Uniphos Enterprises : A Hidden Gem

A review of Uniphos Enterprises Ltd balance sheet was quite revealing & is being summarising as follows:-
  
It has capital of Rs. 5.09 crores comprising of 2,54,74,670 shares of Rs. 2/- each; it is in the hand of just 22 shareholders who own over 75% of the capital; the promoters stake is high at 45.61% Its principal business are owning strategic land and investments owning 5.68%  of the capital of United Phosphorus, i.e., 2,49,85,130 shares of Rs. 2/- each. Effectively, any one owning 102 shares in U Enterprises is owning 100 shares of UNITED PHOSPHORUS.

Anyone considering acquiring Enterprises shares must have a long-term views for eventual rewards. Besides, owning UNITED PHOSPHORUS you are sitting on a land with an appreciation of Rs. 145 crores against debts amounting to Rs. 72.95 which is to be repaid against proceeds of a right issue for Rs. 75 crores inclusive of premium. Guessing the terms for right issue is difficult ; it may be even 3 right shares @ Rs.20 against every 2 shares. 
Shroffs had over the past few years first vested lands in favour of Enterprises & then cashed it & accumulated a corpus of over Rs. 194 crores against a migre investment of barely 5 crores.
I think right issue shall be so prised that most of the minority shareholders will NOT be putting in any funds & Shroffs will enhanced their grip on the Company.  

Negative points:

Very reluctant to pass on benefits to shareholders as evident by surplus in Profit & loss a/c exceeding Rs. 18 crores but no DIVIDENDS for shareholders.

Hero Honda : A Betrayal by HONDA of Japan

When Hero Honda was born to launch Bike manufacturing in India, Honda of Japan was a well-known brand. They took Munjals of Hero Cycles as partner in order to comply with the then license requirements (who proved to be loyal to Honda.) We, the minority shareholders, took up shares in the IPO just because of our fancy for brand HONDA and were rewarded for superb performance & financial pay back by way of dividends & bonus issues since mid 1980's.
However, to our chagrins and dismay, Honda had talked to just Munjals and NOT all other shareholders holding 47+% shares. To be fair to their INDIAN PARTNERS, Honda should have insisted on selling their 26% collectively to a SPV whose shares should have been offered to all such partners proportionately and Munjals may have taken up all UNSUBSCRIBED shares them severally (i.e., taking PE routes). Exit of Honda will be damaging to the business of Hero Honda and their shareholders.
Munjals are NO match to HONDA as far technology is concerned
Present plan is totally tilted in favour of Munjals. To safe-guard the interests of minority, the government must have a re-look on the severance of such collaborations & joint ventures..

Piramal Health : A plan to share wealth EQUALLY

Contrary to suggestions from minority shareholders that promotors are enhancing their own stakes in Piramal HealthCare by giving an exit plan through buy back offer @ 600/- per share by tender methods. During first half ending on 30/09/2010, the Company declared an earning of Rs. 604.60 and reported a book value of Rs. 676.50 following a major business being sold to Abbotts of USA. Initial statement of promotor's participation in the buy back offers was doubted by most shareholders and market.
Interestingly, the promotors had sold 10,08,03,085 shares (at diverse prices ranging from 525 to 502) during a period of 30th August through 6th September 2010 & same were bought by three new entities and existing Cavaal Fininvest Pvt Ltd enhancing holdings from 6,40,000 shares to 1,58,52,677 shares. As these were carried out on the SE floors, the encashment of long term capital gains are fully tax-exempt. Promotors had officially stated their "intention to participate in the proposed buy back offer" to the extent of 10,14,43,085 shares and maintaining their holdings to 54% . It is a win-win situation for Piramals, as they may off load a part of their holdings post closures of open offer to other entities and book appropriate "losses" to neutralise "gains" upon acceptance of a proportionate holdings. A nice tax planning.
Kudos to Ajay Piramal for these scheme to distribute the windfalls in a fair manner. I am sure he will come up with further buy back scheme(s) as soon as possible in future.
　
　

Buy back by Company : A whimsical Implementation

By adopting a resolution for 'Buy back scheme', the Indian Corporate World get authorisation to play the market. It  is implemented most whimsically and NOT in the spirits of the resolution. Take the example of one taken by DLF Ltd - authorised to buy back upto 2.2 crores share & upto rs. 1100 crores subject to price limit of rs. 600/-. On the first day, the Directors bought back just 2,50,000 shares @ rs. 304/19, next week 7,55,888 @ rs. 265/58 & following week a token 5,000 shares @ rs. 210/-. Eventually, price went below rs. 200/- & they did NOT cared to mope out the balance quantity available below 1/3rd of the cut off price of rs. 600/- showing ABSOLUTE LACK OF FAITH IN THEIR OWN COMPANY !

