HOV Services down to under Rs 140 !
Many have been worriedly enquiring what’s happening here !
Some want to buy more !
Further Exposure is Foolhardy and assuming More Risk in the Wake of Inadequate and Non Disclosures from the Company & it’s Promoters.Corporate Governance Issues are raising an ugly head
SEBI & BSE & NSE must take the company and it’s promoters to serious task for keeping Minority Shareholders in the Dark on many issues that keep cropping up
Read my recent and even few years old blogs on the HOV
So if you are Holding HOV should you exit even at a loss ?…..my sense is to wait and not panic…the trading volumes are heavier than normal today on BSE & NSE but not alarming…yet
The enhanced stake of 44.82% in US based merged entity SourceHOV is the underlying Asset
So what happened to the US $ 95 m proposed sale of the pre merger stake of 26.1% held in SourceHOV ! that was cleared by minority shareholders in the recent postal ballot ! ?
And how was this enhanced stake funded !?
The Drop today looks like a panic reaction to suspicion that the Deal will now not go through and/or the enhanced stake was funded by Debt
Should not a higher Stake in a merged entity that boasts of over 16000 Employees across over 85 centres with a turnover of over US $ 900 million and now one of the worlds leading and largest Transactions Processing Service be more valuable than just US $ 95 m !?
Hope it does not result in shareholders who swore by the Company begin swearing at it on a realisation that they are being led up a garden path !
SEBI,BSE & NSE make the Company Disclose more and not just accept and file away the recent notification for the stake enhancement
HOV is testing Shareholders…clearly not an appropriate selection for many who begin sweating on a 20% + fall
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I strongly advice those who read and follow my blogposts and act on what I express to do so at their own risk and judgement and preferably after seeking counsel from their investment advisors
6 thoughts on “HOV Services down to under Rs 140 ! ~ Is Company leading Investors up the Garden path !”
Gauravji… In my opinion, there was no debt raised by HOV Services Ltd. to fund the acquisition…
The debt was raised by the merged entity to fund the acquisition…
That’s the reason, the combined entity’s debt increased to $1 bn…
So, once the Rohatyn group’s stake was bought back with debt, HOVS LLC’s stake increased…
I agree that the company is not disclosing the details of the deals happening to the public…
The below URL from Moodys should give a view on who funded the debt…
New York, October 09, 2014 — Moody’s Investors Service assigned to SourceHOV, LLC (NEW) (SourceHOV) a B2 Corporate Family Rating (CFR) and a B2-PD probability of default rating. Moody’s also assigned B1 ratings to SourceHOV’s proposed $855 million of first lien credit facilities comprising a $75 million revolving credit facility and a $780 million term loan, and a Caa1 rating to the proposed $250 million of second lien term loan facility. The company plans to use the proceeds from the new credit facilities to redeem the preferred equity interest held in SourceHOV by its existing majority shareholder, The Rohatyn Group, for approximately $354 million, and refinance existing indebtedness at SourceHOV and BancTec Group (BancTec). SourceHOV expects to close its planned merger with BancTec for $339 million in an all-stock transaction concurrently with the proposed recapitalization.
Also, some thoughts on the valuation of HOV’s stake in the merged entity…
The BancTec group merged in an all-stock transaction pegged at $339 million…
HOV’s stake after merger is 44.82%…
For assumption, if you take the balance stake is owned by BancTec shareholders, the valuation is $339 mn is for 55.18% stake in merged entity…
If you value the 44.82% stake on the same logic, it works out to $275 million…
Disclaimer: These are all just assumptions and for discussion purposes only… No onus on me please… I also have vested interest in this stock from low levels…
If you remember corporate governance issue of Khodays issue which you had written few months back on voluntary delisting SEBI has now acted on it “SEBI has filed two applications before the Hon’ble High Court of Karnataka to recall the order dated August 07, 2014 and to implead SEBI in the proceedings.” Refer recent filing with BSE. I repeat what I then wrote in case of SEBI, it should be made up of body of professionals and not typical Govt. employees who think ” getting a govt job is settling in life” and retire mentally once they win a Govt. job. Perhaps, not to blame employees alone, SEBI should report to Parliament directly and should have a strong army of CA’s,Tax experts, Ex-CEO’s, CFO’S and lot of other professionals with enough tooth to fight. Else small investors will keep shying away from market and the ones who have burnt fingers bcoz of coporate governance issues will not return. Need of the hour is to have a strong ,powerful, autonomous body.
The Shares held by Rohatyn group were written of from capital by Source HOV by buying their shares and so the share capital of Sourch HOV has fallen
Therefore The stake of Hovs LLC has gone up as number of shares held by HOV LLc is same but share capital has fallen.
My concerns are
a) Has the offer to buy stake from Hovs LLC is by promoters of Hovs Ltd or it is by way of writing of the capital ?
b) Because of higher debts and non transperancy, promoter are valuing share of company at approx $220 mil (It is expected to have sales of $900 mil , with and EBITDA of 20 % (as per moddy report)).
c) The promoters have imposed lots of debts on share holders of Hovs, by taking huge loan on Source Hovs.
d) Also the date of Merger of Bantec with Source Hov is same as getting approval from Share holders of HOV Ltd. (Very fast).
e) more than 20 lakhs shares supported the resolution for merger, But Are we aware who are they. (They could be entities related to Hands on 3) They may not be promoters but they can be related parties in resolution ?
(Check public share holdings for numbers)
In a blogpost on HOV on October 31,2014 I had stated whether these shareholders of SourceHOV are being redeemed through a Buy back as it was disclosed that the new line of credit of US $ 1.1 b would be partially used for such redemption….Of Course it is now apparent that the HOV Stake has gone up because Rohatyn stake was redeemed with debt…imagine converting Equity to Debt at a Premium !…normally we see Conversion of Debt to Equity !….whatever there has been inadequate disclosure and I yet hold a degree of undervaluation of SourceHOV…Share Price has drifted with markets to drop to Rs 135 today on low volumes after a big drop yesterday and a drift last week too