down 20%… fall is not a result reaction as it started midday… several brokerages have this one in their top diwali picks with 40-50% growth predicted over 2-3 years and targets between 125-150. It’s steadily halved since then and nearing 52wk low now
been eyeing this one since I saw the reports and also saw it in Abhishek’s portfolio.
Anybody knows why the knife is falling…
CEBBCO has 8.4% of the total shareholding pledged (~26 cr Mcap), ROE,ROCE ~10-14%, DE ratio moderately high at 0.43; seems like at current price, a lots of expectations were inbuilt with it.
Once the result is out, people might be in a race to sell before the pledge share sell happens, thereby moving the stock towards the pledged share sell by creditor mode. Sort of a self-fulfilling prophecy.
Going by attached Investor/Analyst update at ResearchBytes, the HSBC pledge was for short duration to meet Working Capital requirements.
While the Religare Finvest pledge was for Rs. 5 cr loan for which there has been a partial release, and the promoters expect further release after paying additional dues recently.
http://www.researchbytes.com/Commercial-Engineers-and-Body-Builders-Company-Limited-C0687.htm
Unable to attach due to large size.
Was the fall to do anything with Tata motors fall because there is a direct relation? The stock has been weak for a while. But there were quiet a few sellers even at end of day.
The results were flat and the expansion is supposed to come in this quarter. The margins have increased over the last few quarters as they have moved to the replication but the sales have been pretty flat if the Braihwhite orders are removed.
Below is their story on pledging. I did read in the newspapers last month that tata etc was offering discounts worth Lacs ( ?!!) to sell trucks and factories were barely running ( and since nobody was buying tata cars I used to wonder how it’s on a 52wk high). Margins in the body replacement market are much higher and that’s what seems to have saved the day for cebbco.
The promoters have pledged 41,76,471 shares to three different institutions namely;
1.Axis Bank Limited.
2.Hong Kong & Shanghai Banking Corporation Limited (HSBC)
3.Religare Finvest Limited
A total number of 17,51,471 shares are pledged to HSBC & Axis Bank towards working capital limits provided to the company by the said banks. The shares that have been pledged in favour of HSBC are for a very short period of 20-30 days and will be released shortly. Also the promoters have pledged shares in favour of Axis Bank limited , once the security creation process is completed the same will be released.
Religare Finvest Limited : The promoters had pledged 2,42,5000 shares against a loan of 5.00 Crs availed by the promoters. Out of this 1,62,000 shares have already been released. The promoters have paid INR 1.50 Crs out of the said loan during this week and further shares are expected to be released. INR 3.50 Crs
Can someone comment on the proposed 50 paise per month increase in diesel prices announced by the government and the impact it will have on the company…
20% LC hit again today.
What’s going on here…could somebody discover what’s the reason.
Can’t believe that increasing diesel prices or a sudden drop in Tata Motors shares is the reason. In fact, Tata Motors has recovered to some extent today, but CEBBO has again hit the LC today.
There has to be a reason, which I am not able to see but Mr. Market is able to understand.
In the shareholding pattern also there are two finance companies holding around 60 lakh shares which it seems is on the block.
Around 40 lakh shares traded in last 2 days. We may see another ckt in case selling does not get absorbed today.
Taking a punt here at 48 as high risk.
It seems, fall has connection with below news.
Inter se transfer between promoters a no exemption in the first three years after listing says SEBI
Introduction
The Securities and Exchange Board of India (aSEBIa) has taken a conservative stand in its interpretative letter1 dated December 5, 2012 issued to Commercial Engineers and Body Builders Company Ltd. (aCEBBCOa). The letter clarifies that the exemption for_ inter se _transfer of shares amongst promoters can only be availed by persons who are disclosed as promoters in the shareholding pattern of the target company for the last three years even in cases where the target company has not completed three years of listing on a stock exchange.
Facts
Equity shares of CEBBCO were listed on NSE and BSE on October 18, 2010. The promoters and the promoter group collectively hold 55.81% of the paid-up share capital of CEBBCO. Mr. Ajay Gupta (aAGa), one of the promoters of the Company, intends to sell shares of CEBBCO constituting 17.61% of the paid up share capital to Mr. Kailash Gupta (aKGa) another promoter of the Company and also father in law of AG. Since, the proposed transfer will trigger the open offer obligations under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the aTakeover Codea), parties want to avail the benefit of exemption under Regulation 10(1)(a)(ii) of the Takeover Code.
Per Regulation 10(1)(a)(ii) of the Takeover Code, acquisition pursuant to inter se transfer of shares amongst persons named as promoters in the shareholding pattern filed by the target company in terms of the listing agreement or Takeover Code for not less than three years prior to the proposed acquisition is exempt from mandatory open offer requirements subject to prescribed pricing and disclosure conditions.
