bankers cant decide they can suggest only
As someone who has been following PC Jewellers only since Vakrangee fiasco, apart from smoke and mirrors and myriad concerns, not one solid issue on the company has been substantiated or proven without doubt. On paper atleast, the fundamentals look same as before the rumor mongering began.
Though sentimentally poor, I am not sure if this news is that negative. With the assumption that 1500cr of cash is actually there in the bank, if they repay all the debt and buyback 425cr of shares, the liquidity would have been severely which I think CareRatings highlighted.
Secondly, as a shareholder, I am happy that they did not use nearly half their cash to buyback shares at 350 when market price is at 125. Unfortunately we have such stringent norms for repurchase that companies cannot take fast reactions to a new level of stock price.
Disc. - Invested (protected by far OTM puts for black swan events), Not selling unless there is tangible news of wrongdoing. Anyone who has invested since 2010-2012 in midcaps will know such madness goes on regularly.
I remember IRB going down to Rs. 40 in 2013 when news of murder of the social activist came out. PCJ itself was at Rs. 48 at 4 PE.
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And now they have opened a new store in Deoria (U.P.)
bd9cc844-0358-4545-bd13-09d2694d3b17.pdf (287.8 KB)
The same store was earlier Gitanjali Jewels.
We had the same doubt for the previous store which they opened in Hyderabad as well.
Are the Gitanjali stores are being handed over to PCJ (PCJ bought them?) or whatâs with this connection ?
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Think these are all franchisee stores which are changing branding from Gitanjali to PCJ. Not sure if it any red flag.
Itâs a good move, PCJ is capturing all domestic market of Gitanjali, all corporate governance issues will be forgotten in 2-3 months, our stock market is very generous. If we get a 2nd rank company with little poor corporate governance & trade at 8 PE. Always better to buy than buying Titan at 81 PE.
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Hi,
Now it has become fashionable to talk about management quality. However deciding management quality turns out to be even worser wild goose chase than price eqilibrium chase as here participant bias is itself catalytic and self-reinforcing.
I think Cshar is correct in pointing out valuation concern and negative bias created by quality of management issue.
We donât use to feel pain when we use to give moneylife or gurus of multibaggers 1 Lakh as tution fee but we feel devasted and idiot like if we use to loose 50k in some stock. If you are not selling and holding to your position maybe chances are there that you will recover your money even in PC Jewellers or Manpasand or even Vakrangee, however tution fee is a permanent loss of capital. Most of the people in Vakrangee has lost money because of Valuation and not anything else.
Buying at wrong prices (except in few cases) will mostly turns out to be a bigger crime than cigar butt investing. If anybody is sure about earning potential of the company for 3-4 years go and buy all these nonsense about management quality will evaporate with one good dividend announcement. Only rational that can be given is alternate good (WHAT IS GOOD TODAY WILL REMAIN GOOD IN FUTURE???) stories. But this rational use to apply for people who are not invested not for people who are heavily invested. So, please donât create panic without any proof. Better than this walk to PC jewellers store in your locality and talk to their staff and management.
Upgoing stock and its management is like GIRLFRIEND, âSPOTLESS, MOST BEAUTIFUL, ENTERTAINING AND THE BESTâ whereas downgoing stocks are like WIFE, "FILLED WITH MISTAKE, LEAST BEAUTIFUL, BORING AND TORTOUROUS"
Disclaimer: Not Invested
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One simple observation: Company has 700 Cr of debt and 930 Cr of Cash and Bank Balance. Why the hell company do not clear the debt. One reason can be that the Cash is not real. Also no details in AR about banks name where the money is deposited.People who hold this share can be biased and do not want to hear anything negative but unfortunately truth cant be denied. 1275 Cr of receivables is also a big concern.
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Just a Comparative Analysis between two companies offered buyback recently after fall !
- DCM Shriram : Stock fell more than 60% from its peak and reached near Rs 270 , Company announced Buyback to the tune of 250 Cr from Market Purchase and is now constantly buying shares from market to keep price stable . Company will buy more than 50 Lakh shares over 1 year and that will surely help keeping the trust of investors. Current Price : 330 ! Summary: Investor Friendly , Cash is real
- PCJ : Stock fell more than 70% from peak . Company announced buyback to stop the fall but the stock kept falling even after the announcement. Reason can be that people may be aware of cancelling of buyback in advance. Investor Unfriendly , Doubt on real cash after Cashback withdrawn. CMP: Rs 130
Disc: No holdings in both the above Companies , Just for academic Purpose.
