PC Jewellers


(Cshar) #742

This can be utilized as buying opportunity, general rule of investing, buy when blood is on the street. Apart from 2 % gifting or selling by promotors, nothing abnromal is found, PCJ opened 8 new store and shutdown 2. Current owned stores are more than 80 plus 15 frenchisee store. Margins are better than titan. Debt reduced by 800 cr. Export stopped to focus on receivables. Opening 95 stores is not a cake walk hence compitiin will be limited to 2-3 organized players. Titan quote at exorbitant valuations due to presence of marquiee investors. Titan vis PCJ PE is 65 vis 6. Fair value of business is quiet huge, risk can be taken on corporate governace issues,


(RICHAJ) #743

Perhaps now this really was a gift. Padam Chand Gupta passed away and could have been trying to some estate planning last year.


(VALUE2017) #744

Huge Cash Balance on Asset side along with high Debt on liability side are red flag. It is a known fact that return on deposit is always less then interest on borrowed money, so its a no brainer to liquidate your cash and pay your debt. Even if the company looses 5 to 10 cr on interest on deposits on premature breaking of deposit it is worth reducing debt by Rs 1000 Cr . Investors today will find comfort with reduced debt of Rs 1000 Cr rather then deposit of Rs 1000 Cr in balance sheet.

As per company business model No debtor in Inland sales and all debtors are pertaining to export sales.

Debtor O/s as on 31/03/2018- 1761 Cr
Export Sales : 01/04/2018-30/09/2018- Rs 991 Cr

The company advised that it allows a credit period of 90 to 180 days to its debtors, if we assume all debtors outstanding as on 31/03/2018 are of 180 days then they should have been realized by 30/09/2018 .
So debtors outstanding as on 30/09/2018 should be maximum 991 Cr i.e sales made during this 6 months i.e from 01/04/2018 to 30/09/2018.
where as the debtor outstanding as on 30/09/2018 is 1976 Cr.

Let us analyse further… Assuming 180 days credit period ,Export debtors outstanding as on 31/03/2018 should have been realized by 30/09/2018 but they have not been realised. Let us give them 90 days more so on a conservative basis all export receivables of Rs 1760 Cr will be realised by 31/12/2018.
Further with credit period of 180 days all export sales made during the period 01/04/2018 to 30/06/2018 i.e Rs 807.68 Cr should be realised on or before 31/12/2018.
So on a very simple calculation the Recievables outstanding as on 31/12/2018 should not be more then Export Sales made during the period 01/07/2018 to 30/09/2018 i.e Rs 84.72 Cr + Export sales made during the period 01/10/2018 to 31/12/2018 say Rs xxx Cr.

Export recievables as on 31/12/2018 = Rs 84.72 Cr + Rs XXX Cr

Now the company has very well understood and are also aware that the entire investor community and analyst are skeptical about their export business which is is capital intensive and low ROE buisness. Every investor wants the company to dis continue its export buisness (for which the management has also in principally agreed ). So if if the management is fair and the books are not cooked or their is nothing to hide then the Export buisness in Q3 should not ideally be more then export buisness in Q2 i.e Rs 84.72 Cr.
In that case the recievables levels as on 31/12/2018 will be around Rs 200 Cr i.e cash realisation from recievables will be Rs 1750 Cr .

So with cash realisation of Rs 1750 Cr from recievables and 1000 Cr from fixed deposit the company can easily reduce debt by Rs 2750 Cr and I can assure the management that if they can do this (which is very much possible if nothing is cooked) then the market will reward them with an increase of Rs 2750 Cr in market capitalisation (from current level).

Disclosure : Not invested but following for learning and sharing.


(VALUE2017) #745

One thing which is very perplexing is, what is the COMPULSION of the company to continue (or grow ) its export business when the buisness is a low ROE, Low margin, capital intensive, SUSPICIOUS,risky, generating negative sentiment etc etc…

In domestic market PCJ is smart enough not to give any credit period but for export buisness it is not able to recover its recievables even after 180 days and still wants to continue that business.
The company should itself offer for a forensic audit for its export buisness recievables and share the report with exchange. If the company is not doing on its own then in next con call the investors should take up the matter with management for voluntary forensic audit of its Export receivables. The audit will hardly cost RS 10 to 20 Lacs but will repose faith on management in billions.


(Cshar) #746

Idria investment is promoted by brahmi vasudevan, i found that Idria is invested in PCJ during all this turmoil. Investment of 360 cr will be done on detailed study of promotor and business, they might have done forensic audit already, this quarter results are important for PCJ, lets hope they come clean, dirt cheap valuations, holding in PF.


