please help share the concall recording link / key take aways
I wonder why the transcript isnât out yet. It was a thoroughly disappointing call on the part of the management. They kept on justifying that MEBLâs valuation was done by an independent valuer so they just took it.
The issue is. If this was a merger between two unrelated parties (separate promoters), nobody would just agree to an âindependentâ value and arrive at a swap ratio just like that. They would obviously use their brains to figure if itâs a good deal or not.
With valuing MEBL at a 30% premium to AABL, theyâve conveniently increased their rewards. Their holding goes up, they get free cash when they have to bring it down to 75%, the minority shareholders end up losing representation as well as possible loss in value. Itâs a blow in the face of minority shareholders. I donât remember any other time where I have come across such outright rejection of stakeholders.
Irony is that promoters have been taking out a high percentage of money off AABL, kept on supporting MEBL at the expense of AABL (erstwhile Corporate Guarantees), and now they inflate MEBLâs value on hope that the future is bright.
The book values of both the companies are starkly in contrast! And if a 15% grower with 25% ROCEs and a high EBITDA to FCF (AABL) is at such a discount, then MEBL should be one of the best businesses ever. (sigh)
I have put my concerns during the call as well. Have asked for past 4-5 years of data. Iâm sure that again will be of no help. Theyâve honestly lost credibility. Earlier incidences were already off-putting but this time around theyâve handsomely outdone themselves.
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I have written about this before as well. Minority shareholders took the risk of MEBL growth funding and now rewarding promoters at their expense. Will stay away from this one.
Growth prospects beyond the state of MP are suspect, CG issues,
DISCLOSURE Not invested, Not a recommendation
The company has tax evasion history. Promoters are not trust worthy.
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If you read the concall carefully, you will get to know that management is Chor
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They have made a fool out of minority investors
What they have been divulging was just one quarter comparison in which would have out performance of beer company given that it is summer.
MEBL was supported by AABL and now for investors are being robbed by promoters who draw huge salaries but not even sit on board. Stooges are doing work for them so that they escape any liability. Independent valuation is a big joke.
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This is clearly a situation where the interests of minority shareholders are being sidelines.
A few things that caught my attention:
- During Q2, OPM of Associated came down drastically (nearly 7%) (I say drastically because one of the reasons Associated catches most peopleâs attention is the consistency in their margins) and during the same timeframe margins of Mount Everest were significantly higher. The reasons given by mgt. in the concall were raw material price pressures and energy prices, but the obvious thesis is the same should have been effected Mount Everest OPM as well which is not the case. I personally think they just did this to extrapolate the good margins of Mount Everest whilst valuing for the purpose of merger.
- Whenever they are asked about the reasoning for the swap ratio, all they say is the fact that they will have huge synergies due to a single shop for both liquor and beers. No solid mathematics behind it. They just keep saying a reputed valuer has done it.
- As per AR 21, investment in MEBL was valued in the books of Associated at 128 per share, in AR 22 it was valued at 225 per share and now for the merger at 650 per share! Makes sense? To me atleast it doesnât!
- Overall itâs a scheme which completely kills the minority share holders and only benefits Kedia family since they are the promoters in both companies.
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i held AAPL and sold few months back for the same reason you highlighted
Opportunity cost with Radico which gave 2x whilst AAPL gave 1X with the same holding period.
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