Both AG and KG have been identified as promoters of CEBBCO in all the shareholding patterns filed with NSE and BSE since the date of listing of CEBBCO. AG has been a shareholder/promoter of CEBBCO since December 23, 2006 while KG has been a shareholder/ promoter of CEBBCO since October 3, 2005.
Issue
CEBBCO became a listed company only on October 18, 2010 and therefore, it is impossible for the company to have filed shareholding pattern for three years prior to the proposed acquisition. Though KG and AG had been promoters of CEBBCO for more than three years, since CEBBCO was listed for only 2 years prior thereto, AG and KG had been reflected as promoters in the filings with the stock exchanges for only two years. Accordingly CEBBCO approached the SEBI to seek guidance as to whether a transfer of shares from AG to KG would be for the exemption under Regulation 10(1)(a)(ii) of the Takeover Code.
Order
CEBBCO had argued that the condition of continuous disclosure of persons as promoters for three years prior to the proposed transaction has been prescribed under Regulation 10(1)(a)(ii) to ensure that only persons holding long term interests in target companies were eligible for the exemption. If such a condition was not prescribed then persons could identify themselves as promoters immediately prior to the transfer and would avail the benefit of the exemption under Regulation 10(1)(a)(ii). In this case AG and KG were promoters of CEBBCO since December 23, 2006 and October 3, 2005, respectively and they clearly held long term interest in the target company.
CEBBCO also clarified that it was impossible to mention AG and KG as promoters in its shareholding pattern for three years as the company was listed only two years prior thereto. It was argued that the AG and KG should not be denied the exemption under Regulation 10(1)(a)(ii) of the Takeover Code merely on account of a technical impossibility. CEBBCO suggested that the emphasis should be on the spirit of the provision but not on the literal interpretation of the provision.
SEBI, however, did not accept the arguments of CEBBCO and clarified that the exemption under Regulation 10(1)(a)(ii) of the Takeover Code could be availed only if all the compulsory conditions were duly fulfilled. One of the prescribed conditions is that the transferor and the transferee should have been identified as promoters of the target company in the shareholding pattern filed under the listing agreement or the Takeover Code for three years prior to the acquisition. If this condition is not fulfilled for any reason whatsoever, inter alia including if the target company was not listed for three years then the exemption under Regulation 10(1)(a)(ii) of the Takeover Code cannot be availed.
Analysis
In light of this interpretative letter, it would appear that the earliest the exemption under Regulation 10(1)(a)(ii) of the Takeover Code can be availed by promoters desirous of transferring shares inter-se is after 3 years of listing of the target company. Though SEBI has relied on literal interpretation of Regulation 10(1)(a)(ii) of the Takeover Code, such situations may be fit for seeking specific exemption from SEBI under Regulation 11 of the Takeover Code. It may also be noted that in the present set of facts since KG is AGas father in law, the proposed transaction may also be eligible for automatic exemption under Regulation 10(1)(a)(i) of the Takeover Code, being _inter se _transfer between two aimmediate relativesa. The definition of aimmediate relativea under Regulation 2 (1)(l) of the Takeover Code includes the father of the spouse of a person.
Conference Call: CEBBCO
4th February 2013 (MONDAY)
5:00PM
022-39406000, 18002000209 (PIN: 9590958)
At the present price, the stock is looking quite attractive.
I am waiting for today’s call to see what the management has to say. First of all, good to see that the management is atleast reacting by having the call. The crash may be attributed to the pledged shares, but the initial fall cannot be attributed to that. The liquidation from the banks and finance companies would have come only after it went down below their threshold level. Will update after today’s call.
Abhishek, They have earnings call in earlier qtrs so dont think it’s a reaction to the fall. It will be good to hear what they say in the call today.
Salient Points from the Conference Call which was addressed by Ajay Gupta:-
Abhishek covered most points. A few other points though not so relevant:
The order book is not relevant as every month they decide orders to be executed (have seen earlier mentions of 1000 cr. order book)
Reiterated that 7% of promoter holding has been pledged and those are for WC. There has been no sale from promoters.
Rumors of anyone quitting from top management are false.
Also, indicated that for Tata Capital to sell shares, the director will have to resign at least 3 months before to avoid insider trading norms. (Probably this question from DB was to gauge whether Tata Capital was selling)
Thanks Abhishek for excellent summary of the concall. I have not studied the stock properly just throwing up some questions to get some clarity.
Read somewhere that unorganised sector build bodies to accommodate overloading. In the current slowdown, why unorganised sector should move away from that option, looking at the fact that tariff for long distance is not keeping up with increase in cost.
