Scrip Watch

Indiabulls Ventures Ltd at Rs 33 ~ Up 100% in a month ~ More in Store?

Scrip Sanctuaries for protection from the wildlife in this jungle of Indian Equities

Indiabulls Ventures Ltd at Rs 33 ~ Up 100% in a month ~ More in Store?

52 Week high was Rs 39+ a year ago in July 2015 & 52 Week Low was Rs 13 this April 2016

The Market Cap from @ Rs 500 crs a month ago is now kissing Rs 1000 crs

It was earlier called Indiabulls Securities Ltd

The uptick has been brilliant in quick time & the writing has been on the wall.. read that as Company Notifications on the BSE & NSE in the past few months

May 13, 2016 ~ Granting of 9.5 Million Stock Options at an exercise price of Rs 16 (current price at the time) under the ESOS 2009

June 15, 2016 ~ Board Approval of a Preferential Issue of  58.3 m Convertible Warrants to Promoters & CEO at exercise price of Rs 19.75

June 20, 2016 ~ EGM Notice for July 15, 2016 to pass the Preferential Issue as above & SALE OF INVESTMENT 

July 2, 2016 ~ Granting of 19.7 M Stock Options at an exercise price of Rs 24.15 (price a few days ago) under ESOSs 2008 & 2009

So what’s the Big Deal ?

Big Deal is being planned to happen & that’s disclosed in the June 20, 2016 Notification of SALE OF INVESTMENT for improving liquidity & reduction of debt purpose which is Item No 2 and relevant part extracted as below

“….to sell upto 100% of shares held by Indiabulls Distribution Services Limited, a wholly owned subsidiary of the Company (“IDSL”), in India Land and Properties Limited, a wholly owned subsidiary of IDSL, on the terms and conditions, including the consideration, which shall be more than the amount invested by IDSL, in such shares, as the Board may finalize” 

This actually is the Sale of One Indiabulls Park,Ambattur, Chennai which was bought in November 2014 at @ Rs 600 crs from Madrid Based NRI Investor Harish Fabiani (he’s also invested in Edelweiss & Indiabulls Group Companies + others)

FY 15 Consolidated Accounts as on March 31, 2015

Consolidated FY 15 Accounts of Indiabulls Ventures Ltd shows Net Fixed Tangible Assets at Rs 550 crs  of which 77% is this Property reflected  with a aggregate value of Rs 426 crs ~ Rs 320 crs for the Building + Rs 15 crs for Furniture + Rs 91 crs for Plant & Machinery

Long Term Debt at March 31, 2015 was Rs 331 crs, all of which relating to the One Indiabull Park Property ~ 150 crs 10 year (monthly EMI) Lease Rental Discounting Facility + Rs 185 crs 5 year Loan Against Property

FY 15 also shows Goodwill on Consolidation of Rs 109 crs, most of which is related to this property acquisition by subsidiaries

FY 16 Consolidated Accounts as on March 31, 2016 reveal :

  • Networth was Rs 332 crs with FV Rs 2 Equity at Rs 58.57 crs giving a Book of Rs 11.3 per share
  • PAT was Rs 74 crs (half of FY 15 PAT of  Rs 151 crs) on Sales of Rs 376 crs (Largely Rs 312 crs from Broking + Rs 55 crs from Lease Rentals) with Finance Costs at Rs 148 crs (FY 15 were just Rs 61 crs) ~ EPS computes to Rs 2.5
  • Long term Debt had moved up to Rs 392 crs while Short Term Debt was up from Rs 1353 crs to Rs 1708 crs
  • Fixed Assets had moved up to Rs 575 crs & Goodwill to Rs 122 crs

So if the Chennai Property is being sold, what will be the Consideration ? ~ as per Item 2 of the Agenda of the EGM on July 15,2016 it has to be more than the Cost which was Rs 600 crs => @ Rs 3000/sq feet for the 10 acres Land + three 16 storey’s Commercial Buildings offering 2 m sq feet on commercial rent on the Plot

So what will they get for this one & a half year from purchase ? ~ Rs 700 crs or Rs 800 crs or….?

Why are they selling the property so soon after purchase? ~ getting a good price or not contented with low lease rentals flow & less than full occupancy rate or tightening of liquidity & margins in broking related activities or….

