The upfront payment is 25% and not 10%, the Promoters have earlier forgone their right to buy warrant at 138 , promoters are not buying the shares directly from the market at lower price because that will not infuse any capital into the company .
As per my findings the steel demand in India is very robust and the prices are also very strong, (however the uptrend in price have stabilised) . The margins at the current price are very good. There is shortage of Wire rods(one of the finished goods) and demand for other long products is also very good.
The successful resolutions of Bhushan Steel and the revised buddings for Essar Steel by global players is an indication that the steel cycle will remain robust for next 2 to 3 years,otherwise why would large steel companies evince their interest in stressed steel assets.
In my opinion Just like in a long flight, we will be having a perfect journey and there will be turbulence for short periods like the current one and we will be coming out of it.
However, we only need to ensure that the plane in which we are boarded is a sound one.
Past corporate governance issues are still there with the company and is sitting fresh in the minds of all investors .The promoters will have to do a lot in this direction to come clean. Its good that they are coming in buisness channels to clarify on various issues but still if they can held investors concall after the results which will help the investors to clarify their doubts.
The comfort at this turbulent time is infusion of Rs 208 Cr by the promoters and as per my understanding the promoters are insiders who are aware of all the merits and demerits of the company and in all probability they are anticipating a turn around other wise, I do not see any reason as to why would the promoters infuse capital in the company.
Extra shot : One thing I have noticed that while going through the balance sheet of last 10 to 12 yearsI have observed that the promoter/company has never availed significant credit facilities from Banks. The reason for mentioning this fact is that one of the trait of fraudulent promoters in India is to avail significant credit facilities from Banks especially from Public Sector Banks by inflating Project Cost and then siphon off money to subsidiaries and associates. From of 2008 to 2012 was the period of rampant funding of Expansion projects in Steel and Power sector by Banks (especially Public Sector), the result of which is the present NPA problem with Banks.
Prakash Industries had also expanded its capacities in power and Steel during the same period and in one of the past interviews (Dec 2009 https://www.youtube.com/watch?v=LoQVX7OoVA8) the management had intended to increase its power generation capacity to 625 MWW and that to from internal cash accruals and without availing any debt. Ironically in Dec 2009 the share was trading at the same level at which it is trading now.
I will give clean chit to the promoters at least on the matter of not availing un necessary debt from Public sector Banks .
Disclosure : Invested and would like to have contrary views from other members so that we can have better analysis on the company