Hi @giridesh3
By any means… can you throw some light on how listing price of LASA and Omkar will be decided ?
Just wanted to digg some more on demerger and listing price after that… how it comes out?
Paresh:
You get one share of Lasa for every share held of parent Omkar. That means total outstanding shares will be 2.01 Cr for both companies. The value of the total equity of each company will be divided by respective 2.01 Cr to arrive at valuation per share for each company. I will leave at that.
no i am not asking that…
i am asking about listing price… how would that be decided?
I think Lasa’s equity will be 10% more than Omkar’s as Omkar will directly hold 10% shares in Lasa.
Paresh. You can read this article to understand listing price in case of demergers. https://moatinvesting.blogspot.ae/2016/08/how-process-of-demerger-works.html
http://www.bseindia.com/corporates/Insider_Trading_new.aspx?expandable=2
Apparently promoters have sold 2.95 lakh shares between 24-25th Nov again after their last concall…In every concall they commit that no more sale but …
I think you have got the management wrong , they have clearly told it can go down, but wont go down below 51% thats what the management had confirmed on the concalls as well . And I dont think they have gone down below 51% in promoter holdings .
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Need expert views on omkar speciality…looks future multibagger in making.
Api business could easily contribute about 150 crore and speciality @ 300 crore for 16/17.
So at minimum 10% pat lasa lab eps should be 8 and omkar eps should be 15 rs.
After demerger i foresee lasa lab at 15 pe which is 120 rs and omkar at 12 pe means 180 rs which is almost 100% appreciation from current levels.
Risk : promoters sold about 15% stake in last 1 year.
Pros : promoters sold to reduce pledge shares.
Disc : initially sold due to reduces promoter holding but not added…hearing last few concalls promoters seems genuine.
Dear Hiteshji,
Looking at the current expansion plans and demerger, whats your call on omkar speciality?
Need your expert views on the same.
Thanks
Saumil
Thanks for remembering me and marking me in your post. I dont track Omkar or for that matter any chemical stocks So, I have absolutely no clue about it.
Thanks Meet. Appreciate your taking the time to reply. Have a great day.
Agree, the promoters seem genuine. What about their CFO though, finance division seems laggard?
Discl. Invested 7% of PF, exited after share sale against their words
Hi Atishay.
I have heard this argument many times. My two cents; if a company waxes eloquent then we suspect that they are “smooth talkers” and cannot be trusted, if a company does not have a person who “waxes eloquent” then too we say their communication levels are… to borrow your words “laggard” :).
Any company is in a business. This company is in the speciality chem and api business and not in the public speaking business.
We should not be taking decisions on the way a particular employee the company speaks but on the data and financials… which aptly explain the “business” to us.
Our investment decisions need to based on our current visibility of the financials and actions of the company.
My reference was not about their words but the actions. I fail to understand if they had the money to de-pledge all the shares which they communicated so many times, why it has been getting delayed for past many months. A capable CFO with a good finance team could’ve done it by now and all we hear during conference calls, new dates- Tarikh pe tarikh. A CFO should foresee that in the next one month they wouldn’t have the liquidity to service the debt and mis-communicated during investor concall they won’t sell. Still I held onto the holdings after that fall, in fact added some. In the next con-calls again they seem to answer about all technical questions lest the finance part which I felt at some places response was inadequate.
All I mean is I don’t doubt the promoter integrity but very much doubt the CFO capability. For e.g. let’s say the liquidity positions goes further bad in short-run and CFO can’t foresee that -> stock takes a beating -> further share of sell -> de-merger process postponed -> collapse. Hence, following Buffet’s rule no 1. Of course, risk appetite for me would be very different from anybody else and one can take individual call.
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Dear Atishay. First… you hit it spot on with “Tarikh pe tarikh” There are no better words to explain the way this dates just keep getting extended. Having said that, I believe that is why the company is available at a PE of around 9 and with doubling of the capacity from around 5350 MT PA to 10750 MT PA within the next 2-3 quarters will mean the company is at a forward of 4-6 quarters (keeping in mind some time needed to work at close to full capacity) valued at a PE of 4.5 to 5. Now that means all the news is factored in, in my opinion. Once they do manage to clear the air, a not so generous PE re-rating should make it a 15 PE company (Will need a 24 month horizon). So basically, triple the valuation from today. The CFO is doing what they can do; that is doing the same as the promoters and giving priority to servicing customer needs… i.e. use money for WC needs. That is always a good sign. That means that the orders they have to process asap are a bigger priority than other things. So sales seem to surely be on an even further growth tangent.
