We can clearly see that the recommendation of one of the investor during con call has been implemented. The holding mentioned is clearer
@Nolan How do you take auditors resignation. Normally it’s negative. Pravin has also been selling his stake like he did in Omkar during Q3 and we see where Omkar is. Please share your thoughts.
Indeed it may be negative. But there is just as much a chance that it could be a non-event. There could be several (not so harmful) reasons which could have resulted in resignation of auditors. In micro/small cap companies, we run the risk of having limited information to act upon. High risk results in high volatility in these stocks. And high volatility causes fear.
The Oracle of Omaha says - “The most common cause of low prices is pessimism—some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”
Pessimism is sometimes built upon unconfirmed news items. And lack of clarity around these news items propagates fear. I personally like such situations where I find good future potential in an asset, and yet its available at a discount because there are rumors in the market that something is going wrong. Firstly, by acquiring this asset at a discounted value I increase the upside and reduce the downside potential. Secondly, I act on my conviction that future seems brights and ignore the rumors around it. Still it is best to stay cautious - I wait for the first signs of confirmation of the rumors. If there appears a red flag, I sell out/minimize risk. But in most such cases, when the rumors are found baseless, the upside potential is huge and this is what I bet upon.
Thanks @Nolan. So, basically, we need to really see who the next auditor coming on board. If, it is a reputed one, we are good. If, it’s unknown we have to see the next quarter and full year result to confirm it’s positive or negative. Is there anything else we can do to confirm the rumor.
I am not expecting a very reputed Auditor. Omkar is not the kinds who would spend big on any account which is not a revenue center for the Company (not atleast at the moment). My hunch is that Auditors might have left due to cost/payment issues. Auditing Lasa post-demerger would require extra pains for auditors due to parental linkages, and they may have asked for additional fee, which Omkar might not be comfortable paying. Again this is just my hunch and it is primarily based on what I have gathered from the discussion above, especially from the post of @Madhurkotharay where he described the miserly nature of the management, which in a way is good for shareholders:
The current quarter financials didn’t look like doctored, else the numbers would have continued to picture an excellent growth trajectory in line with its past performance. Even the commentary from the management to mellow down the expectations of the shareholders in terms of future growth was also a step in the right direction. Dear @inteliinv highlighted this clearly in his post summarizing management commentary on future outlook:
When the red flags would emerge, they would give some tell tale signs, but right now I just feel both Father and Son are trying to clean up their houses after a nasty demerger. There may be speculation on several counts but unless there are a series of steps or any drastic measure that impacts shareholders interest, I would wait and watch on this story.
Disc: Invested 8% of PF. Averaging 134.
Now that Dr Omkar is the CEO, lot of people who were there in the company from the pre-demerger days, might be replaced , so that everyone on the management team is on the same page. The CFO and the auditors have been removed and will be replaced soon by new ones. This process of changing the management team might continue. Nothing alarming about it. What is important is that the new team should be able to take the company forward and continue the process of growth of LASA.
@Nolan. Thanks. Let’s hope for the best. Yes, that’s positive side. Changing top management team when CEO changes is nothing new in industry. I think, mind gets alarmed looking at what as happened in Omkar speciality chemical. How do you see selling in LASA stocks by Pravin, Rishi & Svaks Which is a promoter arm, mainly Pravin. This matches with what Pravin and Rishi did in Omkar during Sept-Dec period and now they are selling the LASA shares. Understand it could just be again a hunch but if this selling would have not happened stock would have been performing better.
As per the Dec 2017 shareholding data, Pravin Herlekar held 13,55,226 shares of LASA. But the latest disclosure dated 17th Feb states Pravin’s holding to be 16,55,226. Where have these additional 3 lakh shares of LASA come from ?
To take Dr. Omkar’s holding to 36 %, another 11 lakh shares need to be transferred from previous promoters to Dr. Omkar. However, Pravin Herlekar has only 5.55 lakh shares with him. So, where will the balance 5.45 lakh shares come from ?
