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Tuesday, February 25, 2014

How one could have avoided Everonn Education

This post on Everonn Education has a thread that goes back about 2.5 years ago, see below. One of my friends asked my opinion on Everonn Education when one of Everonn's key management personnel (MD and founder of Everonn Education) was just arrested by CBI.
The stock was trading around 350+, see below note. However, the stock bounced back for a brief period sometime in Oct 2011 and reached a high of 390. I was of the firm opinion to exit this stock and this price movement was god send for the friend.

Later this stock, read the darling of once upon a time of the market punters, could never see those levels. Today that friend reminded me of Everonn Education and asked me to check the price. Its today's price is Rs34 which is a loss of about 91% of the capital from Rs390 levels. I am sure if it will never see those levels again in its lifetime. It will be worth reading below communication and if you have any opinion, please do share.

Niteen S Dharmawat

On Fri, Sep 2, 2011 

Niteen S Dharmawat wrote:
How one could have avoided Everonn EducationEveronn Education which came in news because CBI had arrested the founder and managing director of Everonn Education Ltd., P. Kishore, on charges of bribing an Income Tax official with Rs 50 lakh. 
This will adversely affect the stock price of Everonn Education. Everonn Education had been a darling of stock punters for last several months/years due to various reasons including flamboyant business model, appointment of prominent personality like Dr. J. J. Irani on the board of the company, selling stakes to prominent shareholders like Sea King Infrastructure's (SKIL) Mr. Nikhil Gandhi and investment by some prominent non-promoters (part of public shareholding) in the company include  Morgan Stanley Mauritius Company (4.32%),  BNP Paribas Arbitrage (1.31%), Citigroup Global Markets Mauritius (1.30%), Reeshanar Investments Ltd (2.96%),  JF Eastern Smaller Companies Fund (2.05%), India Fund Inc2.28%), Indea Capital Pte Ltd A/c Indea Long Termopportunities Master Fund(2.08%), Amundi Funds India(1.82%) and New Vernon India Ltd (5.69%).
Could we as an investor save ourselves from investing in a company like Everonn Education? Yes, certainly. If someone had just followed the parameters described in my investor education presentation, s/he would have never invested in this company. One of the reasons which would have given a red signal is ‘Skin in the game: Promoters buying or selling’. 
If you see the Shareholding Pattern (SHP) of Everonn then you will find that main promoters are holding 42.67% of shares. This 42.67% includes the diluted stakes by selling 40 lac shares (which is equivalent to 20.83% of total shares of Everonn) to SKIL Infrastructure. If you see the SHP reported in June 2011 (same in March’11) this entire stake of 40 lac shares is pledged by SKIL Infrastructure. In other words, the skin in the game of promoters is reduced to 21.84%. Out of this 21.84%, the main promoters have also pledged 8,13,989 shares. If we remove this also then the promoters holding comes down to 17.6%. One would not have invested in Everonn Education because: 
- Promoters have pledged significant stake and thereby reducing their stakes in the game significantly 
- The main promoters have less 20% stakes remaining with them (don't smell a similar to Satyam? we forget so fast.) 
- Never get tempted in the company just because of big names are part of the venture instead a due-diligence would have helped.
Trust this is of help. Please share your views.
Happy investing,
Note: the views expressed here are in all respect my personal and may go completely wrong. This is for private circulation and has been sent only to limited people to get their views. You are requested and advised to do your due-diligence and take the advice of a qualified financial advisor before taking any financial decisions.

Wednesday, February 19, 2014

Suni Hitech Engineers - BSE: 532711, NSE: SUNILHITEC

CMP: INR 53. Market Cap: Rs 65Crs, PE: 2.6, Div Yield: 2.3%, Book Value: 227
Trailing Twelve Months (TTM)
Revenue: Rs1172Crs
Net Profit: Rs 25Cr

Dec QTR:
Revenue: Rs 362.09Crs
NP: Rs 6.26Crs

Promoters holding: 53% (no pledging)
Foreign holding 10.45%, 
Non Prom Corp 4.26%. 
Public 32% i.e. Rs 21Crs

Also in public category, more than 1%:
Bessemer Venture Partners Trust: 8.96% (click here to know more about BVP investments: http://www.bvp.com/portfolio). They acquired a long back and if I remember it correctly it was close to Rs400 per share.
Ashish Dhawan: 2.00%

So remaining from public category is Public 21% i.e. ~Rs 14Crs

Niteen S Dharmawat

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that I consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above. I sincerely request you to do your homework before you take any position whatsoever. I, my relatives or friends may have/have positions in the stocks discussed here.

Saturday, February 15, 2014

Eimco Elecon: The Power of Quality Undervalued Stock


I delivered a presentation today on Eimco Elecon. I believe that it is an undervalued stock.

Eimco Elecon is a leading, profit making and established manufacturer of various Mining equipment. It is a zero debt company available at a Market Cap of just Rs92Cr (CMP INR 160). More importantly it has an investments of INR 60.42Crs in high grade shares and mutual funds. So effective market cap is just INR 32Crs i.e. INR 55 per share. Besides Net Current Asset per share is INR 154 and book value of INR 295. It is like company paying us to acquire its shares. Some additional highlights include consistency in operating and free cash flow, dividend yield of 2.5% (paying dividend for last several years), ROCE in double digits during last 6 years, and high promoters at 74% stake including 25% by Sandvik group. Also HDFC holding 4.79% for last several years. The key negatives are slowdown in mining and construction industries and overall economy & equipment industry and the stock is an illiquid/low volume stock.

You may get the presentation from: http://www.slideshare.net/ndharmawat/eimco-elecon-the-power-of-quality-undervalued-stock

Please share your feedback.

Niteen S Dharmawat