Lloyd Electric & Engineering Ltd (LEEL)

Thanks @Cshar, @RICHAJ, for your feedback.
I feel the current price is the bargain comparing to peer companies in the same segment, however if no improvement or betterment in corporate governance then no use how cheap the stock might be vaialable, it may remains same for some more time.

Some thoughts on LEEL -https://www.evernote.com/client/snv?noteGuid=c184a8ac-c211-43a0-b9ce-9f386499b01d&noteKey=eb1e12e4b0df265be36e643dc1015f97&sn=https%3A%2F%2Fwww.evernote.com%2Fshard%2Fs297%2Fsh%2Fc184a8ac-c211-43a0-b9ce-9f386499b01d%2Feb1e12e4b0df265be36e643dc1015f97

Disc - Held, no trade in last 30 days

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5E8496C6_B12C_4EC4_83F3_33D49C4CC802_185507.pdf (641.2 KB)

Promoters pledged shares supposedly for “as a collateral for the loan taken by the company "

So the siphoning continues! This company is one of the best examples how how bad corporate governance screws investors!

  1. They first said they have taken in KPMG to do internal structuring to improve shareholders gains. I am not sure what kPMG has done, but at the end of 6 months they came out with a sale of their consumer durable business
  2. )Siphoned of huge money from the Havells sale
  3. Showed losses instead of gains, paltry one time dividend(compared to the sale gain)
  4. Now pledging shares for a company loan which should be ideally be debt free with a post B2B business. It can’t go worse than this

It might go up in a bull run again, but with a management like this investing here is a high risk gamble .

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I asked the investor relations the same thing yesterday and they replied that there was an error in the disclosure they made on 3/10/2018. They revised their disclosure yesterday and as per this disclosure LEEL elctricals has not taken any new loan. The promoter entity’s pledged their shares for their own needs i.e the loan was taken by the promoter companies for which they pledged their shares as a collateral.

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There is some problem uploading the whole pdf. Only the first page is showing up. Plese refer the discloser made on BSE https://www.bseindia.com/corporates/ann.aspx?scrip=517518&dur=A&expandable=0

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AR 2017-18 :

  1. page 152 - Huge inventory outstanding of 502 cr.
    *Does that mean they are not able to sell their products ?
    they have repeatedly said that their B2B buisness wont be affected and they would continue to supply to havells as a OEM.

  2. Page 154 - 548 cr of working capital loan @ 10.5 to 11.5% pa.

  3. Page 113 - 1550 cr recieved from havells sale minus BTA and e-waste mgmt rules impact of 887cr leaves a mearge 492 cr post tax for us.

  • what have they done of this 492 cr ?
  • what necessitates a working capital loan of 500cr after receiving almost thr same amount in cash in the same year ?
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http://www.careratings.com/upload/CompanyFiles/PR/LEEL%20Electricals%20Ltd-10-30-2018.pdf

It is difficult to take rating agencies seriously these days. On Oct 12 LEEL was upgraded from BBB- to BB-, and now just 2 weeks later is has been downgraded from BB- to D. I can’t imagine what may have changed over this time, unless LEEL has already missed a payment or defaulted.

Hi AJ41, stumbled across your post after 1 yr 3 month from posting. Whatever management have mentioned in their conference at that time i.e point 1 to 5, none of it happened, instead revenue declined to 1/3 rd, margin is pathetic, debt not reduced to that extent etc…
What is ur opinion now ? I wonder why management told so at that time…

Below was my post on 31st of May 2018 made on this forum - hope this gives clarification on my position.

Definitely not good. I still maintain that this is a company in transition, but I’m not so sure where it is going. Leaving aside the P&L, the balance sheet is what really concerns me now.

No increase in PPE and Capital WIP is exactly the same as last quarter. This adds strength to the theory that related companies have been used to siphon off money.

Receivables being overdue is another big red flag. A writeoff would seriously dent LEEL’s net worth. Maybe this is what the market is pricing in. Higher borrowings were also unexpected, given that the drastically lower revenue.

Unless something changes very soon, I see the company running out of cash soon.

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There has to be someway for shareholders to illicit some kind of a response from management. I can’t believe that Porinju with his 7%+ stake has not talked with them. Does anyone know somebody at Equity Intelligence? Or have any other ideas?

More than 8% holding still !

In fact 0.48% increased from quarter ending June 2018 - Sep 2018 by EQ India Fund & PMS clients of Equity Intelligence India Pvt Ltd. as per BSE shareholding releases.

However the reason behind this minute increase by EQ India, at this situation where ample of good companies are available with reasonable valuations, is not able to understand.

Porinju holds 8.38% of LEEL. He added 0.48% in the last quarter.
Source- https://trendlyne.com/portfolio/superstar-shareholders/53777/Q3-2018/porinju-v-veliyath/

Please note this data was last updated in Sep 2018.

Disclaimer: One shouldn’t follow Porinju or any other celebrity investor blindly but should use it only as a starting point of their research.

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In his ETNow interview today, Porinju mentioned about LEEL (link - skip to 11:00 minutes)
He believes the promoters have siphoned off money.

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Any comment about recent development, making new 52 wk low each day, now at 50/- etc…

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There is an interesting lesson from this episode.

On the one hand,

  1. @vivekbothra had analyzed the accounts / Annual Report and pointed out in a post in Sept, 2018 to many suspect transactions.

  2. Mr Brij Raj Punj passed away on 05 Dec 2017, and the company was ‘headless’ till 30 May with various Board Members acting as Chairmen in the interim (page 26 of FY 18 AR). This even as Bharat Punj was the Dy MD while Mr Brij Raj was alive. Surprising.

On the other hand, the article says…(Mr Porinju) had extensive discussions after the older MD (Mr Brij Raj Punj) passed away and his son took the reins - “Throughout our interactions with Bharat Punj and other senior management in various occasions, they sounded optimistic about the business and future of the company, in line with our investment rationale.”

  1. Mr Porinju, obviously a savvy investor met with the new MD and senior management to talk about the business. During this time management knew it was taking a write-down on the sale, but did not disclose this information…or we may say the Mr Porinju’s team could not ferret it out. They met not once but on multiple occasions. On the contrary, Mr Porinju came away feeling that his investment thesis was validated

  2. Though the books were indicating red flags (for eg a sale announced on Feb 2017, completed in 08 May 2017 save some ‘adjustments’, saw no net cash in the Sept 2017 Balance Sheet (Bank balances net of borrowings was negative and the CD business was gone), but obviously they were ignored possibly because management discussions were encouraging.

In other words, if Mr Porinju had stayed with just concluding from the numbers / annual reports, and not interacted with management, he may have saved himself and his investors a lot of money!

The big insight to me is that meeting with management can not only take away what you already know from reading, it can completely color your judgement. When in doubt, stick with the books!

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