Something strange that I observed:
Cash decreased roughly by 450 Cr and Fixed assets increased by roughly by same amount in FY23
On further Investigation it looks that company has paid this amount to government to buy Lease hold Land based on Q4 FY23 Results
Isn’t this a huge transaction taking away 50% of the cash company holds? Shouldn’t it be covered by company as to why it was required and if was must?
@Ravindra83 @dd1474 Can you share your views please?
@Amit2saxena
Thanks for seeking my view. My view may be negatively biased due to my exit and investment in competitor ITC.
As correctly pointed out by you, the company spent around Rs 350 Cr for purchase of leasehold land. As per screener data Rs 350 Cr are utilised for purchase of land while around Rs 73 Cr is addition in Plant and Machinery which I assume normal mainteance and growth related expense.
I also gone through Q2FY24 results which has following comments in the covering letter.
From this, it appear that company management intend to integrate its operations at one place and likely gain from synergy. Further, it is likely to release Azamabad property in Hyderabad, which may be encashed in future. Hence, to take a view only on purchase of land and infer that management is misallocating capital may not be correct in my limited understanding. One need to see action of management, specificially about land encashment/utilisation of Azambad in Hyderbad and how it share the benefit with the shareholders. In short term, such action would mean lower other income and hence lower dividend distribution, but in long term, it might be positive for the company.
Disclosure: I have exited from VST couple of years back and continue to remain invested in ITC. Hence, my view may be negatively biased. I have excellent track record in being wrong with my forecast. I am not SEBI registered advisor. I am suggesting any investment action in the company.
Out of the blue, today this stock hits 20% Upper circuit breaker - Nothing on the news though!
There is 4% change in equity
Most probably it’s revaluation of the land they own on the books …
I haven’t gone through AR , just checking via screener
Company converted leasehold land in Hyderabad to freehold land by purchasing (paid around Rs 325 Cr) land from Govt. of Telangana
Why the company invest huge amount to purchase the lease when they already had the lease and also doing business from there.And what incremental revenue this land can generate for the company, any idea?
I am expecting that the market value of the land will be much higher. They can sell the land and move outside the city at a much cheaper cost. The return will be distributed as dividend
Majority shareholder is BAT.
While BAT Selling in ITC is well.known they might want to take as much out of vst as possible too.
BAT has stated publicly on it conference call that it needs to reduce debt. They are monetising non core assets
So this is a possibility for sure