(VALUE2017) #747

By that logic Banks have extended loan to the tune of Rs 3500Cr and they are still continuing.
I am interested in understanding the logic of the company behind continuing with the Export business.

We in this forum are not for passing any judgement about the company but to analyse the things in 360 degree and in the process enrich our knowledge.

Regards/


(ARUN AGRAWAL) #748

My understanding is thatt if they do Export, they are allowed to import gold without duty. Hence good margin is there in Exporting of Jwellaries.


(atul1082) #749

This was done around 4 years ago as per BS article.subsequently PCJ has passed through an upwards and then vertically downwards journey and a whole lot of bad news.when prices go vertically upwards, a no of investors get hitched in not so good companies too.You can see some of RJ’s investment in the past.The question is whether Idria is still invested , price they invested at that time.If yes, is it out of compulsion as they are looking for proper exit price.


(Amit Jain) #750

Due to controversy, price plummeted from 600 to 60… QED.


(VALUE2017) #751

If the exports receivables figure do not reduce substantially as per above calculation then in my opinion the reasons can be :

a. The receivables are not realisable and the company will have to provision for it.

b. Another possibility can be that the company might have made export sales to related parties and through them they would have made some overseas investment.

For example : Assuming that the ideal realisation period for exports is 90 days but the company gives 180 day credit period :

For Export Sales : 3600 Cr

Case 1 : Credit period 180 days
Recievables = Rs 1800 Cr

Case 2 : Credit Period 90 days
Recievables = Rs 900 Cr

So if the industry credit period is of 90 days and if you show it as 180 days for your buisness and the exports are done to related/known parties, you will have additional Rs 900 Cr to make overseas investment.
This might be one of the reason why management has to continue showing export business to hide its overseas investment.(My assumption) .

The management should un ambiguously confirm that all recievables outstanding as on 31/12/2018 pertain to sales made after 30/06/2018 only.

Disclosure : Not invested but tracking for knowledge.


([email protected]) #752

Decent Set of Results in Q3 - 2019.

Domestic Business growing with Export Business degrowing.

Marginal Fall in Domestic Margin is a concern. https://corporate.pcjeweller.com/wp-content/uploads/2015/06/investors/financial-results/FY-2019/Financial-Results-Q3.pdfhttps://corporate.pcjeweller.com/wp-content/uploads/2015/06/investors/downloads/FY-2019/Q3-Results-Management-Presentation.pdf


(RICHAJ) #753

If anybody is going to attend the concall could you please try to record it and upload it here? Last concall was highly entertaining and the transcript doesn’t quite do it justice.


#755

Could you please share the gist of last conference call ?


(RICHAJ) #756

Management was essentially being grilled by folks at Lucky Investment Managers and Enam.

They promised to limit the export business to Rs.2000Cr, and to reduce receivables to Rs.1000Cr. It seemed like credit periods for export clients were very liberal as the management was hesitant to go into details about this or the receivables schedule, saying that tighter credit periods would require a whole new export clientele. Also may have promised something to do with lower inventory levels.

Higher interest costs were from tighter working capital loans and higher fund-based loans. Higher receivables, despite lower export revenue, was from INR depreciation.

The last caller from Enam suggested demerging the export business but the management didn’t seem too keen about it. (Assuming they are honest) it seems like they got carried away with the high ROI it provided, albeit at the cost of lower margins.

I was hoping to see a Q3 balance sheet since management promised to improve quarterly disclosures also.


(VALUE2017) #757

Out of total 20 pages of presentation , 14 pages are irrelevant. Further the outstanding debt and more important receivable data has not been provided by the company in the presentation.


(VALUE2017) #758

Can any body provide link for investor Concall for Q3


#759

Please look out for @crazymama 's awesome repository of conc. call transcripts.


(sanooj) #760

Current price is less than Net current asset value per share, Isn’t this an attractive buy?


(sameer80) #761

Problem is no mutual fund is holding it now and perhaps no one believe either promoters or balance sheet. Further in last six months many quality scrips are available 30-40% down including blue chips then why to bet on pcj with risk of wipe-off of full capital.


(skg) #762

Hi, I was checking financials of PC Jewellers. It has book value of 105 and current PE is 7. D/E is 0.28 and promoter holding is also 57% with no pledging. ROE and ROCE is >15%. I know stock has been beaten down in past. Does anyone see any risk with the business?