Saturday, April 18, 2015




Often we must have come across the term book building in financial dailies, magazines or television when companies air the advertisement for their likely IPOs, FPOs or rights issue. The book building is nothing but the price discovery mechanism for the issued shares when a company plans to raise capital. Listed companies raise capital either through follow on public offer (FPO) or right issue but unlisted do so through an Initial Public Offer (IPO). And during the process, shares can be allotted to investors at a fixed price or investors can be provided a price band for making their bids. And based on the demand and supply for the shares in the market, cut-off price or the issue price for the floated shares is determined. This process involving the provision of a price band for the investor class for issuance of securities is referred as book building.
Company Issuing securities and Lead Manager complete book building process
The company raising fund capital to effect the book-building process appoint lead manager and an investment bank for making the issue public. Size of the issue or the maximum capital that will be raised through the issue as well as the price band is determined by the lead manager and the issuing company. Following, based on the bids from the investor for the issued securities as well as the demand-supply market forces for the securities in the market, cut-off price or the price at which the securities would be issued to the public is decided and finally securities are issued to investors. Accordingly, letters of allotment or refund are send across to the investors.
Further, as the bidding for shares of the company in the book building process is done within the provided price band; the lowest price referred as the floor price and the maximum price as the cap price, the demand for the securities is known on a daily basis unlike in case when the securities are issued at a fixed price.
Book-building vs Reverse Book building
Book building seems to be a much known term in contrast to reverse book building. So how the two process are different? While book-building as well as reverse book building process both facilitate price discovery, book-building methodology is adopted when a company plans to raise capital and the other is applied when the company voluntarily engaged in delisting of shares. Similar to the book building process, for buying back the shares, shareholders of the company can make bids a either the floor price or at a higher price. Maximum bids at a particular price then determines the discovered price I.e the price at which the company buys back shares from the public.
SEBI in a move to simplify the delisting process for companies is making plans on examining the complete structure of delisting that includes the number of shares to be bought back from public shareholders and price discovery to effect the delisting process among others.

Saturday, April 11, 2015


Pioneer Embroideries is a stock need no introduction to veteran investors .It was a hot one till 2007-08 which recorded its lifetime high @ Rs.345 during January 2008. Company is in the business of manufacturing embroidered fabrics, laces and dope dyed yarn and its brand “Hakoba” is still the undisputed leader in embroidered clothing category.In the ‘Laces’ segment company is the second largest producer in the world
                                                                             Company operating six manufacturing facilities across India with facilities to produce Embroidery (4248 million stitches), Bobbin Lace (25,200,000 mtrs), spun yarn (1,788 MT) and dope dyed yarn (10,500 MT). Due to leveraged and untimely expansion ( mainly in retail segment)  and  unexpected downturn in overseas markets due to recession ..etc  company went into big trouble .From a net profit of Rs.15 Cr reported in 2007 , its bottom line crashed to a loss of Rs.33 Cr in 2013 ( Out of this Rs.33 Cr , more than Rs.15 Cr were interest payment) . Sensing the big trouble, management initiated efforts to revive the company . Efforts to settle bank loans through CDR mechanism failed due to disagreement of few banks in the lender consortium . Because of this reason company initiated talks with each banks separately for one time settlement ( OTS) .Through this route company already settled its due to ICICI Bank and it is expected to complete the payment  to  State Bank of Patiala which already negotiated and reached amicable agreement .Meanwhile during last  year , company re-paid its entire FCCB obligation on a modified repayment terms .Now  its efforts to reach settlement with other banks are at various stages and management expressing their confidence to reach an amicable settlement with remaining lenders within not so distant future. In a recent development, Edelweiss ARC Limited ( EARC) , an asset reconstruction company sponsored by  Mr. Rashesh Shah led  Edelweiss Group took over the debt of Pioneer with EXIM Bank. I believe , Compared with banks ,Private asset management companies are more flexible and time and formalities needed to deal with them is less compared with PSU banks . Now EARC agreed to accept re-payment of interest outstanding on this loan in the  form of equity . As part of this agreement company now allotting  Eight Lakhs Fifty Thousand shares to EARC at a price of Rs.35 each. I don’t think ,any private ARC will convert  even a part of their assignment to equity if they feel the underlying business is not viable . 

Company’s retail venture – Hakoba Lifestyle-  is running through its subsidiary ( Currently four stores are operational ) and it also selling products like ready to stitch salwar kameez and dupatta sets, sarees ..etc through e-commerce sites like Flipkart..etc. Amid its not so good financial situation and working capital crunch , for the last five years pioneer reported substantial and steady improvement in its top line ( See below Table)  .

This clearly indicating,demand of product is  not the major issue of the company but mainly  the debt related issues eating its bottom line. Major fabric manufacturers in India and overseas are company's customers and the increase in export income was robust in last years which jumped from Rs.17 Cr to Rs.41 Cr. Its operating cash flow turned positive  in 2011  and it is about Rs.61 Cr in last FY. Now promoters are trying their level best to find a solution for debt related issues  and considering the recent developments ,I believe the possibility for a success in this effort is quite high. If the success of of their efforts continue in this same tempo , Pioneer may emerge as a dark horse in the years to come . Due to cash crunch company could not modernize some of its machineries in recent times. Once they are in a position to do that it will surely improve their efficiency and margins.   After the news of allotting shares to EARC @ Rs.35 , stock price appreciated in past few days . Average risk takers can wait for a correction ( if any )  for an entry and high risk takers may buy part now and add further in any dip ( if it happens) . This is not a stock suitable for those looking for quick bucks by investing only for one or two quarters. Earlier also I   indicated my positive stand on this company around Rs 20-25 level ( through replies to reader queries) which was before the arrangement with  EARC .  Stock listed in both exchanges and currently trading around Rs. 30 .

Link to Company Website HERE

Disc: It is safe to assume that I have vested interest in this stock.

Monday, April 6, 2015


SML ISUZU LTD - Recommended @ Rs.335 hits its life time high today @ Rs.1415 . Today company  reported  33% year on year growth in vehicles sales at 1,772 units for the month of  March 2015. Those with some risk appetite can still HOLD it

Recommendation Link HERE

CAPLIN POINT LABORATORIES LTD  - Recommended @ Rs.86  hits its life time high today @ Rs.1176 .Company now  informed the exchange that a license and distribution agreement has been made and entered by and between Caplin Point Laboratories Limited, India and Fresenius Kabi USA, . Under this agreement, Caplin Point shall be responsible for developing and manufacturing identified parenteral products whereas Fresenius Kabi USA shall be holding these ANDAs and commercialize the same in USA. 
Earlier suggested to book part profit to recover your cost . One can still hold the remaining quantity . 

 Recommendation Link HERE

SMS PHARMA LTD Recommended @ Rs.240 hits its life time high today @ Rs.650 .  Those with some risk appetite can still HOLD it .

 Recommendation Link HERE

Caplin Point Laboratories Ltd has informed the exchange that a license and distribution agreement has been made and entered by and between Caplin Point Laboratories Limited, India and Fresenius Kabi USA, LLC, a Delaware Limited Liability Company.
- See more at:
Caplin Point Laboratories Ltd has informed the exchange that a license and distribution agreement has been made and entered by and between Caplin Point Laboratories Limited, India and Fresenius Kabi USA, LLC, a Delaware Limited Liability Company.
- See more at:


Tweet TopOfBlogs