The matter has to be judged on the light of the fact that :
a) It is permitted as per SEBI norms
b) The board had earlier approved had allotment of warrants to promoters @ 138, some 3 to 4 months back and which was subsequently cancelled.
However it would had been better, if the promoter could have infused entire 100% amount upfront which will save around Rs 24 Cr for the company (156 Cr for 18 M @ 10%), however the other side is that interest saving of company will be at the cost of interest loss by the promoters.
The company will be generating cash flow from operation of more then Rs 500 Cr in the current financial year and once it gets debt free I expect all future CAPEX to be funded by internal cash accruals.
In the forum I was reading comments on operational leverage by @desaidhwanil which I found relevant for Prakah Industries also
“The point that I am trying to make is that one can find good opportunities in business models where the operating leverage is very high, while the growth is not happening or de growth is happening due to some temporary industry/business challenges. The important aspect to figure out is whether the challenges are transient or not. The interesting part is, if the growth returns, the operating leverage will lead to non-linear growth in bottom line and hence suddenly, business that was looking expensive, can start looking fairly valued/undervalued. I personally like those kind of business models.”
In case of Prakash I presume three leverages will work in favor of the company:
Capacity utilisation which till last quarter was around 75 to 80% is expected to incease to 95 to 100%.
Due to Captive mines and coal linkages the operational margins are expected to improve substantially.
The price of the finished goods itself is witnessing an uptrend and is expected to continue or stablise at substantially higher level as compared to the prices 6 to 12 months back.
CAPEX expenditure even during the downtrend cycle of Steel Industry, which is going to benefit them now.
Apart from this future CAPEX which the company has planned, if timely commissioned, will also help in improving the performance of the company.
Domestic steel producers should be happy at China’s Tangshan city’s decision to continue curbs on steel output. Winter curbs on output in this key steel-producing city were to end in mid-March but have now been extended till mid-November. This signals a tighter supply situation when demand is expected to pick up, after a lull due to winter and holidays in China.
Tangshan is part of the Hebei province which produced 191 million tonnes (mt) of crude steel in 2017, nearly 20% of China’s total steel output, according to Reuters. The city contributed to over half of Hebei’s output. Its decision to continue with curbs also indicates China’s continuing resolve to keep steel output in check. Improving air quality is one objective as also the need to quell criticism that excess steel output in China is adversely affecting steel producers elsewhere in the developed world.
Chinese steel and iron ore prices have risen this week on this news. The impact on steel is understandable, as a tighter supply situation when demand should increase signals higher prices. For iron ore, it can cut both ways. Lower Chinese steel output means lower requirement for iron ore. However, a trend noticed last year was companies buying higher quality iron ore to stay within pollution limits. That led to higher prices for quality iron ore. Higher ore prices in turn set a floor for steel prices.
Where do Indian steel producers fit in? Major steel producers have been doing well, on the back of rising steel prices and completed capacity additions. The prospect of domestic steel prices staying firm in fiscal year 2019 has improved after China’s decision. Also, India has turned a net exporter of steel, meaning it benefits directly from rising global prices. In April-January 2018, India’s imports of finished steel rose by 5.5% to 6.4 mt whereas exports rose by 40.2% to 8.2 mt.
Recent data shows that global crude steel output rose by 0.8% in January over a year ago, with China’s output estimated to have declined by 0.9%. The next few months will give a clearer picture if output increases trend low.
There is one risk to the brightening steel picture. The US may impose higher duties on steel imports in a bid to give an edge to domestic steel output. That can put prices under pressure as it can upset the global demand-supply balance. That can then, potentially, undo some of the good that will come from China keeping a lid on steel output.
I am not giving a clean chit to the promoters on this issue but why would Prakash Industries take transfer credits from benami accounts directly.
The companies are smart enough to first transfer the amounts to other shell companies then to some other sister concerns and then to the main company. The companies layer one transaction over another so that it becomes difficult to trace the source of funding.
Again at the cost of repetition no clean chit to the promoters but at the same time I do not see any strength in the allegation and also it will not be easy to prove the charges.
OSuch charges
My view may be biased as I am invested in this company and will remain invested till I see any fundamental deterioration in the company or steel cycle.
If u read the above report and if it is true, the activist has complained to ED, Pmo etc etc and must HV definitely had the evidence of the same.Therefore there is definitely a case for further investigation ,If possible rather than speculating on the report.
My point is that if I have to do any benami transaction I would open shell companies to route all those transactions rather then directly taking credit from benami accounts into my main accounts which is subjected to statutory audit.
The allegation further says that
“He further alleged that Rs 493 crore which was transferred to the account of M/s Prakash Industries Ltd, may belong to Maoists. However, after the money were transferred to these two accounts, the money vanished and neither its rightful owners could be traced nor any action was taken thereafter.”
Now if fund is coming into a listed company then how can it vanish and if suppose my purpose had been to simply vanish the infused amount then I would rather open another shell company for routing such transactions.
My belief is any listed company with turnover of more then 2000 Cr would never do such kind of suspicious transaction in their main account. Had the transaction been done in any associate or sister concern account I would have given more credibility to the allegation.