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Share price appreciation is the effect of the well managed business, not the cause.
Option is simple - Stay invested if you believe cash is real, dump otherwise.
Disc. Tracking, will invest in mouth watering valuation only.
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Trying to put myself in the management shoes to get my head around this new development. While cancellation of buyback and giving a reason like bank not giving NOC is very bad but if I was at Mr Gargs place what would have I been thinking (a BIG IF that all that has been said by co so far is factually correct)
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I got hit because someone- read Vakrangee- mentioned my name in their presentation and then bought 20lakh shares of mine. Could I have avoided that - NO.
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A non active promoter gave 2% shares to relative - for whatever reason it may be. First investors donât know for sure weather those shares are actually sold, itâs just speculation. Second even if I had to sell and I knew sentiments are bad, I would have either done sale right after Vakrangee purchase (when stock went up) or would have waited for things to stabilize.
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auditor has not resigned in case of PCJ. In this season of so many resignations this is a saving grace.
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I promised to buy back at 340, prices are 120. Does it make any business sense to buy something at nearly 3x the price? If we thought of buying a car at 3X price but the prices drop to X, will we still pay 3X? Banker might have just told him that - look I appreciate you trying to do this but it doesnât make sense. Share price may have short term reaction but in longer term this is a much better decision and if you keep doing of job well, prices will recover eventually.
In summary, some of events might have been bad luck (Vakrangee purchase), some might be stupid action (gifting) and but not to buyback is prudent.
Key things to watch out will be how much debt they have reduced in this qtr.
Nitin
Disc: holding and biased.
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There is only one thing that needs to be checked. Is the cash true or not and that will be decided by amount of debt they repay tis quarter and next. If they come up with some excuse on debt repayment, then âcooked booksâ can be assumed.
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Not invested and have been following the PCJ thread only for educational purpose. I do not know if PCJ is a buy/sell under the current circumstances. Just would like to express my opinion here on the procedure followed for buyback announcement and withdrawal.
Having worked in a bank earlier, I feel the company should have approached banks first, before approaching their Board and announcing buy back (I am not sure, if its mandatory to have banks approval before approaching board but in my opinion is definitely a good practice to check through loan document covenants, as Board members are not expected to read through loan documents etc ). Even, if banks would have approved a buyback, they would still qualify their approval, subject to companyâs Board approval.
May be they would have noticed this covenant in their loan agreement at a later date (once the buy back was announced). Or, in the standard loan documentation, a clause would have been inserted by the banks pertaining to the change in capital structure of the company. While signing the loan document, company would not have paid heed to this standard clause, which proved to be a thorn in the flesh now. Using the covenant, may be one of the bankers now would have asked the company to utilize the cash proceeds to reduce bank debt, rather than buyback of shares. In such cases, company may not reduce their debt (may be due to their working capital position or any other valid reason), they also can not move ahead with buyback.
Worst thing to happen in such cases is , a bank would like to exit the company fully after noticing some irregularities and would be using such covenant during these times to control the cash usage (please bear in mind, I am only providing a hypothetical situation here and not in any way pointing that some thing is wrong with PCJ).
Disc: not invested. This is not a buy/sell reco. Pls do your own due diligence.
They had an option for buyback offer from open market also. It would have also given support to stock prices and more no, of shares would have reduced. And why did they not confirmed this with Bankers earlier.
They could have given dividend also, Dividend and buyback means same to investors unless thier is some different tax treatment. What I am feeling is that they gave this buyback news just to fool the investors, Management do not seems to be trustworthy anymore.
Disc : Sold all holdings today in loss.
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Too much chaos on this thread. All are requested to restrain rather than heating up the discussion.
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Please keep the discussion civil, no personal attacks and no conjectures please. Support your discussion with logic and data. That will help you in your separating the âwheat from the chaffâ. Never get emotionally attached to a stock.
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What a sham! They never had the intention to buyback which is evident from them releasing a press release a couple of days before withdrawal but which was actually drafted 21 May. They are also competing with vakrangee to give an equally absurd reason to cancel buyback when the market has no trust in management figures and the only way to get some trust is to complete the buyback. I am sure now the banks will suffer more as the market cap of Rs1250crs has been wiped out just today and D/E looks increasingly bad. If the buy back happened, the banks would have more to gain as the price would have balanced at a level and they could also request for management pledge as a security for loan. In my opinion it would be in any bankâs interest for the buyback to have proceeded. I have zero trust in management that they have this cash that they claim to have. At a minimum they should share the bankâs correspondence rejecting the buyback.
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