TIL - Infra story-can this be the next multibagger?

[varadharajanr]

@aveekmitra

These type of deals are common for giving kick backs to benami companies of politicians and policy makers to compensate them for their generosity. Look at vadra-DLF.

My sense is some big fish who helped them get the contract has been given these shares instead of cash to make this quid pro quo and all “white”. I used to be an investment banker and these type of shareholding is common in companies like indiabulls power (ahmed patel), GMR, GVK.

This is an industry wide well accepted practice as no cash exchanges hands and even if someone gets caught, they are no legal grounds since no profit has been booked out - remember, it’s mere allotment of shares and big paper profit.

[Anant]

I have removed the email conversation but the gist of my email discussion with the mgmt:

a) Showing absolute reluctance to respond to investor queries.
b) Same response as Aveek citing confidentiality.
c) Currently asking the mgmt. to sensitize me with the confidentiality of information sought.

[Anant]

This is from my discussion with Sekhar Bhattacharjee:

a) Only Rs 1 has been called up. As long as company does not call up remaining Rs 9 the transaction will become void.

My conclusion:
On the face of it, this looks likes some kind of wrong-doing by the mgmt. But I think once AR is out there could be some clarity and a loan against which these OCPS are issued as security (my hypthesis based on discussion with the CS and another investor who was able to get through to Aloke Banerjee).

Disclosure: From the time this issue has been brought up I have remained on sidelines. There is no material change (+/-1%) in my position. TIL continues to be a 10%+ position in my portfolio.

[priyank9]

But i feel the transaction will be void is just to escape investors query as 1.5 cr for a company whose turnover is Rs. 1000cr plus and is making profits and you get 25% share in it on conversion, is not at all a bad deal. Why would it go void in first place? i dont beleive that anyone would be reluctant to pay rest Rs.9 and get 25% holding.

Its very important to figure out that whom have this shares placed ? and secondly as per my knowledge no Prefernetial shares as per new act, can be made at par, it has to be at BV, correct me if anything is wrong in my understanding?

Need to still dig more to find out the truth…

Disclosure: I continue to hold TIL and there is no material change (+/- 1% ) in my portoflio for TIL

[Anant]

The option to call up Rs 9 is at the discretion of company. This is from what I could gather of my discussion with the CS.

[basumallick]

What puzzles me is why go through all this trouble for 15 lakhs or even 1.5 crores?? Smells very fishy

[varadharajanr]

This has the smell of a quid pro quo deal all over it

1. placement done at par which is ridiculous
2. only Re. 1 called up - in case anything untoward happens, they can reverse this transaction
3. the transaction neither provides liquidity nor has a marquee investor and is done with an unknown. So, it obviously is done to benefit the other party rather than TIL.

@priyank9

once the shares area alloted and the shareholder pays up full amount, company cannot refuse it - the company is lying on this.

[priyank9]

Hi Thanks @varadharajanr
Anything from the law side if you have any clue please do share for the firum to understand that too in a better manner.

[Anant]

There is no strategic or other investments that has been made by the purchase of the OCPS.
The following is the modus operandi:
The issue of OCPS happened to Abhiksha Enterprises Private Limited. Following is the TIPL resolution to that effect:

“RESOLVED THAT pursuant to the resolutions passce by the Board of Directors of tl-re Company at its meeting held on 17d October, 2013 and also by the Shareholders at the Extraordinary General Meeting held on 186 November,2013 respectively 15,00,000 (Iifteen Lakhs) Optionally Convertible Preference Shares of i 10/- each at a partly paid up value of { 1/- per share aggregating to { 15,00,000/- (Rupees lifteen Lakhs only) bea ng distinctive numbers ftom 1 to 15,00,000 be ancl are hereby issued and allotted to M/s. Abhiksha Enteryrises P vate Limited having its Re$istered Office at J4/95A, IInd Floor, Khirki ExtensiolL Malviya Nagar, New Delhi 110017.”

Abhiksha Enterprises was founded in 2010 and following are the promoters/directors of the company:
Balakrishna Chaturvedi (Born 1936)
Mr. Akanksha Chaturvedi (Daughter of Sunil Kumar Chaturvedi born 1990)
Ms Meena Chaturvedi (D/O Bhagwandas Mulchandani(born 1959)

There is a tonne of information which points to a) things not adding up (like weird email-ids, age of director etc., change of address) and b) nature of transactions that can be faulted - from a minority shareholder standpoint. I will cut the long story short: the company passes a bunch of resolutions to increase the shareholding capital on 01/04/2015. In the newer shareholding pattern you find that Mr. Sunil Chaturvedi’s name appears, his PAN no. is also mentioned (from MCA disclosures).