I agree the promoters seem quite genuine, and we by default then cannot say that the CFO is not. Yes, they have challenges, but it seems quite clear that with such amazing growth, they can overcome them.
I believe the demerger will happen. It is already applied for and waiting for court approval. That takes it’s own time. We generally have a horizon but one cannot advise the court to give the approval by a specific date. That also means, the promoters will have to clear their holding before the de-merger is approved. They cannot wait for clearing their holding. We should see the data officially soon.
Having said that, these are all personal opinions and I may be wrong.
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I’m just wearing a skeptical hat here - fully understand they are not in a public speaking kind of business. However, can anyone explain to me how the CFO / the firm takes a years time to increase their working capital limits ? How can they not see that in their budget ? Why have they not used other banks except bank of baroda ? If BoB is their relationship bank, why is it taking so much time for approvals to come through ? I’m pretty confident Other private banks will be happy to fund a legitimate claim , especially if the see the doubling of capacity + more business. This, in my personal opinion, was downright incompetence. It borders on stupidity.
Hope is not a strategy.
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Dear Saran. It’s always great to be wearing the sceptical hat. I did not join this forum to see everyone to agree with each other but only to validate with each other and that’s exactly what this is. I am glad.
On the BOB issue, if one tries to get a loan from them they will find out how slow bob can be…
Also, there is a correlation here… that’s the same time period till the recent events the banks were tackling NPA issues and that also played out not in favor of omkar not easily getting further facilities.
The promoters in fact had to give a personal loan as well apart from pledging their shares to the company of 27 Cr (approx from my memory). If they are so bullish that all this can be solved and:
A. Pledge their shares
B. Give further loan when banks do not
C. Grow the business at the pace shown
D. Manage to keep their mind on molecule development
E. Manage to keep their mind on CAPEX
D. Manage customers well
F. Manage to get approval from the govt for their new unit
I find them positives.
I do not know the mechanics on why a private bank did not step in to help but they have failed with financing from private banks and also a private investment. I would not hold it against them, because we know they simply have not managed to explain things well. That is the one issue they had. I now see them also beininning to learn how to communicate; even with us shareholders.
That though is my biased opinion maybe because I am invested 
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Financial savvyness is zero with CFO and promoters.
- They took 180 Cr debt 3 years ago to more than double the capacity in one go. They bet the balance sheet on that. This proved very aggressive and ill timed. Could they have not added capacity in phased manner to minimize the operating and financial risk?
- Looks like the demerger decision was taken without scenario planning. Should they have depledged at their comfort and then announced demerger? They assumed they will get credit extension just because they are asking BOB. No risk mitigation options thought. The business is generating lot of operating cashflow to repay the term loan, interest and take care of incremental WC. But not enough for premature paying entire NBFC debt taken against pledged shares. But all this was not well thought out.
Either promoters are very aggressive kind or they are not being counselled well by their finance head. As the company gets bigger they need to get their act right. Immature entrepreneurial risk taking won’t do. This is not startup. The company is still around because of its product portfolio, wide customer base and repeat business. Basically quality of operating business has saved them so far.
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I think they hadn’t anticipated they would face delays in the commencement of operations in unit-5. If you listen to the concalls of previous years, it seems they were expecting to start production in unit-5 in 2015 itself.
But do they need all that Unit 5 capacity immediately. As per them they can grow without Unit 5 capacity for some more time and that may be correct. Because Unit 5 is dedicated to Lasa. And Lasa had only 35% capacity utilization as of end of March 2016. So even if Unit 5 had got commissioned then it would not have made material difference to liquidity situation in my opinion. They also added capacities in other units and those capacities are helping them grow the business this year.
In the end everything may work out all right but with the benefit of hindsight it looks as if they chewed (capacity expansion) more than they could digest in one go. That is why I am not impressed by their CFO.
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