In the PCJ Board meeting of May 10, they have announced the quantum and the price of the buy back. However, is there a time line within which the company has to complete the buy back process? Also, can the buy back offer be “withdrawn”? Would be great if someone can share SEBI guidelines ( I am assuming there would be some) for his area. Thx
Source of MF data: https://www.rupeevest.com/Mutual-Fund-Holdings/223032
PCJ employee cost is quite low = 1% of revenue. TITAN employee expense is close to 5% , that of Thangamayil Jewellery is nearly 2 % and for TBZ the figure is over 4%. Does this data say something. Its important in the context that PCJ has many company owned stores.
PC Jeweller posted flattish nos:
Profit up 7.3% : Rs 118.3 cr Vs Rs 110 cr (YoY)
Revenue (net sales) down 2.5% : Rs 2,103.2 cr Vs Rs 2,158.1 cr (YoY)
Segment wise breakdwon:
-Exports down ~45%: Rs. 302.76 cr vs Rs.551.93 cr (YoY)
-Domestic up ~12.5%: Rs.1,800.46 cr vs Rs.1,606.19 cr (YoY)
Guys, heard the con call for q4 2018. Management seems to have answered most of the questions we discussed in this forum for the last few months. I agree, one can say that it is still status quo, because one has to still trust the management’s word and it has not come out from a formal enquiry, but i feel they have given at least some confidence to the street.
They clarified the below points:
Interest payments: they gave a detailed breakdown of their debt tranches and corresponding interest rates. They have a significant off balance sheet debt “gold lease” ~3,000cr, which lead to 300cr. if annual interest
Why the promotors are not buying from the market, if they feel the co. is undervalued: admist voilent swings in share price, promotor’s direct buying might be preceived in a wrong light (~price manipulation). Despite showing interest in market purchase, the board decided for the buyback, which automatically inc. promotor’s stake
Also, they expressed confidence that the co. will complete the buyback soon
Why do they have 1,000+ cr. cash with 1,000+ cr debt. shouldn’t they repay the debt to save interest cost: they have excess cash now as they expect to grow using franchise model which does not require lot of wc debt, so they have decided to repay all the 1,000 cr of long term debt on the books in the next 3 months
They plan to open 30 stores in 2019, 90% of which will be on a franchise model
Drop in exports: due to crisis in middle east, and mainly due to vat/ import duty (or some other tax i cannot recall) in their main export markets
2% stake gifted to daughter in law
Why is the company not doing anything about the traders beating the stock heavily: the company has clarified to the investors and done their part, now it is the job of the exchange to take actions against the miscreants.
I might have missed out on some of the other important points, as i heard it on the go. Would appreciate if some of the seasoned VPs listen to the call and give their take on it
I expect a gap up opening on Monday and see at least some optimism around the company after the disclosures made in the concall and the investor presentation.
Can you please explain what is “off balance sheet debt “gold lease” ~3,000cr” ?
Hi, thanks for pointing out.
Actually, it is not off balance sheet. It is shown as trade payables worth 3,622 cr. as of q4 2018.
It is basically gold loan. Not 100% sure about this, but positive. Experienced guys can help clarify this.
So basically, we thought that the implied interest rate was too high ~30% as we did not consider a/c payables item in the denominator as usually it is non interest bearing liability. But in this case it is interest bearing as pointed out by the management and hence should be included. Actual implied interest rate is about10%, which seem normal.
Could you please share the link to conf call audio ?
Pls listen to this at Research Bytes…
Looking at the market reaction, it seems the market is pissed that the company did not disclose a definite timeline or roadmap for the buyback. If there is an expert on buybacks in this forum who knows the regulations around it, please feel free to enlighten us on the process. How much time does it normally take to be executed? what are the necessary approvals etc.
Quarterly results have been quite good despite a 20% decline in industry due to high gold prices. Dqomestic growth is strong at about 12%only reason they are slightly subdued is the decline in exports of about 45% due to factors beyond the company’s control (5% excise duty and 5% vat). 5% vat has been removed recently. Also, the company is trying to overcome the decline with aggressive growth plans in the domestic market by opening 30 new stores this yr. Outlook looks quite promising.
I guess these guys have just lost trust. If you look at the numbers (and these are audited and the auditor has not yet resigned!) they are not bad. At these valuation multiples and the quality of balance sheet, and the overall macro trend around value migration to organized retail etc, in an ordinary course PCJ, would have been a straight buy if not a screaming buy. But people have this fear- that what they are seeing in numbers and hearing from management may not be accurate or complete. The way things are this is going to be a very slow grind one way or the other- at least till the buy back actually happens; that is if it happens!
Do we have any facts regarding any wrongdoing by PCJ ? There is nothing by SEBI or on BSE/NSE sute.
No nothing. All of this is perception but then perception is stronger than reality. It all started off with the Vakarangee episode and they got tainted with association. Then the gift business and they never unequivocally said what happened with those shares. They said it is a private matter and hence they will not comment- of course elder brother gifting to his daughter in law is private but then they of course know what happened to those shares. Then the Fidelity sell. So people are linking events and thinking how can so many things happen together- and there is overhang of Nirav and Choksi et al.
They have addressed things to an extent in the mgmt presentation (especially about the debt and the cash part) but the tone could have been more direct and forthright. For instance instead of saying buy back would be completed shortly- that it would be completed by let say July 15th. That instead of saying we would repay the loans shortly; that we would pay off XX by date YY- stuff like that. I think both Mr. Sanjeev and Balaram can benefit from some adult advice as regards investor communication
Agreed, though they gave a faint deadline on the debt repayment. They said it should be paid off in the next 3 months, if i recall correctly.
Market can be really moody/ irrational at times. Why would a company doing fraud would pay cash taxes of ~200 cr. on PBT of 736cr, and also plans to repay all of their o/s LT debt. They could have cooked books to evade tax and continued paying interest on the debt, if they didn’t have real cash in the company.
Over the years, I have learnt that We must give respect to market, unless very very sure about one’s research, company’s business & management.
Regarding why should a company pay cash tax and all that, same was the case in Vakrangee, Satyam etc…
Disc: Not invested.
One thing that needs to be considered - if the company did not really want to go through with the buyback why would it appoint IDBI (a central govt. institution) as the merchant banker for the transaction? It could have very well appointed some pvt. company. And the fact that IDBI (again, the govt. institution) is working on it, I’m not surprised it’s taking time!
PCJ presentation and newly opened show room snapshots.
Good presentation and con call clarification.
Vakrangee promotors also initially defended a lot with frequent clarifications and presentation on capital allocation plan, buy back dividend policy etc but till now no reversal. 39ee0352-6d1f-4942-a99f-caa59d5e28ab.pdf (602.6 KB)
Hope, this should not get repeated with PCJ.