Sanwaria Consumer - Re-branding their way to survival & growth

Thanks for sharing this. A lot of the red flags I came across are listed in this post and the writer has done a fantastic job being thorough and lucid. I found it bizarre that the market was cheering launching of numerous FMCG products as if it was easy to crack those established segments just because you have a product. The issue with the inventory, weird employee costs, working capital management, high receivables (strangely not mentioned in the blog post), poor margins were enough for me to avoid this scrip, along with the dubiousness of the promoters. It is however quite easy to make money in these possible pump-and-dump setups if you know what you are doing.

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I now realise that it is a “pure” pump and dump game. If one one can play
it smartly - one can make good money - else one can loose one’s capital. No
harm in playing it - if one is clear about the game !

Disc : Invested.

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^^^ This article does not address any of the problems of the promoter’s past.

@mntolia - I would take it with a pinch of salt. The person who runs that company (Paul Asset) has a thread on KP Energy in which he hadn’t posted the risks but quite a few were later brought out by other VP-ers.

Govt has put in budget 2018 that govt will give 150% of cost of production to farmers.
What impact it can have on Sanwaria consumer and in general to all other processing companies?
Won’t it make food produce pricier?
Govt also bring few change related to MSP.

I want to see farmers who always sit on loss even after good produce happy. But here I want to analyse Stock and its possible impact on price.

i dont think its 150%…its 50% more than cost of production.

Any increase in cost would be passed on to the end consumers I believe. Sanwaria does keep a healthy inventory and should be able manage short term volatility in prices. But in long term, I don’t see any adverse impact on margins.

Having said that, I have serious doubts upon the implementation of MSP based upon the track record of similar government schemes in the past. In such schemes, true beneficiary is not the farmer, but the middlemen. Although, as you said, I would also like to see the benefits reaching the targeted group, such policies have mostly turn out to be an election gimmick to lure votes in elections. So lets just wait and see.

My other bigger concern, which I have highlighted in previous posts too, has been its lower operating margins. The margins are so low that it makes me think that probably the company owns its farm produce (outsourcing land for contract farming) largely, and is somehow able to manipulate prices of raw material, passing on very little benefit to shareholders. I would be very interested in some feedback from investor/s from MP having proximity to company plants and offices. Any details about their operations at the local level can throw light on these concerns and can help us get a better understanding.

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Promoters sold total Shares of 30247044 in the open market to reduce short term debt as per the update submitted to BSE and resulting in reduction of promoter shareholding to 67.56% from 71.68%.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/5895df4e-4f88-40b5-8242-d5712c19992f.pdf

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This day was coming wasn’t it?

Same bull market magic - Equity sold at elevated valuation to pay back debt (supposedly) has been seen in the following

  1. Ujaas Energy
  2. OSCL/Lasa
  3. Sanwaria

in just the last 1 year.

Hilarious part is this - “Furthermore on the request of the company (SCL), both these firms have transferred the sale proceeds for using in reduction of short term debt of the Company”. Such generosity indeed.

Now we know why the results come before the shareholding pattern too.

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Given the way the promoters of Sanwaria are behaving, does it make sense to stay invested over a long term horizon - 5 yrs???

Looks like many mid and small cap sold the shares to pay the debt :point_up_2:

Why promoters sold the shares in open market and they are issuing preferential at price 35, why can’t they use the same amount to pay back the debt ?

http://www.bseindia.com/xml-data/corpfiling/AttachLive/bf44cfb6-43c8-40a3-82a5-d34267eb318e.pdf

NSE Scrip Code: SANWARIA 
Pursuant to Regulation 29 of Securities and Exchange Board of India (Listing Obligations and Disclosure 
Requirements) Regulations, 2015; we wish to inform you that a meeting of the Board of Directors of the 
Company will be held on February 20, 2018 at the registered office of the Company at E-1/1 Arera Colony, Bhopal 
M.P. — 462016. Inter alia to consider the following: 

1. To approve the Preferential issue of Equity shares to promoters to the tune of Rs. 100 Crores at Rs. 35/- per 
share 
2. To approved increase in the authorised share capital to facilitate point 1 above. 
3. To consider SCL Employee Stock Option Plan (ESOP) 
4. Any other matter if required, with the permission of chair.
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Finally it is here - the shareholding

http://www.bseindia.com/corporates/ann.aspx?scrip=519260

Sir - the issue is very clear. It is a pump and dump game…

Exited fully at 212% gains. Would’ve happy to hold, had if the management didn’t play this “debt repay” game by selling at elevated level !! Being a turnaround candidate, I’m not really comfortable with this activity. So many good scrips has been correct by 25-50% recently, happy to reallocate from here.

Funny dispatches to exchanges continue.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/71ff0e05-5cd5-4174-a3c8-cdfe47f4d788.pdf

36%20PM

Interesting thing though is that the govt. hasn’t done anything to change the import duty of Soybean oil as it was already at 30%.

The change was done to groundnut oil, olive oil, cotton seed oil, safflower seed oil, saffola oil, coconut oil, palm kernel/babassu oil, linseed oil, maize corn oil, castor oil, sesame oil where the import duty was raised from 12.5% to 30%.

But yeah, they like telling shareholders the topline and bottomline are going to rise (even if logically it won’t) while selling shares at elevated valuations.

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This posts content has reduced my confidence. Many things looks meaningful. Few things looks like the blogger is just harsh on the company. What others think about it? I am not able to add at this lower price today. So, I am looking for input on this from few more diggers.

Disc: Invested.

The regular notifications from the management to cheer up the market is not adding confidence to their motives. The upcoming results would be audited ones and should give a clearer picture of any (if) manipulation in fundamentals. There are quite a few red flags emerging and investors will have to stay cautious.

Disc update: Sold 1/3rd holdings at 3x. Now holding free shares.

Today also Sanwaria Consumer came up with a story. This is about supplying Soya Chunks to Patanjali. Also given hope that Sanwaria may supply rice to Patanjali. Also said that Sanwaria Products will be available online too with Patanjali.
Screenshot from the attachment submitted to BSE.

Disc: Invested

Are you talking about different kind of auditing this time. Previous March quarter result was also good. In fact, Very good result is coming from Dec 2017 quarter. March 2017 quarter result is audited and passed then we can expect everything is fine then!

Disc: Invested.