During the conference call, repeatedly management reiterated that there are no concerns form OEM side. Tata motors M&H CV sales have declined at the rate of 50% during Nov-12 to Jan-13 [monthly y/y numbers] and going by the pressure on truck rentals [http://timesofindia.indiatimes.com/business/india-business/Truck-rentals-set-to-remain-range-bound-Report/articleshow/18307348.cms], I do not expect situation to improve atleast for next 2 quarters. Then is it possible that there is no decline in demand from OEM side in line with decline in sales. Here just trying to understand how frank management is with investors.
Some time back read that new railway minister had its budget and accordingly all rail wagon companies share prices reacted negatively. From call, my reading is they are not expecting any new orders. As margins are higher in railway business, to what extent this will impact their margins [not sure how much do they derive from railway segment]
Just trying to understand to what extent companies sale will be shielded from replacement segment in view of steep decline in truck sales. I got the feeling that mgt trying to present totally positive picture.
Hi Anil,
Here are the answers to your questions:
1). The last budget had provided financial benefits in terms of tax cuts for FBVs and hence vehicles moving from unorganized to organized sectors(check my first post).
2). There has not been dearth of orders of OEM. However earlier also management has indicated that they are more keen on replication business which gives better margins. However the relation with OEMs is also important. If you compare results the margins have improved due to replication replacing OEMs to certain extent. The replication business comes primarily as family has dealerships and CEBBCO makes use of that.
3). The railway plant is fungible i.e. the capacity can be utilised for FBVs when there are no rail orders. The actual capacity is around 20k for FBVs and remaining for rail - currently all is being utilised for FBVs and hence ~7500 FBVs being produced per qtr. There is an additional capacity of 12500 FBV which is to come in 4th qtr.
ET Now: To begin with today is the second day of 20% down circuit on Cebbco. If you could explain to us what is going on?
Ajay Gupta: We came out with our numbers last week on Wednesday and the numbers are in line with what guidance we have been giving to the market. Honestly speaking, there is nothing wrong in the company. Deloitte continues to be our auditors. There is not negative qualifications, anything negative that Deloitte has found while doing the audit, our entire top management is in place, nobody has left, nor has we removed anyone, operations continue to be as they were, our third quarter numbers are out three days back.
As far as the company is concerned, there are no governance issues. So there is nothing wrong in the company and what is happening is purely due to market forces and we are at loss of words ourselves to understand why this fall has been because it is pretty illogical in my opinion.
ET Now: Just walk us through what the promoter shareholding is at present and what percentage of that has been pledged to raise money?
Ajay Gupta: Yes, the promoters have close to 56 per cent and now that a very small portion has been pledged, it has been pledged through three different institutions, two of them are our working capital limit bankers – HSBC Bank and Axis BankBSE -1.76 %. So there is no way that the pledge can impact the stock price in whatsoever. The third pledge is given to Religare which is for a total loan of Rs 5 crore, out of which Rs 1.5 crore was repaid last week and another Rs 1 crore is getting paid today. So the total loan amount outstanding against that pledge is only Rs 2.5 crore, which also we are hopeful and confident to get it removed in the next few days or in a short period of time.
There are probably rumours on the street that the pledged shares had come to the market, but that is totally wrong, I would request everyone to please check the BSE, NSE websites. It is very clear that if a pledged share gets sold, then it is informed to the stock exchanges on the same day and is uploaded on their website. Nothing like that has happened. Most people have good connection with Religare. I will request them to also speak to Religare and verify these facts, there is nothing to do with the pledge of shares. These are only market rumours, which is beyond our control, but I would request investors not to go by what they hear, but please speak to the management.
ET Now: Should you not be going out proactively and trying to engage with your investors to clarify the situation?
Ajay Gupta: We have already arranged a con-call for today evening at 5 o’clock with all the investors and that is something that is the right way of addressing investors queries and that is what we are doing. The correct way is to do a con-call and hold a conference call with all the investors and that is exactly what we have done. We are not doing anything which is not normal or against the market practice. We are just following what is being advised to us.
The NP had risen 10 % yoy, debt to equity is only 0.43 which is manageable (also the debt is raised for expansion), roce is 25 % which is not bad.
The stock has fallen almost 45 %. A severe fall like this is mostly due to corporate governance issues or may be due to some major change in govt policy . I doubt a fall like this is just due to tata motors fall. If that is so ,how come company has been able to manage same sales yoy.
Manappuram finance had a big fall but then it was due to rbi policy, corp governance issues like promoter group co. accepting money from public, directors selling shares etc.
Here there is something wrong which we are not aware of.
