omax recently held their egm, and the notice is in the link above. as per this, they are completely exiting the 2w business, rather then just reducing it. it appears that more pain is in store by way of reduction in future sales. but losses would also reduce. provided their railway, cv and pv picks up.
as per the notice, the promoter salary is being increased from 1.28 to 2.85cr. commission of 2% of profits is extra. for other promoter, salary is being increased from 20L to 30L. i did not like this increase especially when the company isnt doing well. one argument in favour could be that because they are taking money officially (through salary), probably they are not siphoning any.
and perhaps they are using this additional cash to buy into their shares
The story was being sold a year ago with the hopes of Huge orders from Railways. It was told that they are the biggest supplier of Bio Toilets to Indian railways and there is a huge opportunity in the space as most Railway Coaches will be converted into Bio Toilets over time. However after taking a small position (which seems a mistake and learning), I realized it as a high capital intensive business with very poor Return Ratio’s and very fluctuating Tax Rates , Margins and numbers does not look like backing up the story.
Moreover , there are frequent trading by Promoter’s and reporting it to exchanges is done after 1-2 Months which does not instill confidence. If there is any kind of restructuring going on between Promoters, i think they should do it at once and concentrate more on Business rather than Buying/Gifting and Disposing Shares on frequent basis.
Acc to the disclosure , these two Units contribute around 35-40% of Revenues. I do not rate Promoter’s high on Transparency and it would be difficult to say what they will do with the cash coming after the Sales of the two division.
Definitely Sir but currently it seems lots of Moving Parts will be there in short term. How much consideration after Tax comes to the company, How they utilize this Cash and to what extent they reduce the debt, What may be the Operating Margins for the rest of the business , What kind of restructuring is taking place between promoters , What is the growth in order book from Railways. Looks like they should arrange a concall with the shareholders.
Good thing is that they have announced doubling the capacity for railways last year somewhere around June. May be a part of Sales from 2w business can go in funding the expansion for Railways. Their FY18 Revenues were around 1200 Cr and Railways contributed around 150 Cr (10-12% of total revenues) and 2W contribution was somewhere around 50-55% while rest was from PV/CV. Their plan is to take the revenues from Railways to 500 Cr by 2020 after capacity expansion. They guided OPM levels of 7% from Railways. If things work out that way and with Less debt and good margin Products , there can be a turnaround but for now , seems a risky bet.
As I had hinted, "Any thoughts on numbers’
Stock and management both had given indication when it started to fall.
This is a classic Bull market stock with queestionable promoters.
Was it a Pump and Dump ?? Dont think so.
It was a case of flawed analysis and thinking that all cheap stocks are good.
If a company which has been around for 10+ years and hasnt done well and suddenly stock/company starts doing well in Bull Market, we should get cautious and double check before committing to such stocks
Promoter shareholding has increased over last 1 year.
One of the younger sons Warun Mehta is exiting the company and his shareholding is closer to zero now due to selling over last 1 year.
Despite that overall shareholding of promoters has gone up as other promoters have increased stake.
The company is closing down Hero OEM business. Selling off land to reduce debt.
The company is doing Capex for railways business which will be a higher margin business compared to lower ROE hero OEM business.
The stock price has fallen as the hero OEM business has gone down and railway Capex has not completed yet. Thus the quarterly numbers have gone down as of now.
Once the railway Capex is completed and the higher margin business starts, we will know how it does.
Let us see how this works out.
After selling at higher price, one can always buy back at lower levels.
We personally dont know how money is being routed between promoters.
The company missed the entire auto boom despite being in Industry at the time of inflection. I doubt the execution skills based on past track record of promoters and would wait for 3-4 qtrs of continuous performance before taking any position
Yes, the business has not performed in the past. For the simple reason that bulk of the business was OEM supply to Hero moto.
The Hero moto itself is a very low growth business and they leave wafer thin margins for the OEM suppliers.
The promoters also learnt that supplying OEM parts to hero will not make them money.
That’s why they took a big decision to close the OEM plants, lay off a big chunk of people, reduce debt and change business to Railway supplier.
In the HDFC Securities Report dated 09-04-2018, it is mentioned as under :
“ Value unlocking from land could bring upsides : OAL has entered into an agreement of the development of a commercial complex with a built-up area of 23,185 sq mts with M/s Spaze Tower Pvt Ltd for its land at Tikri, Gurgaon. This could generate revenues/profits for OAL over the next few years. In the future, it may look to sell a part or the entire Dharuhera land, depending on its manufacturing needs .”
In “ Application for Environmental Clearance for Commercial Complex “Spaze Boulevard - II ” available on internet, “, it is mentioned as under :
“ Permanent or temporary change in land use, land cover or topography including increase in intensity of land use (with respect to local land use plan) : Licence has been granted to M/s Automax (A unit of Omax Autos Ltd.) for development of Commercial Complex. Since, M/s Automax (A unit of Omax Autos Ltd.) has collaborated with M/s Spaze Tower Pvt. Ltd., the complex will be developed by M/s Spaze Tower Pvt. Ltd. Hence, there will be change in land use from open land to commercial complex “Spaze Boulevard II”. Copy of Land papers are enclosed as Annexure VII ”
However, Mr Devashish Mehta, Vice President of the Company, in an interview with Bloomberg Quint, (uploaded above by inteliinvsri krishna bhutrasri krishna bhutra in Jun 2018) in response to a question indicated that Omax Auto has not entered in to any agreement for development of commercial complex at Tikri. He indicated that it was being done by one of the promoters of the Company and not by the Company.
I find this very surprising. Was Land not owned by the Company (Omax Auto) in the first place? If so, how the confusion got created. In case any one has clarity on the subject may kindly indicate.