I believe this site posts analysis based on evidence.while your view point may b right, but not strong enough to contradict what’s there in media report.Till su h time, investors have to be cautious
The article suggests a logical sequence where a big amount was split into small parts routed through benami accounts and deposited with Prakash Industries. Prakash Industries being a big company could have used it in giving contracts to the people whose black money they were trying to convert… but I would seriously doubt that the promoters are stupid enough to use books of a listed company to convert money that belongs to Maoists… Would wish the truth comes out quickly else it would be a drag on the stock…
Another point to note is the period of deposit coincides with the cancellation of coal block when the company had to pay an additional levy of ~250cr. Maybe the company tried to arrange money and what they could find is black money which they tried to convert through benami transactions etc
Disclosure: invested, would wait for more info before taking any decision
As far as I know accounting if any company receives any amount from third party then either it has to be routed through capital account or through Profit and Loss , however during the given period neither there is increase in capital account (no Capital infusion) of the company nor there was substantial profit . The cash flow from operation was also at the same level during that period.
Accounting is on a double entry book keeping basis and any receipt will be either in capital or current account i.e if a company receives any amount in the form of Capital then it will go into capital account and the person giving the amount will be classified as an share holder and if the receipt is treated in current account then the person will be classified as an creditor and if it is classified as none of the above then the receipt will be treated as other income and reflected in P&L.
I fail to see any substantial changes in any of the above accounts
May be somebody who is expert in accounting may advise as to how the transaction( if any) might have been routed.
Most likely the alleged funds must have been routed through the Balance Sheet via Loans and Advances taken and given and could have been squared off before the year end. That is most likely way someone would do it. Routing through P&L brings in a lot of suspicion and is easily detectable in case of large amounts. Just giving my views and this article casts further doubt on company’s not so clean corporate governance.
Why has it not been picked up by any other media? Is this site reputed and genuine?
So we can assume that there is a further Debt reduction of around Rs 158 Cr in the current quarter : Debt reduction of Rs 116 Cr by cash payment and reduction of Rs 42 Cr by way of equity dilution.
Apart from this the management has given indication that the sales realisation are at higher steel prices compared to steel prices in past. It means the EBIDTA margins will be strong and the company as projected will give a strong set of Q4 results.
Also the company has advised strong growth trajectory in PVC division also.
Summary : Valuations comfortable,Debt is reducing,sales are improving, capacity utilisations are improving, margins are improving, sector in a strong uptrend, Government focused on revival of Steel Sector(& financial sector), Indian steel demand improving,Global steel demand improving, Global steel prices improving,China rationalising its production(one of the main factor and in my opinion this factor alone is the sole and major contributor and other factors mentioned above are just a by-product of it).
The rationalising of production and price of Steel by China will play for a longer term and one needs to understand and comprehend the basics of this alone factor to have a holistic view on Steel Industry.
As already mentioned the government has no other option but to help Steel Industry in a big way for its revival. The government support will continue so that bidders are optimist for stressed steel assets with financial institution. The Public sector financial institution are in very weak financial position and one of the major reason is due to lending to Steel sector. If the steel sector is revived the Banks will be able to manage NPA assets which at present is over Rs 2 Lac crore.
So if you can understand the China factor and urgency of revival of steel sector in India you can have logical view on Steel Companies in India.
Steel Secy. says U.S. move to place import curbs may not have immediate impact on India
India does not expect any immediate impact from United States President Donald Trump’s decision to impose curbs on steel imports, according to Steel Secretary Aruna Sharma.
Mr. Trump on Thursday announced that he would impose hefty tariffs on imported steel and aluminium to protect U.S. producers, risking retaliation from major trade partners like China, Europe and neighbouring Canada.
“We have only 2 per cent of our exports to the U.S., so no immediate dent, but validity of Section 232 is stretched to be used as tariff barrier,” she said on Friday.
The Trade Expansion Act of 1962, Section 232(b) gives the U.S. the ability to investigate whether certain imports, or high levels of certain imports, pose a threat to national security.
Although the general consensus indicate that direct impact on India may be less, as India’s export to US is only 2% of steel produced, what could be a cause of worry is how the flows get redirected from the impacted countries. Indian producers like JSPL for example exports to Mexico & Canada, and these countries will be significantly impacted by the new tariffs. They have to redirect their flows elsewhere going forward, and could that mean more competition for Indian steel exports?
The Steel market is predominantly managed by China and I do not feel any move by USA will have any significant effect as the total imports by USA is paltry 30 MT, and its annual consumption is at around 130 MT. Compare it with China where capacity is in excess of 800 MT. China alone has shut down its capacity of more then 150 MT in the last 18 Months.
As already said unless China resumes its production at full capacity, which as per my understanding will never happen again(for reasons already mentioned in my earlier posts), the demand and price of Steel will comfortably remain at healthy levels which augurs well for entire steel industry especially India.
The news may have some sentimental effect for some day but I do not see any material change in the fundamentals of Indian Steel Industry. India is not a major exporter of Steel products and in all probability will ensure to impose sufficient import tariffs to prevent any major inflow for protecting Indian steel Industry.(If USA can impose tariff barriers why cannot India)
As per market information TATA Steel and JSW are further expected to increase price of finished goods in the current month
Senior members may throw some light on the steel fundamentals.
What is the ferrous alloys production of Prakash industries and how much percentage of that is sold in market.As far as I know it export ferro alloys and iron ore.
