I was the one who asked the question on their total pledging in conf call. It was 70% as revealed by them.
Now the update is the promoters have recently sold 2.5% of their stake. I am told they may sell up to 10% of their stake in near future. This to release their pledged shares. This will hammer down the stock. But critical question now is why they are in a hurry to release the pledged shares by selling their stake. Is it to keep their word to investors that this pledging was only for short term…or they are forced by circumstances (or banks) to sell such a big stake.
If any one knows then I will be interested to know…
Yes Theyh have liquidity issues. But I am not yet convinced it will be life threatening. They have capacity to pay interest and current portion of LT debt. They may forego some of the growth this year to avoid further deterioration of ST debt and WC issues. Let us see. Things will be clear in next 2 quarters. The management has said this year they want to repair their balance sheet. They have promised to strengthen their BS by March 2017.
Few facts…
This year 25-30% revenues will come from exports which does not have such cash conversion cycle issues.
Lasa will be 35%+ of revenue. This biz does not have such CCC issues.
They have tightened payment terms and brought down CCC to 110 or so days. The chemical biz may not be able to reduce this further due to nature of the beast. That biz will be beset with WC issues.
No capex for next 2-3 years. That means all the cash generated will be used for debt reduction.
The management has explained in the conf call few times that they do not get into long term orders due to dependence and risk of raw material cost. That is standard practice in chemical sector by many. Having said this they do have few LT contracts though. But majority are one quarter ahead contracts. I do not see any issues with orders and biz. In fact investors will be happy if they forgo some of their blistering growth and focus on strengthening balance sheet.
I think they need good CFO with a strong voice. The promoters are technocrats and not finance wiz. That is showing in BS.
This stock has some uncertainty due to liquidity issues. It is also a micro cap stock. That is the reason it is cheap. Do your own analysis and then decide.
@giridesh3 Where did you get the information related to 10% stake selling by promoters?Indeed management said that in next 2 months pledged shares will be released.
Thanks a lot Mr. Girish Despande, the reply for debt repayment as well as details of aging debtors was not properly answered by the management. You have rightly pointed out that since both Chairman as well as MD are technical persons and the queries relating to financial issues can not be handled by such persons. In such a situation either the management should give powers to CFO for proper reply or they should appoint financial expert at such times.
Do we see company to repeat the stellar performance what is showed last quarter? Can we expect the company to constantly post 20crores profit every quarter as they have got the environment clearance too
Promoters sold stake more than plot price could be in that area. Further promoter also made an open offer to Amarnath securities, which is a brokerage firm which cost them 1 cr. If they are facing liquidity crunch why do they need to make an open offer to other company shareholders? Promoters pledge has increased to 45% which means officially promoters only hold 17%.
This news of additional pledging hasn’t shown in cmp yet due to buoyant market sentiments. But once the euphoria dies down, it might see some correction, leading to invocation of pledge.
Going by the trend of BSE announcements till now, Daughter (Anjali) and Son (Omkar) were selling. Father (Pravin) once purchased part of that. Yesterday (7th) Father also sold.
Father had pledged shares in May/June, and is releasing pledge in July. Maybe selling the shares is for the purpose of releasing the pledge. But selling at current low prices is like cutting the nose to spite the face.
On the other hand, Son is investing in a broking company. Wouldnt they rather use the money to release the pledge faster, if that were the intention?
Maybe there are margin calls on the pledged shares, which is forcing the promoters to sell shares to repay the loans. Pledge is being released from entities different from whom shares had been recently pledged, giving credence to this possibility.
Discl - invested (currently in loss). Doing nothing but watching the saga.
I think this provides good opportunity to accumulate this stock as there is still no problem at business side.and ultimately if business does well., All other things falls at right place.
Disclosure : bought @168 and planning to add more if it falls more.
This is one of the few growth companies out there which are trading near 52 week lows. Only due to promoting selling, seemingly for a good cause (releasing pledge). So I have bought today.
I would assume that if there are margin calls now at this price then there should have been margin calls in Feb too when it touched a low of around 143. Given the probable liquidity constraints promoters would have been required to liquidate some of their holdings back in Feb too if there would have been margin calls. So not sure if current selling is due to margin calls on previously created pledges. I would be very very worried if such margin calls are reason for selling.
Current promoter selling and investment in broking company gives an uneasy feeling.
Able to hold on till now 'coz doesn’t look expensive on the basis of current business performance and due to upcoming demerger.
Company has responded to queries in the past. Let me see if they respond to basic queries on the above.
Dear Shareholder,
We wish to inform you that, the shares have been sold by the Promoter Group for repayments of loan against shares outstanding. Thus, the amount received is being utilized for reducing the debt burden on the Company. This fact is also highlighted in the respective disclosures about sale of shares posted by us on the Exchanges from time to time.
We wish to reiterate that the promoters are committed to the future growth of the Company and reduction in debt will pave way for improving operational margins in the Company.
We further wish to confirm that Omkar Speciality Chemicals Limited is in no way connected with any transaction relating to Amarnath Securities.
Hope this clarifies the matter.
I am not 100% sure on my hypothesis but considering daily trading volume occurs in Omkar of average 10 lacs shares, it seems one or other way market makers are very active in this counter. It could be the case where promoter wants to utilize such opportunities considering capital intensive business and pledging and release of pledging of shares. Hence, taking controlling stake in Amarnath Securities would pave a way for them to maintain stock price at a desired level while executing the trades. I would really like to know from other boarders on the same.
Difficult to say. Or maybe the previous pledges were created at a higher rate of interest and newer pledges have been created at a lower rate of interest and therefore release of previous pledges. But then again the same question that why sell at current low prices? Anyways, lets see how things unfold.
