Is it possible to takeover mcdowell holdings for management rights

hi friends

Mcdowell holdings , holding company of vijay mallya group its current holdings in UBL,UB HOLDINGS & Manglore Chemical&fertilisers value 1000 cr surprise is market cap 40 cr only means 96% discount to its holdings value.

i go though annual report why this much discount this scrip quoting to know

i found that company given corporate guarantee of 280crore to UB holdings ( group company) with pledger of 63 lakh UBL shares as a guarantee with YES bank and taken 70 crore loan from EDL finance with pledge of 16 lakh UBL shares as a guarantee this amount also given to UB holding. and showing as a receivable from UB holdings considering good in balance sheet.

so total approx 350 crore they have liability but asset side 1000 cr . if u remove that 350cr liability from its holdings value also NAV comes to 650 crore which value 464 per share( 650 cr/1.4 cr total shares of company) i am not understanding why this much deep discounting going on here

major holding company of mcdholdings is united breweries ltd(UBL) approx 850 cr . UBL present managed by vijay mallaya and heinken but heinken UK increasing its stake from 35% to 42% in this year bought from various stake holders @ avg prise of 960 including mcdholdings pledge shares from yes bank. it is in process of increse stake to 51% in UBL for take management control and gate out for vijay mallya.

one more interesting factor is promoter holdings is 18% only and 100% pledged and FII & DII s selling their stake in open market in this year . why they are selling at this penny valuations.

why not anybody buy majority stake 51%( approx for 20-25cr) and take management control take control on 650cr asset, it can be cashed with talks with heinken UK to buy mcdowell holdings entire stake in UBL with re pay of its liabilities,

dear friends solve this puzzle

disclosure : i am recently bought 25000 shares @ 30 if picture is clear i want to increase my investment on this .

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ayush or donald can tell better solution to this

Just a super quick glance at the latest AR i.e AR2014 but No further research.

To quote from page 42 Section 3.8 Non-current Investments

Market value of quoted investments 9,292,432,255 i.e 929 cr

and then again from the Note at the bottom of the same page

10,036,000 shares of United Breweries Limited are under pledge to secure the borrowing availed by the company as well as Group Companies. The carrying cost of such investments is 275.18 million and the market value is 8,244.07 million

So as per the AR 2014, 824 cr of 929 cr is pledged leaving 105 cr of value for its investors. Moreover, given Mallya’s reputation (Financial shenanigans discovered at United Spirits in the last year), who knows what is left of the remaining 105 crs.

Keep in mind this is as of 31-Mar-2014 and the assumption that the company is not able to clear its pledge.

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Latest annual report will shed more light on whats under the skeleton. Also they report huge loss in the current quarter, wait and watch is what I plan to do. Also the trading volumes are super thin. Better to buy such companies in SIP mode during correction and of course not to forget its a crazy risk high return kind of stock according to me. Shall post in the group once I decide to take the risk. I don’t plan to allocate more than 1% of my portfolio to it.

If we see latest AY company now only 200cr corporate guarantee against pledge shares

Last week yes bank invoked 150 cr worth of UBL shares of McDowell holdings.
Now company debt 50 cr and quoted holdings value 600cr

Anyone tracking the company now ? beaten down to 33, wondering if the mallaya liability has increased for the company ?

holding in ubl isnt it attached by ed and now transferred legally?

Stock going up 20% … back to back upper circuit

Now lower circuit series start because the script has been put in ASM. Court greenlights the sale of Vijay Mallya’s assets in India. ED has 16.15% of UBL valued at 5300 Crores. Another 8.08 % stake of Mallya valued at 2600 Crores… So appx 8000 crores. Another 1.51% stake in USL held by companies close to mallya valued at 650 Crores. There are other private companies associated by Mallya like KAMSCO INDUSTRIES PRIVATE LIMITED, PHARMA TRADING COMPANY PRIVATE LIMITED, DEVI INVESTEMENT PRIVATE LIMITED, VITTAL INVESTMENTS PRIVATE LIMITED, THE GEM INVESTMENT TRADING COMPANY PRIVATE LIMITED which are holding shares worth 400 Crores in UBL. Total movable assets associated by Mallya and already siezed assets by ED are appx 9000 Crores ( 5300 + 2600 + 650 + 400). ofcourse properties in mumbai and bangalore could fetch another few thousand of croroes. Lenders are seeking 6000 Crores. . all above information is available in public domain i.e. bse website and newspapers. In this case , UBL shares ( 1.72% ) pledged by Mcdowell holdings(MCD) amounting 550 Crores need to liquidated. ED has 15% in MCD and hence can fetch 100 Crores to banks from this liquidation and remaining 450 crores can go back to shareholders of MCD. So , i believe there maybe value in MCD shares with the assumption that banks are seeking only 6000 Crores , current market cap of MCD is 40 Crores while assets which are pledged have value of 400 Crores. Can initiate buy for very high risk investors.

My current reading of this stock is as below: Happy to get the forum’s opinion

  1. For the purpose of this analysis we can ignore McDowell Holding’s (McD) shares in Mangalore fertilizers as they are miniscule

  2. The company primarily has 6.34 million shares of United Breweries (UB) which as per latest closing price of UB puts the value of McD’s investment at 635 Crores

  3. The company has debt due to Zuari at 14 Cr. So, all other liabilities combined, the networth of the company should be at 600 Cr. The current market cap of company is 35 Cr indicating a 95% discount. The reason for this is

a. Pledge on 4.5 Million shares of UB held by MCD is still not revoked by the lenders in spite of the concerned debt (for which the pledge was issued) being repaid in full

b.ED has imposed restrictions on the sale of UB’s shares and has effectively frozen them

c. Govt Authorities have transferred 1.7 Million shares of UB which was originally held by McD into ED’s demat account

d. PMLA cases and FEOA cases have issued show causes for confiscation of assets of McD which is being contested

Things to Ponder

  1. Are the actions of ED/Govt authorities just to strifle Mallya’s activities in a bid to make him return or is there prima facie evidence against McD

  2. Can Govt authorities freeze assets of a company just because a promoter-shareholder with 20% control of company happened to be a Fugitive. (Or, if i hold shares of RIL and i am declared a Fugitive, it seems absurd that they would freeze assets of RIL)

  3. Would one eventually believe that these issues pertaining to attachments and freeze be solved due to lack of solid grounds. It is important to remember that none of the assets have any encumbrances as per AR and were attached by the ED or ED issued directives which are being contested in courts

  4. So, if one were to believe that these issues prima facie have no solid grounds and are merely actions to suffocate Mallya and would be reverted to normal, they should buy it as it seems to be a 20:1 upside (or at least 10:1 if you consider 50% holding discount). Not to mention that the underlying United breweries itself will grow in interim leading to a higher upside than mere discount reduction

  5. Alternatively if one were to believe that Public sentiment and arbitrary acts of courts could dent such a logic or in case if you believe that the books of company are misstated with respect to any off balance sheet liabilities or financial fraud done by erstwhile promoters which could have an impact on this stock, they should stay away

Disc: Invested due to asymmetric risk reward (10-20X gain or lose entire principal)

Await thoughts of other members