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Caselet 1_A cable manufacturer_case study

Caselet 1_A cable manufacturer_case study

  1. 1. Case: A cable manufacturer (Only for case study purpose as a part of Workshop, no recommendation) Caselet 1 A cable manufacturer: Manufacturing numbers Case: The share price of the company peaked on 14 Nov 2014 at Rs 134. Now it is an NCLT case. The 2013 Annual report with balance sheet, cash flow and P&L was available by this time (14 Nov 2014). Could we identify the trouble in the company based on the available data and what are the top conclusions that we can draw from this data? Draw 5 conclusions why it should be considered or declined to invest based on 2013 data and information provided? Profile: The company is engaged in the business of manufacturing of Transmission & distribution of power products & services in India. History: It was incorporated in the year 1970, as a conductor manufacturing company. From 1995 to 2006, they set up an LV Cables Manufacturing Unit, Aluminum Road Mill, EPC Business. In 2007, Company acquired Western Transformers and also acquired a substantial stake in Apex Electricals Limited. In 2010, Company made a Capacity Expansion of LV & HV Cables Unit 2011 - Setup EHV Cables manufacturing up to 550 kV and Setup a Transmission Tower unit. In 2012, the company acquired strategic stakes in Utkal Galvanizers and Maktel Control & Systems, acquired a controlling stake in Danke Controls, commenced production of Power Transformers and control & relay panels, and Successfully commissioned 6.3 MW of wind energy at Jamanwada, Kutch. In 2013, the company acquired a strategic stake in M/s Maktel Control & Systems, India’s leading power and control panel manufacturer, and Successfully established Ultra High Voltage Cable Testing Laboratory, a first of its kind in India having a capability of 500 kV capacity. Beyond 2014 what happened: 1) In 2014, the company successfully commissioned the first phase of an ambitious expansion program for 3000 km of MV cables and achieved 50,000 MTPA capacity of conductors in February 2014. In 2015, the company made a rejuvenation of the product brand. 2) As of June 29, 2016, it is alleged that the company, through its management, fraudulently availed credit facilities from a consortium of 11 banks (both public and private) in 2008, leaving behind an outstanding debt of ₹ 2,654.40 Cr. On July 6, 2018, CBI arrested two senior retired officers (V V Agnihotri and P K Shrivastava ) of Bank of India in connection with alleged loan fraud of ₹ 2,654 Cr. by the company. Also, the company had allegedly submitted false stock statements to the lead bank by treating receivables
  2. 2. Case: A cable manufacturer (Only for case study purpose as a part of Workshop, no recommendation) more than 180 days (non-current asset) as less than 180 days (current asset) to get more drawing power in their cash credit accounts. The company is under Corporate Insolvency Resolution Process (“CIRP”) under Mr. Prashant Jain, resolution professional of the corporate Debtor. This case is filed under 27 IBC, 2016/7 of insolvency and bankruptcy code, 2016 in Ahmedabad bench of NCLT. Share price Extracts of Cashflow Cashflow Sep-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Cash from Operating Activity 19 -18 -33 1 -34 -5 -25 -123 Cash from Investing Activity 0 -3 -44 -78 -57 -228 -157 -174 Cash from Financing Activity -2 34 54 83 100 249 191 341 Net Cash Flow 17 14 -23 6 8 16 9 44 Extracts of Balancesheet Balancesheet Sep-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Share Capital 14 16 18 21 28 37 37 37 Reserves 8 32 109 193 266 479 570 665 Borrowings 102 130 160 231 312 443 696 1,131 Other Liabilities 7 7 21 56 144 156 293 511 Fixed Assets 18 17 22 53 96 249 345 319 CWIP 0 5 40 87 96 150 208 387 Investments 0 1 5 5 5 17 17 17 Other Assets - 114 161 241 356 554 699 1,025 1,622 Inventories 47 57 79 141 189 341 591 849 Trade receivables 34 43 82 83 140 190 200 399 Cash Equivalents 19 33 9 15 24 40 49 92
  3. 3. Case: A cable manufacturer (Only for case study purpose as a part of Workshop, no recommendation) Balancesheet Sep-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Loans n Advances 8 23 66 107 193 42 67 58 Other asset items 6 5 4 10 8 87 119 222 Extracts of P&L Revenue CAGR of last 5 years: 34% Net profit CAGR of last 5 years: 16% P&L Sep-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Sales 234 131 487 601 724 1,267 1,740 2,126 Expenses 205 112 424 517 626 1,106 1,547 1,907 Operating Profit 29 19 63 83 98 162 193 219 OPM % 12% 15% 13% 14% 14% 13% 11% 10% Other Income -15 0 2 1 1 1 3 6 Interest 12 5 14 22 24 25 49 86 Depreciation 4 1 3 5 6 19 24 33 Profit before tax -2 14 48 58 70 120 123 107 Tax % -3% 0% 8% 9% 27% 18% 12% 14% Net Profit -2 14 44 53 51 98 108 92 EPS in Rs -0.77 5.44 13.96 19.68 21.85 18.56 Shareholding pattern  Promoter o 29.17%. No pledging  In public/institution category some key holdings: o Macquarie Bank Ltd 7.16% o Kotak Mahindra Trusteeship: 5.45% o Orange Mauritius: 3.66% o Clearwater Capital Partners Singapore: 3.13% o Clearwater Capital Partners Cyprus: 2.46% o Kotak India Pvt Equity Fund: 2.07% o Morgan Stanley Asia (Singapore): 1.75% o Antique Finance Pvt Ltd: 1.58% o Vikas Ferro: 1.36% o Vikas Coating: 1.36 o Pinnacle Cables: 1.36% o Manacles Enterprieses: 1.36% o Rhombus Cables: 1.36% o Signature Electricals: 1.36%
  4. 4. Case: A cable manufacturer (Only for case study purpose as a part of Workshop, no recommendation) Your notes 1) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 2) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 3) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 4) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 5) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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