Kiri Industries: Loan reduction and demand surge

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546

I don’t know but this is (Kiri ind) is straight forward case of mentality of not sharing rewards with minority shareholder. Even they become successful in new businesses (like copper etc) it seems they will not share wealth with retail shareholder.

Investors hoping for some kind of “magic” should study the case of Lloyd Electric & Engineering Ltd (LEEL).

LEEL sold its Consumer Durables (CD) division to Havells in 2017 for approximately ₹1,600 crore in cash, at a time when the company’s enterprise value was significantly lower than the cash received. However, after the CD division sale, Lloyd Electric did not pay any special or meaningful dividend to shareholders, nor did it conduct a buyback.

As the saying goes, “History doesn’t repeat itself, but it often rhymes.”

Check LEEL discussions in the ValuePickr thread:

Also refer to Screener for financial data:

Disc: I am not a financial advisor. This is not a buy/sell recommendation. Please do your own research.

547

Thanks for sharing this. However, LEEL emerged as an outright fraud, especially in the manner in which the promoters blatantly siphoned off money. They did not even talk about long-term value creation, etc.

A more sophisticated approach or example of minority suppression looks similar to what may have transpired at Hinduja Global. They received a large windfall after selling their healthcare arm. They also conducted a buyback and paid some dividend, but it was quite obvious that the intent was not to share the bulk of the proceeds with minority shareholders. The usual approach in such cases focuses on investing the major share of the proceeds. These investments eventually show up as capital misallocation, albeit with a time lag. Commonly adopted approaches are “expensive” M&As or investments in new or unrelated growth areas with a long gestation period.

Aster DM, on the other hand, shared the bulk of the proceeds from the sale of its GCC operations even though it operates in the capex‑intensive hospital business and had visible growth opportunities, whether through acquiring smaller setups or greenfield/brownfield expansion in India. Their reasoning was that existing investors had to live with suboptimal returns for a prolonged period (as the business was still scaling up), whether in the form of no dividend or limited share price appreciation, and hence they wanted to pay this dividend to compensate for that pain. I am sure taxation would have been a consideration and was communicated accordingly by funds/investors, as is the case with a few Kiri investors as well (something that Manish Kiri has alluded to, i.e., that investor feedback convinced him to invest a large part of the proceeds in new growth areas). However, good managements manage to fund their enterprises through multiple modes, without suppressing minority payouts, e.g., internal accruals, debt, or fund‑raises (if needed).

In any case, M&A or investments in unrelated areas just because you have excess cash usually end up destroying shareholder value. As they say, “Invest when you have to, not because you can.”

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548

Are many aware about the quantum of algo trading going on in this company’s share? Could it be with a definite motive to scare away many existing holders?

Here it is - Kiri Industries Bulk and Block deals on NSE and BSE Kiri Industries Bulk and Block deals on NSE and BSE

What could be the motivation behind this?

549

Algo traders have an intraday time-frame so doubt they will focus on long term objectives of “scaring away existing holders”. Of course, they thrive on uncertainty / speculations which results in very high volumes on either side thereby making the ground fertile for high volume intraday driven strategies. If the stock continues to trend weaker post receipt of cash then it is distrust in future management actions that’s further fueling uncertainty / speculative activity. With management holding at ~30%, there doesn’t seem to be enough skin in the game for them to address these concerns.

2 Likes
550

It is a sad state of affairs. After getting INR 5,200 cr in cash, the company is trading at a market cap of INR 3,280 cr.

The market seems to be encoding:

  1. Forget creating additional value, the promoters will destroy value either through questionable ethics or poor capital allocation decisions. That is why the company is valued below the cash it received
  2. The existing business is worthless

That is why the current equation is:
Existing business + 5,200 cr cash - some 1,200 cr debt = market cap of 3,280 cr

Btw, the company has already transferred INR 1,500 cr out of the Dystar receipts into 100% subsidiary Claronex holdings, to repay outstanding debt + interest. That debt itself was USD denominated and at some outrageous interest rate (15% odd if I recall correctly). That begs the question…was the debt itself taken so that it becomes easy to move out the INR 1,500 odd cr? So out of the 5,200 cr, 30% of the amount is already out of the game. This transfer was not even part of a capital allocation discussion. It was already set in motion long ago.

