Most of the people are looking at the current payment. This may be slightly flawed, IMHO. MFCL (MFL) is the unlisted company where most of the expansion is happening. Estimate the future sales and profits numbers to arrive at the valuations and then discount them to arrive at the suitable price. This should be added it to whatever payments that you are considering for the current capabilities of the company. Feel free to correct me if I am wrong.
Valuation analysis in companies/groups where decisions may be taken to shortchange minority shareholders hold little meaning. I don’t think anyone had an idea that a restructuring will be undertaken wherein promoter holding in MFL will increase from 18% to 43% with them hardly injecting any fresh capital. And that poor parent MOL will be left holding the same 57% shareholding in MFL.
On top of that, I don’t think anyone had an idea that promoters have warrants of MFL which will convert into shares at Rs 30/share (This was the pricing at which MOL, IFC and the promoters had injected equity in MFL in 2008 when the company was started!!). And one is not even sure whether promoters have more such warrants left to be exercised (if yes, then MO’s stake in MFL will go down further when they are exercised).
Such an informative discussion, I have a doubt, apologies if it’s too silly.
MFL has to pay 221 CR to MOL with8% interest in March 2019.
And 211 cr with 8% interest with in 10 years
My doubt is this can be paid from loan/debt or from their profits right?
If from MFL profit , 57% of net profit is still owned by MOL right?
Or if from debt, still MOL is also liable for 57% of that debt right?
Please correct me if my thought process is wrong
Q2 FY2019 conference call transcript:
The repository URL is:
What a bunch of thieves these promoters are. It was cringeworthy going through the transcript. They did not give a straight answer to any single question asked on the whole MFL MACL thing.
Shouldn’t this be raised to SEBI and doesn’t this warrants strict actions to be taken against promoters??
This is the video posted by Mr. Ravinder discussing about recent managerial turmoil in Meghmani:
What is your opinion after watching this video, i’m not able to make a value judgement.
Kindly share your comments after viewing.
Meghmani organics is continuously falling as investor are not showing any interest after their unethical work .I am expecting the co to post good result and their expansion is also getting completed soon . i am holding this co just because i have a large allocation but i am not happy with the management’s unethical work and i want to exit as soon as it reach my buying price. are you still holding and will investor shows any confidence if they post good result in q3 or its better to book loss ?
It will take a long time to move northwards. May be it will consolidate between 55-70 levels for some time. Promoters have recently bought shares and increased their holdings so there should be nothing wrong with the business.
The important thing is that Most of the expansions are coming in Meghmani Finechem and not in Meghmani Organics. Promoters have increased their stakes in Finechem by using system loopholes. I believe that business will do good but investors will not get their due benefits.
My allocation is just around 2% of my holdings so i am not much worried about it.
If i will find any better bet in the markets , i will like to switch it before March 2019 or if it anyhow comes above my buying price. The reason for March 2019 is that the losses will be adjusted with overall gains of the year.
I am holding it as of now but have stopped looking at it. Averaging too won’t benefit. It is down around 20% from my purchase price so not much worried.
second biggest allocation from my portfolio. Initially I was looking to average to reduce my buy price, but after such act from management…I am not going to increase my stake. However in present scenario, I will maintain hold status till my buying price comes.
I do not like the act of management specially Ashish Soparkar…the way he is talking during one of interviews…but my gut feelings says …Patience will be key here for better stock price in 1.5-2 years as most of the expansion plans are in line and will come in next 2 years.
Revenue and EBITA margins will increase in next 1.5-2 years that will certainly increase the stock price. This is my conviction.
One important trait of good investors is “One must cut a mistake, as soon as one realizes it, irrespective of price, or whether one is in profit or loss”.
Many investors are averse to taking losses and stay in hope despite realizing that it’s a mistake (the mistake could be because of any factors such as business performance, disruption, management distrust, grossly overpaying for the asset, and so on).
Always remember, “When in doubt, be out”.
Especially, in these kind of markets, where many other ideas are available at reasonable valuations.
My 2 cents.
What is the point in revenue growth and expansion when it is not going to be shared with minority shareholders. Market will take cognizance of this and mark the price down as appropriate. Management intent is as important as growth if not more.
I think you are absolutely correct. Once we realize the mistake , we should cut that mistake and it may requires some bold decision to rectify the mistake. I was in dilemma that the company will post good results and that to their expansion is going to complete soon. So future looks good in terms of performance.
But at the same time they have cheated the minority shareholders .
I think for a novice investor like me, these are the great words and one should not be adverse to take loss. To be an good investor , we have to take tough ,fast and appropriate decision which will benefit us in the long term .
Let me pay some guru dakshina to my stock market
Thank you for clearing my doubt and I have understood what next step I have to take not just for this time also for the next many many year when someone try to act smart and try to cheat us interms of corporate governance issue , related party transactions or giving false hope on performance.
Mistakes are a stepping stone to success. The point is to rectify them and try not to make the same mistake again. There is no investor in the world who doesn’t makes mistakes. Just make sure they are smaller and lesser as we go along.
I kept scrolling up 25-30 comments but I could not find what exactly Meghmani Organics did which was unethical to the interests of the minority shareholders? Can someone explain?
The issue had been discussed threadbare in this thread. You have to go thro’ the thread patiently.
Here is what I have understood:
Meghmani Organics has three segments:
Meghmani Finechem is one segment where MOL has 57% stake, 25% was owned by IFC (International Finance Corporation - arm of World Bank) and remaining 18% was owned by Promoters.
Meghmani Pigments and Meghmani Agrochemicals are 100% subsidiary of MOL
Now IFC wanted to take an exit so the promoters paid them 221 crores through SPV (special purpose vehicle) - MACPL (Meghmani Agro Chemicals) where the money for that was routed through MOL.
Since MOL has given an exit through their subsidiary (which is 100% owned by MOL) the MOL stake in MFL has increased from 57% to 82% (57+25).
Now the promoters want to give back this 221 crores (at 8% interest rate) immediately to MOL and club the MACPL with MFL. On top of this they are paying another 211 crores (at 8% interest) over a period of 5 years for MOL not going beyond 57% stake in MFL.
This 221+211 = 432 crores is going to be given through MFL to MOL but the promoter stake is getting increased from 18 to 43%.
Now MOL investors are unhappy with the following
- MFL paying 432 crores for promoter stake increase from 18 to 43%. Remember MOL has 57% stake in MFL so MOL is also paying part of 432 crores.
- MFL contributes 60% of net profit in MOL so reduction in MOL stake automatically puts a dent in the consolidated profit of MOL and hence lower EPS.
- Most of their Capacity expansions are happening in MFL to the tune of 640 crores and all of them are going to get commissioned by next year June 2019. Hence they are unhappy and the fall in stock price is reflecting this.
The rationale that is being given by promoters for this deal is
- Since MFL is a commodity cyclical business they don’t want to increase their exposure since it pushes down their PE multiple. As Pigments and AgroChemicals come under specialty chemicals sector they attract higher multiple and the management want to project their company as specialty chemicals company.