Virinchi... A bet not to be missed


(Mahesh C) #153

If someone takes this long a time for publishng results, unless it is a special situation, I can safely assume something is cooking, its a thing I have learnt over years, because this is a era of computing and connectivity, you dont need so long for a simple small business to publish results.


(J2EE Professional) #154

but with this logic whoever is declaring results is a fraud. I think one needs to “not” over-analyze everything.


(Vivek Mashrani, CFA) #155

Mahesh,

Very well known companies like Wim Plast (cello plastics) and many blue-chip companies have availed extension for reporting results under new accounting standards. You cannot just judge a company and put a stamp based on that. If you have any accounting related red-flags then please share.

P.S : Kitex once reported annual result in 2 days and people doubted their results calling them fraud :slight_smile:


(Vivek Mashrani, CFA) #156

The price gets decided as per SEBI ICDR guidelines. It will be higher of the following:

  1. Average of weekly high and low of VWAP during last 26 weeks
  2. Average of weekly high and low of VWAP during 2 weeks preceding relevant date

Relevant date being 23-November-2017. I would suggest shareholders to read detailed warrants issue approval document sent by the company. It will clear all the doubts.

Over and above the pricing, promoters will have lock-in of existing shares for 3 years and after issue of new shares from warrants will have further 3 years lock-in. Strategic investors will have lock-in of 1 year.

I believe this shows confidence of promoters in the company and aligns interest of promoters with the company (skin in the game).

Discl: Invested


(rahulshares) #157

Agree completely on the formula given by you. What is not understandable is if relevant date is 23rd Nov why wasn’t price provided? Is Nov 23rd the relevant day? If not then it leaves price open to manipulation considering its such a micro cap.

Also there has been no word on the results and its already 24th Nov which gives more scope for operator play.

This is not a company known to be having high standards of Corp governance, as previously demonstrated by the merger of Hosp business of the promoter.


(Vivek Mashrani, CFA) #158

Yes, 23rd November is relevant date. Hence, the pricing will be transparent. There lot of companies whose results are pending, I would ideally not generalize this unless there is any proof of manipulation.

On merger, I personally believe that this was one of the cheapest transaction for listed entity, I mean who merges hospital of 200 bed working at 80% occupancy for 54 Cr. i.e. 25 lac/bed. Kindly compare with the valuation of hospitals per bed of other listed players.

There are 25 documents related to merger that company had put in public domain (this was 100 cr. mcap company then). I haven’t seen such level of transparency even from many big companies.

http://www.virinchi.com/merger.php

I had asked IR team for financials of merged entity for 2015-16 and they readily provided it. Valuation of target entity comes to 17x PE which is very reasonable in my view. Management could have easily given higher multiple and taken shareholding to higher level but they did not do it.

If you have specific points related to merger which reflects on poor standards then please do share.


(Vivek Mashrani, CFA) #159

For those who are eagerly waiting for results date:

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=8b00543c-c32c-4260-a169-43a6a37d2cb5

Its on 4 December.


(NeelaVi) #160

results out. Fantastic growth (100%) in bottomline w.r.to Q2 FY17 both standalone and consolidated.
http://www.bseindia.com/xml-data/corpfiling/AttachLive/efec9a1c-7c15-477c-8bc9-68983edb5cf4.pdf


(Vijayk) #161

H1 EPS is only 20% UP…while the stock price is up 100% in same time period…so the valuations have increased over last 1 yr due to this stock being popular.
Most small scale IT cos trade near 10 PE only…quite fairly valued


(Vivek Mashrani, CFA) #162

The earnings of Hospital business will increase from here as occupancy rates increases. As such 1H net profit has almost doubled to 15 Cr vs 8 Cr in 1H last year. Including merger, the EPS has precisely grown by 24.5% vs. 1H last year.

Ideally one should value IT business on PE ratio and hospital business as EV/bed basis and then add them up giving ~20-30% holding company discount.

Below is the result pdf:

http://www.bseindia.com/xml-data/corpfiling/AttachLive/efec9a1c-7c15-477c-8bc9-68983edb5cf4.pdf


(Vilas D'Souza) #163

I have some questions and concerns in the consolidated balance sheet compared to March 2017:

  1. Why have the reserves reduced?
  2. Working capital seems under stress coupled with higher borrowings (short term plus long term up by 8 Crores). What is the nature of the loans and advances? borrowed money diverted to related parties?
  3. Receivables need more clarity on the ageing.

Please can anyone throw some light?


(Vijayk) #164

since there was equity dilution, one needs to look at EPS and not net profits.
And the growth is only 24% as you said.
And, many big hospitals in the country have poor ROCE. Apollo makes money primarily from pharmacy. Max hospitals- quite a few were in losses till recently. Hospital is a poor quality high capex business with high receivables from govt and insurance cos and high HR cost. Am talking abt hospitals in general as a sector! Globally, most pure hospital stocks haven’t created wealth for investors


(Vilas D'Souza) #165

Thanks for your views.

The dilution impacts equity capital and not the reserves, correct? My query is not on the share capital, its on the reserves which comprise retained earnings etc.

I am satisfied with the earnings trajectory and purely based on PE, the stock deserves a way higher price; but until profits are backed by cash flows and strong balance sheet, the undervaluation will remain.


#166

I have sent the following queries to the company and will share if there is an update.

  1. Could you please clarify on the pricing and timing of infusion of new funds via warrants to the Promoters and strategic investors?
  2. What will be the use of funds raised from the issue of warrants?
  3. What is the background of the strategic investors and what is their relationship with the Promoters, if any?
  4. What is the reason for reduction in reserves & surplus (balance sheet) as on 30th September 2017 as compared to 30th March 2017?
  5. What is the current utilization of operational beds in Virinchi Hospitals and status of completing additional expansion?

(vibs6615) #167

On QoQ basis, revenue from Hospital biz has increased by only 2cr (9-10% increase). Look at segment wise breakup. That is not encouraging. Does that mean they haven’t been able to ramp up bed usage?


#168

Let’s be realistic about the type of business behind the numbers. It takes years for a hospital to establish a reputation for itself. Choosing which hospital to get yourself treated is a very personal decision, driven by a multitude of factors, and generally pre-meditated. Hence, IMO we should not read too much into QoQ hospital utilization changes. As long as there is an upward trend in segment results coupled with qualitative factors like awards / positive patient testimonials, business should be on the right track.


(barasia) #169

Equity dilution affects share capital and reserves. All the money raised
has to reflect somewhere. The face value reflects in share capital and the
rest in reserves.


(Vivek Mashrani, CFA) #170

Last year they had full year operating cashflows of ~75 cr if I remember correctly. So, the earnings are backed by cashflows.


(Vivek Mashrani, CFA) #171

All answers are there in postal ballot circular for warrants issue. Kindly read the same. Cheers…


(Ashish Arole) #172

Equity Dilution = Raising more money = More Reserves. The question raised is why have the reserves gone down. Am I right?