My thoughts on governance at this company have been consistent throughout this thread. It was always: Chance of Kiri getting the money was high; chance of minority investors seeing anything material in their hands was remote.

The base rate for poor ethics/ poor capital allocation in such windfall situations with an Indian promoter was already quite high. Kiri’s actions since receiving the windfall had only caused me to update the probabilities even more unfavourably. Accordingly, I exited my trading stake. The day Manish Kiri mentioned that he intended to distribute <10% of proceeds was the signal to exit, and frankly, I waited longer than I had planned/ should have. I still hold a smaller portion that I entered between 300 & 400 level - am able to hold (emotionally) because that part has some margin of safety. That part will exit too, at a stop-loss point.

I hope Manish Kiri proves the market wrong. All the best to investors who choose to hold.

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551

There have been multiple instances of large-scale dumping in this stock over the past three years. The first major episode I observed was in 2023, when the share price halved and remained in the ₹250–300 range for most of the year. This was driven by the market’s assumption that Kiri would not receive the arbitration proceeds from the Chinese counterparty, which had initially refused to pay the court costs, even though the court case and assets were located in Singapore.

At those levels, the stock presented an opportunity to buy an upcoming cash inflow of approximately ₹800+ per share (expected in 1–2 years) at roughly one-third of its value.

One consistent shortcoming of the management has been overpromising on timelines—particularly in areas beyond their control, such as court case resolutions and regulatory approvals. For example, the court case / enforcement was resolved more than a year later than management’s expectations, and final clearances for the copper project were received only in November–December 2024.

The copper project itself is an interesting long-term bet. If successful—though it will likely take a year or two more than management estimates—it could be highly value accretive. Global copper demand continues to rise due to EV adoption and broader electrification trends. At the same time, there is increasing reliance on China for copper refining, as few countries are willing to host polluting industries locally. The Sterlite Copper closure in Tamil Nadu is a clear example. Only bigger challenge would be availability of copper concentrate which also is in shortage along with refining capacity. For copper, any commentary on large revenue is immaterial, its the refining margin that matters whenever the the project gets completed.

All major approvals for the copper project were secured by November–December 2024. However, due to funding constraints and the process of offering multiple alternative site options during the Environmental Clearance (EC) stage, the company might have opted for land acquisition rights rather than outright purchases initially. According to the last concall and compliance disclosures, the land was acquired, boundary wall constructed.

In last concall, they mentioned having hired technical consultants, engineering consultants (TCE) who had implemented PT Amman and Adani copper projects recently. They have come up with timeline of 2027 December to finish the phase I and 2028 full year for dry run, trial productions and scaling. It is expected to take more time.

To bridge the funding gap for copper, the company raised an unsecured loan backed by the expected judgement proceeds. The only condition attached was that the promoter would not sell shares in Kiri until the debt was repaid. While this represents an indirect encumbrance (though not a formal pledge), the unsecured nature of the loan reduced risk to the company and the copper project. However, this came at a higher interest rate, largely because management assumed the funds would be received within a few months. This is where 1500 went out for USD130 Million loan. If anyone is reducing 1500 Cr into calculation, they have to take into account ~1100 Crore that was invested in copper subsidiary via this loan.

To best of my understanding, claims that large part of dystar proceeds would be distributed as cash was never the case. Mangement did mention rewarding some amount. Especially when company is planning such large Capex for last three years, in anticipation of proceeds, distributing doesn’t make business sense for a small company which will get debt at higher cost.

On the investing side, there are times when people undersell in panic, and there are times whey they pay anything.

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552

Very well summarized @abhisr the entire timeline and developments. Also issuing of warrants, increasing stake by promoters, even when funding was not in, showed there confidence in the future prospects. The underlying intent of the management is to create good business otherwise for them it was very easy to do nothing and keep waiting for the funds and on receiving funds - reward themselves and others and enjoy the life :)

Disclaimer :- Biased and invested

554

Seems the media channels have finally got a whiff

1 Like
555

Hype around the stock due to stake sale was being created for last 7-8 years and now it is done and dusted. No special one time dividend will be announced which is 100% clear. The money recieved will now be spend in Copper project which is at least 3 years ahead and will be reflected in P&L only after 4 years. Till this time all ratios will be depressed.
Summary : As there is no immediate trigger, the stock should ideally go in consolidation mode for next 2-3 years and all short term investors will exit. The project is unrelated diversification with no proven track record of management. The project is very big and hence there will be execution risk and delays.
I will definitely not invest in this stock for at lest next 2 years as there are several other opportunities and will review the execution capability of the promoter.

