dressing was to provide an exit to Svaks biotech. Now the deferred tax amount will be adjusted in the subsequent quarters. How can this even be legal?
what exactly is deferred tax? we should ask in con call why was deferred tax there is Q2?
I dont think it is fudging at all. Deferred tax is timing difference between accounting and tax books. Considering Unit IV was operationalised in Q3, we see such a huge directional change in deferred tax. From q3 onwards depreciation on same would have commenced in books and hence the reversal of earlier deferred tax gain.
But it would appear conflicting that depreciation in current quarter has reduced, but I believe that is due to one-off additional write-off of assets in q2 as diacussed in previous conference call.
I believe we should stick to seeing PBT figures as its a relatively new and yet to stabilize co. I am fairly happy with results. Only concern is would OSCL and Svkas Biotech continue selling keeping the share price under pressure? Can Lasa management be trusted?
Looking at earlier posts in this thread, and way the management struggles even for explaining simple things like depreciation and defrerred tax and the English they speak, Im quite convinced its a start-up type operation with a lot of ‘just get things off the ground’ type operation. Its not a stable set up yet in terms of the organization is what I sense. Operationally they are definitely going in right direction. Monitor this one every quarter-on quarter before adding more qty is the note to myself.
What might be the reason for finance costs to go up from Rs.2.42 Cr is Q2 to Rs.3.77 Cr in Q3? That’s over 50% rise in finance cost.
Any Update on thier rights issue?
Finance cost increase can be attributed to plant 4.
I also noticed some good drop in cost of raw materials used. A good sign or not ?
Plant 4 is specifically being used to produce raw material hence gross margin has improved
Notes from Q3 FY18 Con call.
Partnered with CIDIC group of China to source API and sell finish goods through them in south east Asian countries CIDIC is a very recognised company in East and South East Asia as per management.
Depreciation to be around 15 crores for year.
20-25% growth in revenue
Operating profits of 22% and above to be strictly maintained
New prices have been communicated to customer due to increase in crude prices. Hence, this quarter onwards new pricing.
Growth rates may decelerate in future as business assets reach sustainable level or practically viable levels . - 100% growth rates 2 years back, 50 % last year and 20-25% going forward
2nd Quarter had rains and hence cattle de-worming campaigns,
Sales growth should not be compared Q-o-Q in veterinary industry. 2- 3 crores of updown QoQ is normal
20 Crores of additional borrowing for Working Capital. Axis bank gave 12 crores hence interest cost has gone up. Working capital has been added after 2 years.
CFO resigned and less efficient people are substituted with more efficient. CFO could be accessed in next concall.
11.Next 2-3 years growth to be 20-25%. Through acquisitions, forward integration or infrastructure of plant IV,
15 products currently. 1-2 products every year conservatively to be added with 100 crores of potential each.
4-5% of topline goes to RnD, this is expensed out. Omkar capitalized 53 crores of cost this quarter and this won’t happen here as both companies are different.
Promoter lended 27 crores
15 Axis bank lended 50 crores of CC loan. 22 crores from other bank ECB loan. Total 90-100 crores debt as of today.
No connection with Omkar Chem. No personal guarantees with them.
Margins won’t shrink.
For more understanding of deferred tax calculation please get in touch with Senior accountant of Bridge IR.
Long term borrowing was 24 crores and has come down to less than 20 crores, rest is working capital.
After SWAP holding to be 36%
Rights issue not necessarily to be 100 crores. Would be decided later on seeing market price, not on the cost of taking toll on EPS. To pay of long term debt and to do acquisitions in pharma space for forward integration into formulations space. Rights issue is going to be around June.
These are product patents which we have filed. We are patenting catalysts and not final products. This, I guess is to improve margins of the products.
Annual capex for next 2-3 years to be 15% of total sales.
Pat level to be 10%. Working capital to is 55-60 days. Working capital to be below 50 days is what management is looking at.
Inventory is 38 crores. Receivables 58 crores. Payables is 57 crores as of Q3 FY17. CWIP is 6 crores and has come down drastically as plant IV has been commissioned. Gross block is 200 crores and net block is 176 crores.
Plant IV topline impact to come in next year. Impact on bottom line has started as a backward integration product production has started. 500 tones capacity has been utilised out of 4300 tones. 1000 tonnes by FY19 (for backward integration). 2000 tones by FY20. Actual utisilsation would be 3500 tones which would be by FY21.
Looking out aggressively for acquisitions in range of 20-22 crores. Multiples would be 1x of turnover. Regulatory approach like USFDA. Veterinary pharma space.
Rights issue to be EPS accretive. All decisions of acquisitions and rights to be EPS accretive. Decision to be discussed with investors over concall
Overall a good concall
hi…didn’t understand your first point…
Like they are partnering with CIDIC to sell finished goods (Formulations) or API…currently they are manufacturing API so why would they source API from them.
Thanks for the notes it summarizes everything…I also listened to their con call.
Just to add …there was some discussion regarding T2T as well. Don’t know exactly how it affects share price performance.
It is moving to B group from 22nd February
Download the file and check Annexure IV
What is B group and how it is different from T2T
In T2T, you can sell only if you have the shares in your demat a/c. When you buy, you need to take the delivery (can not do intraday trading). This basically keeps the traders out of the particular company.
B group does not have any such restrictions.
Also circuit limit will increast to 20% in B group and this will lead to faster discovery of price, market seems appropriate.
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The Statutory Auditors resigned
Resignation of Auditor.
Earlier CFO resigned in jan’18. Is everything ok within the company?
“Pre-occupation with other affairs” or plausible deniability? This seems more and more like a well-executed demerger. OSCL around the time demerger was announced - averaged at Rs.170 (Between Apr '16 to Apr '17). Post demerger once Lasa was listed, the combined price of LASA + OSCL hit a max of Rs.300+ - Value created out of thin air. Meanwhile OSCL before Lasa got listed was trading at Rs.110+ when the promoter sold his stake repeatedly in the open market, now it is Rs.39. Lasa went to a peak of Rs.214 and gave a good exit to the promoter and related entities and is now at Rs.135. So overall Lasa + OSCL now is Rs.174 = Pre-demerger levels and Less promoter stake. Whatever value was unlocked was cleverly captured by the promoters at the expense of shareholders. I don’t know how many in this board capitalised on this clever pump-and-dump operation. Now the interesting question is, where will LASA + OSCL settle given its current price trajectory, sentiment with CFO and Auditor resignations, promoter quality and recent earnings numbers? Let’s see.
Son acquiring 11 lakh additional shares from Father at a proposed price of Rs. 170.37. That increases nearly 5% of promoter holding taking Omkar Herlekar’s holdings to 31.28. Pravin Herlekar now holds only 2.23% in Lasa.