Sreesakthi Paper Mills (BSE: 532701) was originally started as a paper company in early 90s in Kerala. The company was profitable and was performing well till the year 2014 which is evident from the fact that they were dividend paying till 2014. After 2014 the paper business went into losses due to cycle reversal. Also Kerala government imposed strict regulations on pollution control and asked them install effluent treatment facility at their paper plant. Management by their own admission (as per AR 2016) felt it will not be profitable business to continue and decided to close down the paper business.
About the Management:
The company is owned by S. Rajkumar who has vast experience in logistics business. The management currently owns an operational logistics park in Oragadam, Chennai. Everstone which is the largest Indian Private Equity investor, took a majority stake in this part for about 200cr.
The below website has more details about their logistics business:
http://sreekailas.com/Logistics.php
Sree Kailas Logistics:
Based on AR published for the year 2017, the company plans to set-up a logistics facility in place of the current facility in kerala. The company also intends to change the name of the company to Sree Kailash Logistics.
Latest AR: https://www.bseindia.com/bseplus/AnnualReport/532701/5327010317.pdf
The company currently has some debt in the books from the erstwhile paper business which will be retired from the following- So after this company will become debt-free.
- Proceeds from sale of Palakkad Land – Sale completed, company has disclosed to exchange
- Proceeds from sale of current plant and machinery – Sale completed. company has disclosed to exchange
- Convert remaining loan to warrants/equity – Currently voting resolution going on based on announcements.
For the new business, the company plans to use the land in Edayar to set-up warehouse and cold-storage facility.
“Your company has undertaken the implementation of Dry Chill Cold Storage (Logistics Business) and planning to establish 2 lakhs sq. ft Warehousing space during the current financial Year. Your company has also initiated discussions with select MNCs for renting the warehousing space.” – From AR Page 19
Hydropower: Also based on AR the company has 47% stake in 3 hydro power plants (11 mw) which are yet to commence operation.
Risks
- The new business is not operational as of now. Execution risk must be factored in for a start-up company.
- Will they be able to get new clients and make it operational.
Compared to peers like Snowman logistics in logistics business which trade at about few hundred crore market cap, this company at a market cap of 17cr looks interesting if the promoter is able to repeat execution of what he had done in Chennai.
Comments invited. I don’t own any shares of this company as I am still studying it. It looks very risky as it is a smallcap company.
1 Like
Sree Kailash logistics didnt appear in bse. Is this listed?
I think Current company name is Sree Sakthi Paper Mills Ltd.Which is listed in BSE.
https://www.bseindia.com/stock-share-price/sree-sakthi-paper-mills-ltd/sreesakhti/532701/
It is planning to rename Sree Kailash Logistics
The volume looks very low. A lot depends on how the management is because this is altogether a new business for them.
Management ability seems very good considering he has built one logistics park in Chennai. Risk is due to illiquidity as it is micro cap stock.
Now promoter increases 5% stake by issuing equity shares at 11rs/share. today’s published details…
Meanwhile stock has moved to some surveillance category. S+ surveillance.
The stock has come out of this surveillance category and my broker is allowing me to buy. Cmp of 8 and promoter buying at 11 means he sees more value? How to deal with such micro cap stocks?
Hi,
gone thorugh the website…do sree kailas group has got any other listed entity other than sree sakti paper mill? do all the operation such as logistics, RMC, hydro power etc come under sree shakti paper…with everstone investing 200 cr in the project and sree kailas being a 600 cr company and sree sakti paper being a below 20 cr mcap company, will all the operation be under the listed entity??? The number of share holders has been steadly reducing which indicates accumulation…
http://www.shrikailashlogicity.in/LOGICITY-%20BROCHURE.pdf
1 Like
This brochure has details about their Chennai facility and talks about Promoter capability. I think the listed entity has only Kochi operations as per their Annual Report. I got good feedback about the Promoter. Took an initial position. Yes at 20 crores market cap and being debt free it looks interesting. Also Promoter has accumulated more through preferential allotment in March quarter.
1 Like
they have not issued new shares but merely converted their unsecured loans to equity. No fresh money is pumped in because of this.
Yes. But it still implies Promoter wanted to increase his stake. He could have chosen to cash out. This means he has hope on the business plans. it is just a start-up as of now.
ok, but how can he cash out ? There was no other way i think.
The company received a sale amount of about 20 cr from sale of Palakkad Land and Plant & Machinery. I have given the disclosure details for that. He could have encashed that instead of paying KSIDC where it was only a preference share.
ok. maybe i am missing reading the 20cr sale value but i will re-check. Still whatever money the listed company gets, how can a promoter encash that without giving dividends ? Redeemable Preference shares were issued in lieu of conversion of loans to equity.
Because it was the money lent by him. There are lot of examples where Promoter lends in personal capacity and later encash.
my point is that there was no way to “encash” whatever money they had made by selling land as it belongs to all shareholders and not just them. ? They had to convert it to shares to improve balance sheet.
not that way @j2eeprofession_ in listed cos, shareholders take last claim of the profits. lenders > pre shares > common shares in that order. It was a loan
this rule comes in case of liquidation and not before that.also, dont forget that these preference shares became RPS when they converted their loans to equity and not before that. So there was no way for the promoters to encash them. And this is my moot point.
Why do companies deduct interest from the operating profit? To repay lenders first? So would this logic apply only during liquidation? You should read some offer documents when companies raise capital to repay promoter loans. There are so many examples there. When companies can raise capital to repay promoter loans then why not use profits to repay?
they cannot do so, because repaying that would first required secured creditors to be paid. Rules are rules.
