Dystar sale process proceeding as mentioned by the promoter. Valuation at $1.6B. Ideally, they should get the interest amount as well in Nov appeal.
Promoters have pledged their entire holding for a credit line for their new Singapore subsidiary - Claronex.
As per their Feb-24 submission, the company is engaged in Wholesale trading of a variety of goods, Investment and financing activities.
Not sure how related this is to their current business model.
A major worry for me is whether the special resolutions will get approved or not⌠particularly if the promoters do not get the nod to increase their shareholding vide the preferental warrants then that could be a sign of a power struggle brewingâŚ
they would obviously have to engage behind the scenes with the institutional / corporate/FIIâs holding a good chunk of the companys equity beforhand w.r.t the share warrants and the loan security limits that they want approvals for⌠these require special resolutions
one thing is good that the issue of warrants and the percentage increase is planned in a manner that it will not trigger an open offer
Voting is underway at present and closes tomorrow evening with the AGM on the 27th first half
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If anyone attended the virtual AGM, will be grateful if significant points are shared here
Some points from AGM:
Dystar Company Sale:
- Deloitte working efficiently on selling process
- Due diligence has been completed and bids has been invited. Deloitte has reached out to a number of prospective clients all over the world. As per management binding bid is expected to be received by mid to end January 2025 and sale process should get completed by March 2025 followed by sale agreement signing thereafter.
- Priority payment and interest payment appeal is scheduled on 12th Nov and management is confident that judgement will be in their favor and most probably will be received by December end. Since interest payment judgement will come before sale completion, Deloitte will be able to share the interest payment proceeds along with USD600+ million sale proceeds.
- Shareholder raised question on 50+ crore payment from warrants proceeds on legal expenses. Management replied that it will take care of pending legal invoices, Deloitte fees (50:50 shared with Senda) and current appeal case payments. They have strong team of 11 lawyers handling the case and such team will be needed till the end of sale process.
Indo Asia Copper plant
- All the clearances and approvals are in place. Construction not yet started but management is confident about conducting groundbreaking ceremony by October 2024 end and phase 1 completion in 24 months.
- Plant project cost estimate is 16k crores. Production capacity will be 10 Lakh tonne copper and 16.5 lakh tonne fertilizer. Will be constructed in phases with phase 1 cost estimate of 2.5k crores. Estimated annual revenue of the whole plant will be 30k crores and PAT of 3k crores.
- Handled by senior veteran named Sanjay Sarkar who has 30 years of experience and is now assembling a team for the project.
Shareholder raised concern on capacity surplus of Copper after their plants commissioning, management replied:
- Indiaâs domestic demand for copper currently is 15 Lakh tonnes and is expected to reach 30 Lakh tonne by 2030 owing to focus on renewables, EV and allied industries
- Only 2 Copper plants are operational at the moment - Birla Copper (4 Lakh tonne), Kutch Copper (Adani; 5 Lakh tonne operational & will be scaled up to 10 Lakh tonne). Two in process - theirs in Gujarat and JSW in Orissa.
- Forget about exports, there is enough domestic demand to absorb their additional plant production of 5 Lakh tonne (expect commissioning in FY2026-FY2027)
- Government is supportive and has eased restrictions on Copper ore import.
Shareholder raised concern on market not appreciating the 5k crore cash proceeds, management replied:
- They too donât know why market is reacting this way. They said promoter group is fully committed and is increasing their stake through warrants. Their shares are not pledged but encumbered and promoter group is not selling any share of the company (i didnât understand this point).
- Shareholder also asked for more disclosures and reaching out to institutions for marketing their company to which they replied they will surely do that and will invite shareholders to attend the groundbreaking ceremony.
- They highlighted that they are in touch with the FIIs who are invested in their company and they told that even the FIIs too know that the company is going to receive 1000 rupees per share of cash but still donât know why their stock price is not increasing.
- They didnât gave any sure answer/hint on dividends after receiving cash proceeds.
About their newly registered company on Green Hydrogen production:
- Feasibility study is being conducted by a German based firm and hopeful of receiving the results by January
- Team is not yet assembled
- Ammonia from the plant will feed into Fertilizer plant therefore achieving backward integration
Some other points of note:
- Management is aware of the lost decade of no growth due to litigation and highlighted that they will not be investing any more capital in their Dye business and all the future money will be spent on future growth opportunities in Copper and Green hydrogen business.
- Dye business is operating at less than 50% capacity and is slowly improving as shown in numbers of reduction in losses YoY.
Disclosure: Invested with very large bias. Kiri industries forms extra large position in portfolio.
