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“In India, companies may fall sick, but promoters rarely do!”

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May 31, 2012

Rohit has inquired ~ Shasun Pharma @ Rs 115 ~ Now in Reverse Gear from a Meteoric Rise inside Months ~ Prudent to Exit and Book Profits in this Fun Run

Rohit has inquired ~ Shasun Pharma @ Rs 115 ~ Now in Reverse Gear from a Meteoric Rise inside Months ~ Methinks it’s Prudent to Exit and Book Profits in this Fun Run…Rohit,seeking further exposure ,even for the long term is not advisable 

Shasun Pharma was just Rs 38 ( FV Rs 2) in December 2011 and in just over five months it had gained @ Rs 100 racing to a high of Rs 137 on May 25,2012…then this week it’s  been reversing fast and currently is @ Rs 115 

Price Movement (

So what was the excitement all about in the first half of 2012 ? Is the Fun Run over !?…Well,in my humble view,Yes !

The Consolidated Networth has climbed from Rs 84 crs at March 31,2011 to Rs 222 crs at March 31,2012 for two clear reasons ~ Preferential Placement of Equity Shares as below for Rs 50 crs and a FY 12 PAT that soared past Rs 100 crs from just Rs 27 crs in FY 11...Consolidated Book Value at FY 12 end is @ Rs 40…thats a near 3 multiple…too high in my view  

In the March 2012 Quarter there were two highlights

  1. Shasun preferentially allotted  6578947 Equity Shares at Rs 76 to a Mauritius based entity,Caduceus Asia Mauritius Ltd which is registered with SEBI as a Venture Capital Investor…The Equity Capital moved up to Rs 11.03 crs from Rs 9.71 crs ~ RBI has directed the Company to seek Government Approval for this Allotment…Caduceus is the subsidiary of US Healthcare Investment Firm OrbiMed Advisors and will have Director Representation on Shasun Board
  2. Shasun booked  a one time Profit of Rs 27 crs on sale of land and building at Velachery,Chennai

Full Year FY 12 Results reveals a Tax Benefit of Rs 21 crs which the Company has attributed to carry forward loss and unabsorbed depreciation arising from earlier years

With the Government showing great leniency in December 2011,allowing companies to capitalise FX losses and therefore not charging them to P & L A/c,Shasun has opted to adopt the new Para 46A in the Accounting Standard 11 …it allows adjustment to depreciable assets  for Fx differences on long term  Fx monetary items so far as they relate to the acquisition of such assets…for the remaining the difference is charged to a new account called the Foreign Currency Monetary Item Translation Difference Account and written off over the balance period of that Monetary Item

In FY 2011 Results it has opted under Accounting Standard 5 to show Option Contract Mark to Market  Losses of Rs 41 crs as a seperate item relating to prior years

Normal Profitability in FY 12 would be more @ Rs 50 crs and not over Rs 100 crs if the Tax benefit and Profit on sale of land are excluded…thats’s an EPS of @ Rs 10 and not Rs 20…and a multiple of 12 and not 6

The Long Term Borrowings are Rs 78 crs….just a  shade higher than in FY 11…..The Fixed Assets have climbed from Rs 260 crs at FY 11 end  to Rs 331 crs at FY 12 end….clearly exercising the AS 11 option kicking in here to warp the true asset picture…what in means is that as long as FX loans remain,the exchange loss on the depreciating rupee will be added on to the cost of the asset that the loan has financed !…this Treatment,though allowed by the Government, is dangerous as it creates misstatement of assets and liabilities  read more

Nitin asks about ~ Tide Water Oil yet solid at Rs 6750 while Shree Renuka Sugars at Rs 25+ has disappointed greatly and eroded by 70% with continuing micro and macro industry woes

Nitin  asks about ~ Tide Water Oil (TWO) at Rs 6750 and Shree Renuka Sugars (SRS)at Rs 25+ at subdued Sensex and Nifty levels of sub 16200 and 4900 respectively 

My Views on these two Scrips are contrasting….. TWO continues to be solid despite some margin stress,while SRS has disappointed greatly and eroded by 70% with continuing micro and macro industry woes and struggles to service high Debt and regain significant lost ground  in the share price

TWO @ Rs 6750 (FV Rs 10)

Standalone Networth at March 31,2012 is Rs 308 crs with Equity low at Rs 87 lakhs (FV Rs 10) giving a Book of @ Rs 3500 per share and thus a P/BV just below 2…Has no Bonus History but has just announced doubling of Dividend from last year => Rs 120/ share  => 1200% => 1.77% yeild…will involve Rs 10.45 crs and this is  yet below 20% of PAT payout

Standalone PAT has dropped yoy from Rs 64 crs to Rs 59 crs as Cost of raw materials consumed has moved sharply up to 69% of Net Sales from 63%….Though Selling & Marketing Costs have shown a significant decline it is largely offset by the jump in other expenses

Nearly all of the Networth  =>Rs 292 crs is the Capital Deployed in the Core Business of Oil and Grease,leaving little scope for Other Income Generation through Investments …Standalone EPS has dropped yoy to Rs 678  (consolidated is yet lower at Rs 665 after considering two Veedol subs) from Rs 736….Price Earning Multiples hover around 10

Market Cap is @ Rs 600 crs while Net FY 12 Sales were @ Rs 800 crs

The 52 Week Share Price range is Rs 8540 and Rs 5676

Government PSU Andrew Yule holds 228390 shares of TWO =>26.22% of the Equity => worth @ Rs 150 crs at CMP of Rs 6750…A few years ago Andrew Yule had approached the Government to allow it to sell the TWO Stake to help it recover….it then withdrew this request as it began to recover in it’s operations and was able to raise funds  without resorting to the sales of TWO Shares

There are @ 12500 TWO Shareholders,but none is a FII…Apart from Andrew Yule,the other significant holdings are with LIC (4.22%),United Insurance (10.04%) and a few Body Corporates  like Victory Retail Marketing (4.61%) and Standard Greases & Specialities (23.24%,that’s higher than even Andrew Yule Holding))…TWO Employee Welfare Trust holds 2.57% with a current value of @ Rs 15 crs => half of annual Employee benefit expenses of @ Rs 30 crs read more

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