Omkar speciality chemicals also hold 22 Lakhs in LASA as on Dec 2017. OSCL sold 11 Lakh shares in open market. OSCL still holds 11L LASA stocks.
Dear @prakat Yes initially I was concerned by the selling and even I feel the price was pumped to distribute promoter stakes at higher levels. But Omkar had mentioned in Sept concall that he and Pravin have agreed to reduce cross holding off the market so that the stock price shouldn’t suffer. He is doing his best to acquire Lasa stocks from Pravin as is evident from the recent updates. This urgent action from Omkar gives me some confidence that he may not have colluded with other promoters in pumping the price up.
Thanks Nolan. After 11L transfer to Omkar H(LASA MD) and recent selling, OSCL, Pravin, Rishi & Svaks are left with 6% of LASA stocks. As per conf call if Omkar H needs to have 36% stake, OSCL camp would be left with 3% LASA shares(includes data upto 23rd Jan). If OSCL camp want to get rid of all LASA stocks we can expect 3% further liquidation. However, key concern is not promoter sale going forward as damage is already done. Key question is do OSCL camp thinks the prices achieved by LASA in Sep-Jan were high and business of LASA is not upto the Mark. Do we have any clues that it’s not OSCL in waiting? Looking at Omkar situation looks like OSCL needs money hence they sold off.
I am trying to piece together what’s in the public domain about Dr. Herlekar to help establish management pedigree and integrity.
One thing I came across is Amaranth Securities Ltd. Omkar seemed to be the CEO until March 2017 and is still a non-exec director and promoter with 70.56% holding (Rs ~10 cr. at current MCap).
I went through their website and 2017 AR and could not figure out what their business is all about. They make a vague statement about being into financing and leasing of factory equipment. EBITDA margin of > 40%, a 23 year old (Mr. Hitesh Ruke) as a Whole Time Director (and MD?), 0 renumeration to directors and no dividend (what’s in for the promoters??).
Mr. Pravin and Rishi Herlekar also have less than 1% holding each. Omkar loaned Rs. 2.8 lakhs to Amarnath as per related party disclosure in AR 2017.
Does anyone know about what Mr. Omkar Herlekar’s involvement with Amarnath Securities Ltd. is all about?
I m not comfortable the way things unfolded in Omkar Chemical in previous month. Delay in result, qualified opinion of Auditors, silence of management. Similarly resignation of CFO is not considered good, similarly change of Auditors on such juncture according to me is red flag. All factors point out to poor corporate governance.
Diclosure: exited from Omkar Chemical
Having investment in LASA and may come out on any peak.
Looking at the valuation I was tempted to invest in Lasa at 170. I was also keen on the business model as there are not many -players in the same field. Only Hester and Sequent who have many different products and operate in their own niche. Luckily I did a check up on the management which saved me from investing my hard earned money in this scrip, Please check the fate of Omkar. This stock will most likely suffer the same fate and head to the same levels. Lesson to be learned: Stick to good management, even in bad times. Avoid bad management at all times, even if numbers look wonderful!
In concall also issues like depreciation were skirted. I m amazed how a CMD can answer that he is technical person and does not understand depreciation calculation. It means he signed the results without understanding every aspect. More over, regarding share holding he was unable to explain the transfer and asked the participants to send Excel sheet. As Warren Buffet said if we are unable to understand any statement, it means company does not want u to understand the statement. History repeats itself. I m waiting for a peak to come out. Perhaps I paid my tution fee.
The promoter of Sequent recently bought shares in the open market.
Do you think this will propel the stock price upward?
I sense systemic issues. I too exited but started buying back (way too early to my liking, in hindsight), thinking that there is value but alas the saga of ongoing LCs clearly reflect on the saga of messy affairs. Coming to the topic of warrants, yes, that would have been the cleanest option but required belief and that is certainly in short supply all around
@wolfe What is teh source of this info. Searched for teh same but couldn’t find except selling by Svaks.
@nkgambir, valid point, however, there is something shown as others in promoters. May be Pravin has some HUF or other accounts andd holdings