Disclosure : Not invested but following from last 3 months for academic purpose.

556

I have been advocating this view for some time. One should be logical in investment decision. And more important is not to be emotional. After all investment purpose is for return. It does not matter whether you get it from A or B or C company. So any investment in Kiri for long-term is foolhardy according to me. But it is a difficult choice for current shareholders.
Another question has come to my mind. Why Manish Kiri is so gong ho for investment in Copper and Fertiliser. I request experts to give their judicious opinion whether this is a good decision. Any opinion will be highly appreciated.

557

Ritesh Jain’s recent New world order video is a wake up call to investors. He had mentioned we should not expect SIP returns of last 20 years in next 20 years. He suggested investing in commodities, electrification theme etc. Kiri industries i think perfectly fits the new trend if they secure copper concentrate supplies. To develop a copper mine, it requires 18-20 years. Kiri had non binding agreement with Celsius Resources Limited MCB project. Since it is non binding, nothing concrete as of now. Mine development process started in 2006 and expected commercial production in 2027. So if Kiri secures equity in the project, it will be big boost for prospect of the company. fingers crossed.

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558

I sent this email to Kiri Mgmt:

Dear Members of the Board and Senior Management of Kiri Industries Limited,

I am writing as a long-term shareholder to respectfully follow up on my earlier communication regarding capital allocation after the successful completion of the DyStar en-bloc sale.

First, I would like to reiterate my appreciation for the management’s persistence in concluding the DyStar transaction and securing cash inflows of approximately ₹6,200 crore, a landmark outcome after several years of litigation.

However, despite this transformational event, the Company’s current market capitalisation of approximately ₹3,250 crore remains materially below the cash received, even after accounting for taxes and debt repayments. This persistent valuation gap indicates that the market continues to apply a significant discount due to uncertainty around capital deployment.

In this context, I would like to propose a balanced and confidence-building capital return strategy comprising:

₹300 crore share buyback + ₹300 crore cash dividend

This combination, in my view, offers the most effective way to unlock value while preserving long-term financial flexibility.

Rationale for the Buyback + Dividend Combination

1 Immediate Shareholder Returns with Prudence A ₹300 crore dividend translates to approximately ₹50 per share, offering a compelling yield of ~9% at current market prices. This directly rewards patient shareholders and validates the cash on the balance sheet.

2 Material Per-Share Value Accretion A ₹300 crore buyback at prevailing prices would retire roughly 7% of the outstanding equity, increasing cash per share, earnings per share, and intrinsic value for remaining shareholders.

3 Balance Sheet Strength Maintained Even after a ₹600 crore capital return, Kiri Industries would retain over ₹4,000 crore of net cash, ensuring ample resources for:

◦ Core business growth

◦ Strategic investments

◦ Further debt optimisation

◦ Future shareholder distributions

4 Stronger Market Signal Than Either Action Alone While dividends prove cash availability, and buybacks signal undervaluation, the combination removes ambiguity around both intent and execution. This dual action would significantly narrow the discount between market price and intrinsic value.

5 Alignment with Best Practices in Capital Allocation Indian markets have historically re-rated companies that adopt disciplined, shareholder-friendly capital return frameworks following one-time monetisation events.

Expected Outcome

Such a calibrated approach would:

• Reduce downside risk for shareholders

• Improve confidence in capital allocation discipline

• Accelerate market re-rating toward intrinsic value

• Preserve flexibility for future strategic decisions

Importantly, this proposal does not preclude future dividends or buybacks, nor does it compromise long-term growth aspirations.

Closing

Many long-term shareholders, including myself, strongly believe that a measured capital return strategy at this juncture would meaningfully enhance trust, transparency, and value creation. I respectfully request the Board to evaluate this proposal in the best interests of all stakeholders.

Thank you for your continued efforts and for considering shareholder perspectives.

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559

kindly share the reply received.