The name of TIPL Managing Director is also Sunil Kumar Chaturvedi whose DIN can be found in TIPL documents.

Connecting the dots: Go to
http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.do?method=setDefaultProperty&mode=50

The MCA site will ask you for DIN no. of the director. Enter DIN of Sunil Kumar Chaturvedi and you will be taken to a page which gives out his name and his father’s name as Balakrishna Chaturvedi. This new page also contains a field that asks for PAN no. of the director and once you fill that it says DIN/DPIN details are matching with Income Tax PAN database completing the circle.

I do not think we need any further evidence to come to sensible conclusions. As someone in VP Chintan Baithak said and a thought that has stuck to me “You cannot have a good deal with a bad person”, I have exited all my positions.

All my inference/conclusions have been drawn from data that is publicly available on the MCA site.

[Donald]

@aveekmitra, @Anant,
Brilliant work guys. And thanks for sharing your findings that do not seem to add up.
This will serve to educate newbies and senior practitioners too about possible malpractices prevalent in our Markets.

@varadharajanr
At the same time, let us not lose sight of the fact that VP is not an ACTIVIST organisation. Neither are we CRUSADER Journalists in the vein of MoneyLife who are doing a tremendous job on this front. Anyone is free to forward your findings to MoneyLife for example, and let the Specialists take over.

Much as we admire those pursuits, let us concentrate on doing our job well - which is to focus on highlighting absence/suspect business or management quality and/or highlight superior business/management quality.

We have had to intervene on the advise of Seniors who alerted us to edit/delete member posts to maintain that clear distinction. Please understand the reasons behind.

[Shivkumar]

TIL’s consolidated results for June 2014 also has this disclosure: http://www.tilindia.in/pdf/Press_Release_28th_July_2014.pdf

[aveekmitra]

@Shivkumar

On this July 28th 2014 result, TIL mentioned “A subsidiary issued 15 Lakh shares” … They never mentioned “Indian Subsidiary” i.e. TIPL issued 15 Lakh shares.

It is TIPL who provides the bread and butter (and Jam and Jelly ) for TIL and it is a Rs. 1000 Cr. business owning Caterpillar distributorship for North / East India. It was very difficult and improbable to assume in July’14 that dilution was in TIPL and not in TIL (Nepal) or TIL (Myanmar) or TIL Overseas…

But yes, I think, on hindsight, I should have checked the MCA filing of TIPL after this announcement.

[Anant]

In their annual result filing to the Stock Exchange it was mentioned that it is Indian Subsidiary. Point no. 3 describes who the Indian Subsidiary is and point no. 9 describes the issuance of OCPS. This has been my reference point:

http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/DFBC60A7_104E_4CB9_9078_B7C2DB26CFC8_153858.pdf

[aveekmitra]

@Anant

Shivkumar Mentioned that July '14 result also mentioned about sale of OCPS …

In July '14 filing, they didn’t mention Indian subsidiary but told “A Subsidiary” …

My response was in that context.

[ashwinidamani]

I was tracking TIL, but when I listened to the latest concall on researchbytes, I felt the management itself did not sound confident.

Coal theme has been picking a lot of steam, but I would rather avoid companies where management itself isnt sure of future

[ttt1947]

There are two more things which i need to point out

One is that the annual report is uploaded

9% Optionally Convertible Preference Share
Abhiksha Enterprises Private Limited (Number) 1,500,000 -
Abhiksha Enterprises Private Limited (􀀈) 100 -

Second is even in CFO there is 45 crs unrealised forex gain .That simply means that profits are overstated by 45 crs of forex item

I offloaded all my stock a couple of days back

I have also written to Sucheta dalal of moneylife to take the issue forward as the MD is chairman of (CII)

[dua]

Why effect of dilution in not 25 % …bcus company has called 10% value?

[Arka]

A major shareholder of TIL Limited, Girish Gulati (HUF), has changed their shareholding in the company by more than 7%.

[anupam_Jain]

any thoughts on the restructuring, promoter change or capital change that recently has happened.