Panacea Biotech has recently completed its buy back scheme & deserved 10 out of 10 ; they BOUGHT BACK the maximum quantity of 55,92,000 shares spending 85.76% of the authorised amount in the process.

I wish all follow this example of adopting a Resolution & carrying it out in TRUE SPIRIT unless market dynamics decide otherwise.

Dhirubhai proposes, Motabhai disposses : Reliance (nay FARM) Enterprises

The legendary industrialist Dhirubhai used to pamper minority shareholders by way of  fresh offers for subscriptions (eg., convertible bonds starting from 1st issue to the last G-series) and had distributed shares of Rupee One in an unlisted Reliance Enterprises Ltd proportionately. Subsequently, there was consolidation of Face value , open offer to buy back and a  fresh issue of Optionally Cumulative Convertible Preference share of Rs. 10/- at a unheard (in those days) of premium of Rs 190/-. This was a right issue (unlike the present day fashion of preferential issue to the Promoters) and was so priced that it was largely ignored by the general public. Needless to state it was taken up to the fullest extent by the Family.

A brief review of this Company's (surprisingly renamed FARM in lieu of the default name RELIANCE - for the sake of camouflage ?)  the state of finances is being made:
          Capital  (Comprising of Equity & yet to be converted Preference) - 13.94 crores shares of Rs. 10/-,
           Fully diluated EPS of Rs. 4.28 and Fully diluated Book value of Rs. 154/- at present and Rs. 315/-  as & when holders of FV 1 share pay up in full before due date of conversion.

Main business is holding 9.21 crores shares in Reliance Industries Ltd. acquired @ 176.

Somebody may say "Well, I do not understand the title of Blog".

Dhirubhai proposed , a  legend was created by way of DISTRIBUTIONS  , Motabhai disposses the generosity by way of NOT EVEN PAYING DIVIDENDS in spite of good cash flows;
 the company admits Arrear of dividends
(Rs. 15.18 crores) while its profits was Rs. 60.17 crores in FY 2010 .  It looks it will pay dividends once all minority shareholders exit the Company.

Maharastra Scooters : A classic story of major shareholders differing in business policy

Thanks to the associations with the Congress with family of Kamalayan Bajaj , Bajaj Auto Ltd (famous for HAMARA BAJAJ scooters) became the "Scooters King of India". Nobody else were permitted to put up a plant to compete with their nearly monopoly. At that time of the 'Licence Raj', a number of licenses were issued for joint sector projects with 26+ % stake in favour of a state industrial corporation to put up a small plant with yearly production of 25000 scooters. Maharastra Scooter got established in 1977-78 with WMDC becoming a 27% stakeholder and Bajaj being obliged to hold a just 24% stake to comply with the licence requirements.

Maharastra Scooters had best of business with peoples queing up to buy all the products just like any other manufacturers. They used to retain all the surplus (paying pittance to all shareholders which is an UNIVERSAL phenomena in India) and pile up a big portfolio of Bajaj Auto shares. As the scooters were out of fashion, the sole manufacturing were phased out in time.

The problem with Indian businessmen is that they never like to take "RETIREMENT" gracefully and so is the case of  their enterprises. When an enterprises ceased to have business worth carrying on, it should be wind up and surplus being distributed. Colgate Palmolive (India), ICI India were fair in distributions of the surplus. Singh Brothers of the Ranbaxy fame had gracefully exited the business giving minor shareholders to exit thanks to open offer. And, most just love to cling the CASH FULL KITTY to their heart.

When a shareholder (with the backing of a STATE) with 27% stake can not force an equitable distribution of the accumulated wealth, one may imagine a status of a small shareholder. Neither the Parliament nor  the GOI  is expected to help us in such circumstances because the spell of the Captains (??) of the Industries/Business.

Indian Corporate World - Ademocratic Set Up

Our is said to be biggest democracy in the world. Unfortunately bloods flowing in our bodies are more accustomed to ademocratic things. Forget "Government of the People, by the People, for the People" such famous slogans are unpalatable to most of us.

Even the Corporate World prevailing in India is governed by the Indian Companies & others Acts which are  patently favourable to the so-called Captains of the Corporate. GOI is ever ready to act as desired & suggested by the Chambers of Commerce, Industries, etc. Once a Company is formed by issue of shares to the public both big and small, show is run by the so-called promoters with the sole motto : 'Company of the Shareholders, by the Promoters for the Promoters'.

Time & again the laws, the regulations, the rules and the governance is made favourable to the haves. Even GOI disregards the spirits of the laws. Take for example, the appointment of so-called Independent Directors by the listed PSU's. They are appointed by no body else but the Government. To be fair to minority shareholders, such posts should be filled up by selections with the majority shareholder (GOI) keeping a low profile and neutral stand. I wish they set a standard of governance for at least the listed Companies.