Omkar Speciality Chemicals Ltd -- OSCL

Dear Girish, I guess we have all discussed the company for the current quarter based on currently available data. It has been interesting.
If the kind of clarity asked by you above was there in every business and every business owner could think so clearly, I think you, me and everyone else would have a 1000 crores or more. Such clarity can be questioned only in hindsight. That is my friendly opinion. Can you give fair revenue data for any company for the next 4 quarters? Including the company you own or work for? If yes, it will already be priced in. This company is currently a special situation.
My question to myself before the next data is actually published (stock pledging, quarterly results, starting of new plant, conference calls if any, and other data) is:
If everything was in the clear do we think the stock would be available at this valuation? No
Am I as confident as one can be (personally) that the company will deliver great results over the next 6-8 quarters and double their top-line and bottom-line approximately: Yes
Do they have significant power to keep getting the margins they command with their IP: Yes
Will I remain invested? Yes
Conviction Level: 10 on 10
Happy new year and happy investing

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Valuestudent: I think you did not understand my comment. I am not commenting on their or our ability to forecast sales and profits. I am questioning some of their financial decisions. Typically prudent managements do not bet their balance sheet in one go. Many companies add capacity in phased manner for this reason.
The uncertainty prevailing is not because of inability to predict sales or profits. That is inaccurate understanding. On this forum there are many people who sort of know what kind of growth both businesses can expect. The management is also guiding sales growth in every call. The issue causing uncertainty is liquidity, my friend, not sales or profit growth. We are talking about Balance sheet. Not P&L here. Not only here but also in every Conf call this is discussed if you care to read the transcripts.

Another point I want to make here. Note that some of the savviest investors were invested in this stock. They have exited in last 18 months. I want to stay humble and not assume that they were idiots and only I know the truth. I am still holding Omkar because i think, after repeatedly talking to management, that the operating business is rock solid and they can some how come out of the woods , one day ,as far as depledging is concerned. I am assuming they will somehow raise last few crores and depledge 100%, even if with slight delay. But I am cautious and watching the development carefully. I am not at all taking promoter’s promises at face value.

Discl- Invested in Omkar and still holding.

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Dear Girish. I was online and just going through the posts when your message came in :slight_smile:
Actually what you said makes sense to me now knowing you are invested.
I was quite confused as I could earlier see your views on the company and was wondering what changed.
Yes, many people with good knowledge of this company made an exit as the data was not clear and was getting more fuzzy by the day…
It only made sense to start investing in this company again only when the de-pledging and con call for helping us understand the what’s and why’s actually started happening.
I also very much agree that CAPEX should for a company be very well planned.
The reason to my understanding that it was not planned as a normal company would is because of the pressure from customers who are tied in to this company for producing the developed molecules. They cannot go to another supplier and will be at Omkar’s back to deliver.
So, I discounted their reasons for the fast paced CAPEX and gave them the benefit of doubt when apart from pledging they also gave personal money to the company. They sure are showing signs that they know they are overreaching and they also have now said no more crazy CAPEX… not in exactly the same words but the answer was clear.
I think we will now see this turn into a stable company and now I understand you think so too.

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BTW the Lasa facility is working at 72 % since the last 2 quarters according to con call transcripts… However the unit 6 seems to be working at just 10-12% capacity since its inception I guess about 2 years ago( I don’t remember when it started) . its job is to cater lasa’s demands. And though it is running at such low capacities it is still being upgraded from 300 to 750.

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And omkar herlekar sounds a bit too confident in news shows(by my standards)… Can a good business (lasa) succeed with a mediocre management ( Honestly I don’t know about his management skills but I have my reservations about his confidence…though I hope he has some backing for his claims) . though till now None of his claims have proved false or overly exaggerated… He however is less conservative on estimates unlike his father.

N where will this 26 cr . given to the company be shown on balance sheet? Coz the promoter debt has remained constant at 27 it has not increased…neither has the promoter issued shares to himself… So where is the next WC infusion accounted in the BS?( forgive me if the question is stupid.I am a science student )

Loan provided by the promoters should increase cash balance on assets side and also increase liabilities (debt) on the balance-sheet. Hope this helps.

Yeah but according to q2 con call promoter debt is still at 27 cr. So does this mean the recent infusion went in without being categorised as debt?

Dear Girish. What’s up here… your opinion?

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/CE1BC275_D4F7_49CE_AE05_A0F87A6BDE4B_174044.pdf

Just my wild guess that it might be a step related to demerger process

Dear S Dutta. Good question. I have been taught (via YouTube :grinning:) by a certain Mr. Warren that only invest in a business that can even be run by a mediocre management because sooner or later it will be… Best.

May be a bit overthinking here… but they haven’t come up yet with complete depledging which they promised to do anytime between mid of December to mid of January. They also have mentioned that depledging will be completed before the court order is received and there is no information on court proceedings with regards to this as well … I feel the communication on depledging itself is very aggressive and did not accommodate any deviations that forecasts will have .

Their style of management (running operations) may also be on the same lines.Taking help from the comment mentioned by Girish ji in one of his previous posts, they were probably looking at the positive sides alone when they went for expansion. They ventured into doing something without forecasting the uncertainties ( negative possibilities).

Quite surprised that someone who has run the business for so long has not preferred a phased capacity expansion !!!

Typical entrepreneurial mindset. Can Do attitude. Dive in and then check along the way what happens- kind of attitude. Cuts both ways though. You need exactly such mindset to buy tiny company of Rs 1 Cr turnover and then turn it into 136 Cr Lasa Vet API in flat 5 years. And then audacity to publicly announce in media to take the turn over of Lasa to 400 Cr in next 3 years when it was around 70 Cr. Flip side of this mindset is certain volatility and hiccups due to temporary issues and crises. Comes with the territory I guess. In entrepreneurial micro cap space you come across such cases. That is why you need good deal of risk appetite to hold these stocks. And then keep weary eye on the company developments at all the time.

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Valuestudent: After demerger Omkar Herlekar will hold all promoter stake of Lasa and Praveen Herlekar will hold all promoter stake of Chemcial biz. The alignment is going on in that direction. So after demerger there is no cross holding. This is what I am told.

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How in the world this is possible…
there would always be a ratio right?
for the current shareholders…going to get lasa shares

Dear Girish, who has told you this… quite curious. That would imply father and son are breaking up? I don’t think and it sounds like a rumor :smile:
EDIT: Of course: I reserve the right to be wrong too :smile:

Got to know this from somebody who is authorized to talk to and inform investors and who knows what is happening.

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Girish. Thanks. The amount of research and follow up you have on the stocks you own is just amazing and commendable. Let’s see the fact in time as to what they are able to answer clearly and legally… I guess they may have their limitations as well. We should know soon. Best.

I think you have understood it wrongly, the current shareholders will get there Lasa shares . what girish and valuestudent is discussing about the controlling stake of who will own lasa and omkar chemicals

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That’s correct @Hocuspocus32 . @paresh.sarjani1 we the shareholders will not be impacted as far as the internal control of the businesses is concerned. Both unto themselves are great businesses and I am happy remaining invested in both.
Of course @giridesh3 is watching this stock with a hawk’s eye and we will know even if they bat an eyelid…

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