Lasa Supergenerics Limited

(Manish Vachhani) #460

Refrain from posting one liners which does not add value to the fundamental stock analysis.

(lastgenesis) #461

I am not invested in this stock but have been following this thread, with all due respect to the people invested in this stock people seem to be giving this Omkar fellow as much latitude as the national media gives to Rahul Gandhi!!

There are tons of red flags here, the suspect demerger & promoter sale issues have been very well summarised by @phreakv6 & others so wont go into that but i see more basic problems in the story.

Firstly this is supposedly an animal feeds API company, as a category that should not be a commodity play. But if it is genuinely doing some value add products it should be having the power to pass on prices, which as per the promoter in last concall is clearly not the case. I know chemical prices are volatile but not to the extent of 200-300% in a quarter, if there is a 30-40% move it is a huge thing which will wipe out businesses since chemicals is a low margin industry (there may be exceptions but I am referring to the norm). If someone says prices have moved by 200% in 2-3 months, he is IMO probably lying.

b) Intent on debt reduction while increasing WC loans. A CEO saying WC is not debt is beyond belief!! Pretty much the “Cognac sharab nahin hoti” category ;-).

c) going in for acquisitions - of which details are not disclosed - when you have just started a plant significantly expanding your capacity after huge time overruns. Surest way to pile up debt further, which is in any case now certain since the rights issue is not happening.

In any case if this is so much of a one man show like many investors keep saying, one person taking on so much at one go is also not a comforting thought. With all due respect allocating like 10-20% of portfolio to this company is a huge huge leap of faith which this person has done nothing to deserve (till now atleast).

Not giving any recommendations but as an investor whatever profit or loss one may be sitting on, one needs to look at a company objectively. When the primary reason for investing is faith in management and that same management is continuously doing the opposite of what they claim, tough to see hope in future…

(paresh.sarjani1) #462

I had attended the concall. Prices are on contract basis as per MD. Prices can be passed on to customers with some time delay is what he said

(ragsingh0305) #463

The kind of qualities with respect to business and management that you are expecting is more of 10000 crore mcap company than a 100 crore mcap company.

Probably, we need to see the things in perspective, we are talking about a company which is 6-7 years old.
The CEO might not have great expertise in interacting with the market, but does he has good understanding of the business, in my opinion “yes”.
From a current mcap of 100 cr, can it go to 300-400 cr…“possible” reasonable degree of probability. Annual sales of 240-250 crore, with limited competition, potential EBITDA margin of 16%-20% range, currently going through rough patch due to increase in RM costs. The company can pass on the costs, if RM persistently remains high, but likely to take a hit for a quarter or two. Currently, it has scalable capacity with limited capex need. Possibly better operating leverage in the next few years.
Can the company further fall 30%-40% from here, “Unlikely”. The current debt of 90 cr is manageable and the acquisition which company did was small and debt only went up modestly because of the acquisition.

My understanding on demerger- it was done to carve out a growing and profitable entity from loss making entitiy. The owner has not sold anything and has been quite transparent with respect to shareholding details.
Though I agree with your point on reliance on one person but again it’s a company at a nascent stage, and probably can through some good managers once it stabilizes. To give an analogy from sports - Once a team start performing and winning, the mediocre players start looking like good players.

I might be wrong in assessing the company’s future prospects, but i can summarize my viewpoint on this company from the current level by saying - "Head I win and tail I don’t loose much " - a quote borrowed from high profile investor

(paresh.sarjani1) #464

Perfectly quoted. Even my rationale is on the same part that if Promoter has not sold even a single share , why should I sell.

(lastgenesis) #465

@paresh.sarjani1 @ragsingh0305
Just to be the devil’s advocate (I am not saying these are the actual facts) look at this scenario. The father is selling shares in the son’s company, the son is selling shares in the father’s company (this is an assumption not tracking OSCL), the Herlekar family as a whole is making money while in each respective case the retail investor is holding the loss on the books. 1 year later the father and the son settle their “dispute” and they are probably a good 15-20 cr richer even if stock price remains what it is today.

I have been a part of 3 bear market cycles in my life and one thing I have learnt is to take things promoters say with a very large pinch of salt and always verify. Trust in management should have a very high hurdle rate (though once earned do give them a long rope). I get the distinct impression faith is being granted very cheaply here.

(ashutosh_shah) #466

There is something not good with the company. Whole time Director and Compliance Officer both resigned, earlier The CFO resigned. There was no reason given for their resignation.
There is something very wrong with the company.

Disc:- Have invested earlier and got out at 190-200.

(Vivek) #467

Personally things are not good in my view , had been invested and exited around 75 levels as I lost hope in management, prime reason for selling was I understood that these are definitely not the companies I need in portfolio to get a good sleep. Hopefully retail doesn’t burn them, if your allocation or investment is less it might look good in such companies but in a large portfolio with high values allocating in these kinds of companies is very scary.and I identified myself as not fit to ride such roller coaster rides

(shyamdsundar) #468

There are few points that I am looking for clarification. Would be really helpful if someone can answer or add more questions.

  • People such as CFO, compliance officer etc. resigning can be a big red flag. But, given LASA is fairly young, can this be looked at as a more routine shuffling of key personnel? I was not able to locate any of the names in LinkedIn.
  • Is LASA’s market share of 35% going to help prevent the downside of the stock?
  • Are the IPs regarding catalysts really creating a barrier of entry? This seems to be the advantage touted by the management.
  • Can we trust the management’s word that it takes two quarters for pricing to be passed on? If so, when the oil price stabilized or fell down, will we see the profits go up to previous levels?
  • Management mentioned that the growth really is in grabbing the market share. Does this make it difficult for the company to grow?
  • I expect the turn around to be in another one year. But the stock could actually move only much later. My investment horizon is hence 3 years.

Disc: Invested with cost basis of @60. One of my most riskiest bet in my portfolio