Whatever… Company will become Long Term Debt Free ~ Proceeds will wipe out full Long term Debt & reduce Short Term Borrowings …. Finance Costs will reduce significantly …. Company will be on a stronger platform with Own Funds of a few Hundreds of Crores to scale up business operations…they can create fresh leverage on this to scale up faster

The Dilution in Equity too will be significant on exercise of Stock Options & the Preferential Issue ~ the recent notifications show fresh new equity of 8.75 crs shares. Incremental Equity of  Rs 17.50 crs will be created …. Equity will cross Rs 76 crs on this fresh grants (when option exercised) and issue (when converted)… Reserves will be pumped up by over Rs 160 crs on the premium…. Thus Networth of Rs 332 crs from FY 16 end will move up to Rs 510 crs

Assuming Rs 750 crs sale price of Chennai Property the Gross Proceeds work out to over Rs 25/share on current Equity & @ Rs 20/share on diluted Equity

Book Value will move up smartly from FY 16’s Rs 11.3 despite Fresh Equity Dilution (assuming employees, promoters & CEO opt for the shares at their Exercise Price in FY 17 itself) as exercise price is higher than current Book Value…. it will further strengthen with the Net Gains after Tax effect on Sale of Chennai property + FY 17 Normal Higher Earnings (advantage of lower Finance Costs indicated)

FY 17 should show an extraordinary high EPS on account of the sale + FY 18 onwards should grow normal EPS significantly from FY 16 levels

So from the 17 Subsidiaries,India Land & Properties Ltd will cease to be one on the Chennai Sale…proceeds will go to another wholly owned subsidiary Indiabulls Distribution Services Ltd…. what will it do with the money left over after settling Long term Debt & reducing Short Term Debt & paying of Tax on the Deal?…… Maybe invest in another Property/s ?… or will it issue huge dividend to parent to transfer net proceeds & in turn the listed parent part a large part of proceeds to shareholders as dividend ?… The Notice for the EGM of course states the sale is being considered only to improve liquidity & reduce debt

Company also had been paying Rs 1 dividend every quarter earlier in 2015 which they dropped to Rs 0.50 for the last two interims

Deloitte Haskins & Sells LLP, the auditors have given a  clean report… their office too is in Indiabulls Financial Centre in Lower Parel, Mumbai

Disregarding Indiabulls Group’s past controversies, clearly Promoter Sameer Gehlaut will be on a roll as his this company gets re-rated & his Promoter Holding moves up from 33%+ to 43%+…interestingly he’s not on the Board of Directors of this one

So was this 100% price rise indicated in the past months & days ?

I sense it was clearly,if not with the May ESOS grants at Rs 16,then surely a few days ago on June 15,2016 when Board approved the Preferential to Promoters & CEO at Rs 19.75 & a few days ago on July 2 where the ESOS grants were double in number from May at a higher price of Rs 24.15 !… so many approvals & grants in quick succession ?….had to be because of price running away & the fact that they had to be vested with exercise price at current price levels…. Interestingly the EGM Notice came up on June 20,2016 just 5 days after the June 15 notification of Preferential Issue

Now the Price is up 15% yesterday to Rs 33…. and if it maintains or grows from here any further grants will be at this or higher price… that should be another giveaway if it does happen

Promoters,CEO & Employees & Shareholders all being seen to be rewarded …so who’s complaining as long as Price runs up!…. CEO gets Rs 3 crs + annual pay & he regularly returns a large part to the company by exercising ESOS options + now with this 4 m convertible warrants being issued to him… converting his income to equity surely has to be a vote of faith.

Interestingly the EGM begins at 10 am on Friday,July 15, 2016…. hopefully outcome may be relayed to Exchanges during trading hours on the same day…. wonder if the One Indiabulls Park sale has already been finalised & seeking the mandatory shareholders permission for this special resolution is a mere formality…or will they then look for buyers after obtaining this permission

Anybody out there knows what’s the current Sq ft buy out rate of Iconic Big Commercial Property in Ambattur, Chennai !?

Flash Update, Morning of Wednesday, July 13, 2016

Economic Times  mentions other Media sources for a possible raid by Income Tax authorities on Offices aross India of the IndiaBulls Group…… their scrips are down 5% to 8%…. IB Ventures is down 8%+ at Rs 31.50 levels….. EGM scheduled for Friday should go ahead unless Raid spills over

lls Real Estate

Flash Update, Wednesday, March 15, 2017

IB Ventures finally notifies the exchanges of the Subsidiary Shareholding sale for Rs 685 crs that holds the Chennai Property.Sale was to it’s own Group Company Indiabu

After dropping to even below Rs 20 in November & December 2016 and even available at Rs 20 levels till last month in the  first week of Feb 2017 the Share Price closed 10% upper circuit today at Rs 41.95 on both BSE & NSE on this announcement. The Share Price actually began recovering lost ground quite quickly last month.Insiders obviously knew of the deal intragroup itself

Now What !?

Disclaimer : Have an interest in IB Ventures

 

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