It sounds ridiculous the way they are justifying selloffs in each other’s stakes in companies. There could be genuine difference of opinion or animosity between father - son but what does it say about their business skills? Can’t they settle differences within their homes and swap promoter stakes so that this public display could have been avoided. I would rather believe this is all premeditated as a scheme to reduce debt. If it is true, what does it say about their own outlook towards ongoing biz. They display lack of confidence in their own biz which could have forced them to take this route. It is like ‘since I have made a cake (value from demerger), I have the first right to eat it and may be the significant portion’.
I searched my old notes when I did some analysis 4-5 yrs back. I found the IIT guy a sensible 1st generation entrepreneur but his son is too aggressive and can be called as brat. I can’t give anymore supporting argument on this now. One can ignore it as well.
So as an investor we need to be sure about - are you willing to partner a guy which shows a) lack of sensitivity towards minority investors b) Lack of confidence in own biz c) lack of effective negotiation skills or conflict resolution skills.
A demerger ( whatever might be their reasons for it ) in which they give free shares of a company in a high growth industry, does not display a lact of sensitivity towards minority shareholders. Further , we have also to keep in mind that they have been selling their own stake in OMKAR and have lent the sale proceeds to the company at zero interest. This shows their confidence in the future of OMKAR . Finally , if the father and son are finding it difficult to get alond, due to a generation gap or due to being in a different industry or due to other miscellaneous factors, then it is best to part ways. This shows that they are not hesitant to take tough decisions .
Equity investments can never be risk free. The most critical variable, in my view , is the quality of management ( skill and integrity) of the company you re invested in. Omkar Herlekar is managing LASA, ever since it was acquired in 2012 , and the growth of LASA from a turnover of 1 crore to the present 200 + crores, has been very good. Based on this we are judging the management as competent . Let us hope that company does as well in the future as it has done till now.
Last heard we are in a bull market so they could pledge the stake to a sensible NBFC to raise cash since value is discovered largely? I am also surprised they could not find HNIs, MFs for block deal. May be they know little more about the family than us.
Could they communicate their grand (desperate?!) plan to pair stakes in advance? This is not a requirement but calls for adequate disclosure as a part of sensitivity.
If veterinary API biz is so attractive, Mr. Father must be a big fool to sell it so prematurely?
If everything is all fine, does it mean that both want to show each other down? What is the guarantee that they will not create troubles for each other going forward?
well, I made 2x in sequent scientific and did some analysis on veterinary API sometime back. Yes, there is a shortage of generic suppliers but there is no entry barrier as such. Regulations are not as stringent as human API so supply response will come at some point of time. Many pharma folks are struggling so if the sector remains attractive, they will come in search of returns
I assume there is too much fuss about the non issues here. There is literally no need to be Byomkesh Bakshi of the family saga. In businesses things don’t pan out the way it is expected. If only both the owners were accommodative of each other’s concern they would not have split at the first place. And after the split who is doing what to the other company / or the shares that he own is not a promoters problem. Also if you are just not comfortable with the idea / business there are thousands of other ideas out there. Why stretch the fuss here?
Why reduce debt though? Lasa is supposed to make a lot of cash from operations and there are no immediate capex requirements as far as we know, so it should be able to manage its debt effectively without additional fund infusion. So there can be two possibilities according to me - either Lasa is not that great a business we think it is, or Unit V is going to start operations very soon which will require additional working capital.
It is including Unit V. I have taken total Capacity. Unit 5 is ready to be commissioned.
But Management has been facing issues regarding Unit 5 commissioning and they are not very forthcoming in expressing what exactly the issue is. They were pretty confident that Unit 5 would be commissioned by Q4FY17 but that didn’t happen. It remains to be seen if after listing of demerged entity, process to commission unit 5 will speed up.
As is obvious from the post by Utkarsh, the startup of Unit 5 would more than double the production capacity. After that it would probably take some time for a correspondig rampup in the sales, depending on the demand supply mechanics in the industry and the marketing team of LASA. BTW, the startup is scheduled for late October, that is q3 FY18.
I had sent a query in September, to which they had replied . Today I asked them to reconfirm and they have promptly reconfirmed the startup date as late October.
Any information as to who holds “pledged / encumbered shares” 5.93%? I mean not the NBFCs name but who is responsible for its repayment and depledging? And same for Svaks Biotech co? Any idea?