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What is the difference between pledged and encumbered shares? Tried searching but couldnât find anything concrete.
Encumbered share means those shares cannot be traded. these are locked. Locked can be because of many reasons - agreement with company, anchor investor locked for certain time after IPO, pledged.
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So, promoter shares have been encumbered due to a loan facility availed by them for their subsidiary company in Singapore. How is it different from pledging the shares? What could be the implications
When one pledges shares it means that if there is default on repayment of loan proceeds then it can be sold by the pledge holder,i.e. the lender to recover the loan dues⌠Encumbrance is on the right to sell its shares by the borrower of the loan
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Is management allowed to speak about stock prices ?
How come encumbrance help the borrower in such a case. Can you help me with an example.
Not so much of an example but the laws of the land, read RBI and SEBI permit pledge of shares for overseas borrowings from foreign lenders by listed companies/or their promoters only when certain conditions are met ⌠so encumbrance is a round about way to assure a foreign lender that as personal guarantee of M Kiri has been given, there is encumbrance on his shareholding of the company
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They are not talking about stock prices here but cash proceeds per share to be received.
It is interesting that peopleâs attention is grabbed by mention of pledging of shares in AGM. Nobody, even the market, is not ready to appreciate that a company with market cap of 2000 crores is going to receive 5000 crores cash in the bank.
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Dont count your chickens before they hatch
The stock will run when they actually have cash at bank until then it should trade in this or below this range because right now they have no proper business.
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Company has issued ~1.3cr convertible warrants to promotors yesterday.
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Well said - The shares are âeffectivelyâ pledged (both of Dystar and Kiri) as it is litigation financing and the Private Creditor of Singapore would not lend money without the ability to sell the shares in case the loan is not repaid by Dec 2025. RBI does not allow pledging to foreign lenders so âencumbranceâ is used but effectively it is pledged. This makes it very risky now if money does not come by Dec 2025. Then Kiri is at the mercy of the Private Creditor to allow extension and not invoke the shares. It is a high risk gamble on part of the promoter to borrow now vs patiently wait for a year!
Very low likelihood but nonetheless, what if court case is extended beyond Dec 2025 due to some gimmickery of Senda (and say Private Creditor is working with Senda/LongSheng) Private Creditor invokes the Dystar shares and passes it on to Senda - black swan event but a risk nonetheless)
I donât intend to FearMonger but just adding a remote possibility esp. as this case has taken so long already that anything looks possible here and so market will not believe this situation unless money comes in the bank account.
Disclaimer - Invested small % of pf and understand this is almost binary event now esp after this latest aggressive financing event!
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And what is more amazing is that in 2013 the promoterâs pledge was invoked wrongfully (as it was invoked despite Kiri paid all the loan) by the lenders and lenders sold them in the open market. So promoterâs stake went down. Despite this experience, promoter again went into pledge situation. And they did not learn anything basically.
Another case - betting significant money on copper project on the basis of one guy - Mr. Sarkar. Too aggressive behaviour.
Also compare this company with peers who are doing Copper project (Birla, Adani, JSW - all heavily experienced and deep pocketed players in metal/minning industry). So market will never value it till money comes. And still it should trade below cash till the 1st phase of copper gets operational in time and budget with limited bleeding in the 1st few months of operations. Basically lot of question marks so market will remain uncomfortable. This stock will not run on Hope but on Facts!
Disclaimer - invested small % of pf
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Reminds me of Warren Buffett quote âA full wallet is like a full bladder; you may have the urge to pee it awayâ
Another fun fact below folks - this is from 2010 showing the Dystar acquisition capital structure - Below structure shows that KDCL (which is Kiri Industries) put Eu 13.22 mn for 37.8% equity stake and allowed Well Prospering Ltd. (which is LongSheng or Senda) to take majority stake 62.2% as Convertible Bonds. This meant that
- Senda had option to convert into equity if things go great (and they did convert into equity and took control and started Minority Oppression on Kiri) and
- if things go south - Kiri takes all downside and Senda with its debt is superior to Kiriâs equity in capital stack. Sends was responsible and covered itself as this acquisition was from bankruptcy proceedings. But Kiri was clearly aggressive. And they still show this aggression in the latest Litigation Financing.
Again it may all work out fine but just highlighting why market is not recognizing the value and that promoter is clearly aggressive so much that in their aggression they take risky steps! The genesis of 10 years of legal case is the wrong structure which Kiri entered into in 2010. So in some way it is their own making.
Market is supreme!!!
Invested small portion of pf.
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Hi , can someone summarize what was mentioned in the concall due to which the stock is up 10+%?