Aggressive and untimely acquisitions with leveraged funding creates problems for many companies. Big business houses like TATA and big companies like Suzlon are recent examples. If the demand for the products of acquired companies declines immediately after such acquisition by any reason like business cycle, over all recession of economy… etc ,depth of the problem will be big and such a situation may grow as a threat even for the survival of the companies. If the promoters pockets are not deep or they are not able to raise further funds for working capital, such companies may go through life and death situation.
INDAGE VINTNERS is such a company at present. We all know the fact that ,it was the market leader of wine in India till 2008.In March 2008 FY ,company posted a turnover of Rs.254 crore and a net profit of 38 crore .Enthused by the then prevailed excellent growth prospects ,company made some aggressive acquisitions in countries like UK ,Australia,South Africa ..etc. Funding of this costly acquisitions met mainly through issue of FCCB’s. Unfortunately scene changed very quickly and recession gripped the western world which ring the deth knell of Indage Vintners. Declining demand in one side and mounting interest payment on other side drives the company in deep trouble. Company could not eve operate for a long time due to lack of working capital and about 250 employees left the company due to non payment of salary for many months. Company recorded a massive loss of unbelievable 109 crore in March 2009 v/s a profit of Rs.38 crore in previous year.
Now, after a gap of two years , by raising working capital through issuing shares to four entities which belongs to the promoter group of another BSE listed company at a price of Rs.88/-,Indage is trying to come back. This business group even selling the shares of their own company in order to fund the conversion of warrants. One time settlement with lenders are also in a stage of finalization. Considering the fact that ,it is an integrated company with 2500 hectors vineyards, number of wineries in India and abroad ,and established brands – we can’t write it off even at current level especially at a time when its sales are showing gradual recovery. But the chances are 51:49 , high risk takers can try minimum exposure in this old star at CMP of RS.52/-
I agree, boss.
ReplyDeleteThanks boss
ReplyDeleteBoss, Any idea if (a) an open offer will be triggered by thw conversions & (b) where we can access the Sheme Of Arrangement with the company's creditors ?
ReplyDeleteAlso boss, can you mail me at boscom@gmail.com ? Wish to touch base with you.
ReplyDeleteBoss the tunnel is closing and you still see light at the end of it ???
ReplyDeleteStill a buy ??
Boss, I have clearly indicated the degree of risk involved in it.Court verdict is really another blow which happened later.Expecting a clear picture on CDR within 2 days.
ReplyDeleteSo should be bought @ des levels ??
ReplyDeleteBetter to wait for a clarification
ReplyDeleteGone through the advise you have made, looks like long term investment opportunity. In year 2008, it was touched the max limit of Rs. 800 Plus but post recesion, as you said clearly because of Aquisition they had to arrange for funds to full fill the aquistion cost and later it went into cash crunch due to Lack of working capital. However, i feel still its a good future investment as per your recommendation. However Looking at the current scenario and the BSE announcement on Amalgamation , is this a still a hope of light at the end of tunnel ? Can you give your expert openion on this, so that we can start accumalating this stock and can the stock be a multibagger.
ReplyDeleteI expect the court will vacate the winding up order in near future and the merger process of Industrial Agencies Indage Pvt. Ltd with the company will speed up thereafter .The merging company owns some property and the realisation from the selling of this after merger will give some urgent liquidity and also the shares alloted against merger will increase the share holding of promoters.Hope for better days.
ReplyDeleteHi, I am a newbie to the market. Was going through the recos and came across this post. A quick glance of the fundamentals reveal that: (a) EPS is -ve for 5 consecutive quarters (b) Promoter holding is under 20% - as of March 2010 (c) But interest outgo is close to 10 Cr for the past 5 qts, and it is decreasing which is good.. Investment is both an art and science. As of now, am looking at it only as science :-) Your thoughts on this turnaround story please....Thanks.
ReplyDelete