Also, Rishikesh and Omkar Chem (the company) together have another 12+%.
After the 30 Sep results, these things needs to be clarified in con-call or if anyone is going to meet mr.omkar
But now that his dad Pravin, has sold most of his LASA shares, how will the exchange happen ?
Regarding the debt, he mentioned it is around 70cr which is lower than what they had during de-merger and that is because debt is retired with ICD from Mr Omkar.
This, to me looks too good to believe. Why will someone give loan and not increase the stake when the valuation is lucrative and future seems so bright .
Also regarding unit 5, I had sent an email to company asking for the status to which they replied that some statutory approvals are pending and it will be operational in IMMEDIATE future. As the term IMMEDIATE, is relative we will have to monitor their actions.
Release the pledge of 800069 OSCL Shares and sold 695000 of them. The details of selling is not traceable in the bulk trades. Also despite the earlier notification to the exchanges that Omkar is not a promoter, Omkar address himself as the promoter of OSCL in the notification
Basically, it all boils down to one question. Do you trust the promoters of OSCL and LASA , or not ? If you do not trust them, then selling the shares , lock , stock and barrel, and getting out would be a better option. If you trust them , then let them do what they have promised. Instead of getting into the nitty gritty of how they are doing it, allow them some time. They are first generation entrepreneurs and not deep pocketed individuals, so, if we trust them , let us allow them some space, instead of overanalysing.
As Pravin Herlekar and Rishikesh Herlekar are not the promoters ofLASA, so the actual promoters sake is around 35 %. Let us see how Omkar Herlekar fulfills his promise of raising his personal stake to 40 %.
Putting this post since my earlier posts had disclaimer of my interest in Lasa::
I have exited Lasa completely today from all my family accounts, ended up cumulatively with a decent return ( OSCL buy was at 164/- nov2016, sold out at 99/- july2017-. Lasa sold today at 149/- ). I will be watching Lasa and OSCL from the sidelines since I have not been comfortable with the promoters for some time and this was one of my open positions in the portfolio which was causing me stress. I am a risk-averse conservative investor and prefer not to track my companies every hour
Met the management of Lasa Supergenerics recently at their JB Nagar office. Penning down some of the relevant points (few of these may have been covered earlier, pls bear with the same. On a lighter note, may help in refreshing our thoughts):
Commencement of operations - Unit V. While the management did not commit to any specific date for commencement of operations, they were very confident of commencing during this quarter. Further, the plan is to operationalise this in 5 phases, in each phase the capacity utilisation being about 600-700 MT. Only after stabilisation of a phase would they get onto the next phase.
As against the debt of 107 crores outstanding in the books of the company as on 31 march 2017, it is now reduced to about 62 crores.
There would be an inter-se transfer of about 14% of the shares of the company with OSCL, which would increase the shareholding of the promoter to 37%. This would however take some time (6 months atleast) as regulatory approvals are required.
Targeting topline growth of about 25% annually from the current 200 crores. This is a conservative estimate without taking into consideration operations of unit V or any add on products. 98% of the current revenue is from veterinary API and 40% of the revenue is from exports(mainly South American countries, Egypt & Australia). Top 7 products(patented) contribute 80% of the turnover.
The company has over 250+ clients which include pharma, dairy, aqua and poultry sectors. It also supplies to some of the companies operating in the same field (Sequent and Oceanic pharmachem).
Capacity utilisation of Mahad plant is about 85% while that of Chiplun plants are considerably lower.
Raw material (petrochemical derivatives) sourcing is mainly from Reliance and IOCL with some items being imported from China (mainly because of cost factor).
The company would eventually foray into formulation business by inorganic route. No specific timeline for this as of now.
Working capital cycle would be maintained at around 75 days.
With the existing R&D unit with OSCL post demerger, the company plans to setup a state of the art R&D unit within 6 months with a capital outlay of 5 crores.
Overall, Lasa seems to be on a good wicket with strong growth potential along with their expertise in Catalytical Chemistry would enable them to have more patented products going forward. In the short term, however, they may take a while in enhancing their operations, streamlining organisational structure and setting up their R&D unit. Along the way, we may get to see JVs and takeover of a company involved in formulation business.
