Kilitch Drugs @ Rs 22 (FV Rs 10) ~ Lost it’s Core after selling it !
A Client had requested advice on this Holding ~ we’ve just posted it on Scrip Watch
However this should also help over 10700 shareholders who continue to have faith in the Company to assess if their faith is on good solid ground and that the current Market Cap of Rs 29 crs will regain some respectability in the months ahead
After selling it’s Paonta Sahib Plant in FY 12 to Akorn on a slump sale basis for Rs 222 crs, Kilitch Drugs is flushed with cash and has a Networth of Rs 120 crs after a one time rewarding Dividend in FY 12 of 300% or Rs 30 per share last year that absorbed Rs 46 crs and payment of taxes and returning debt ~ Rs 108 + crs are in liquid mutual fund investments ~ Book Value is over Rs 90 while Share Price is Rs 22 ~ that’s a PBV of just 0.24 ~ Dividend though has been skipped in FY 13 ~ Amusing that Share Price now is lower than the Special Dividend of last year !
Interestingly the number of shareholders surged from levels of 9000 at March 31,2012 to over Rs 10700 as on June 30,2013 ~ what must have seduced them was the above sale of business to Akorn at a really healthy price of Rs 222 crs
So what’s dropped the Volumes to just a few bare thousands and the Share Price for the past few months to this low range of Rs 18 to Rs 22 and unnerved over 10700 shareholders ?
Well,for one the market now perceives it as just another Investment Company as it has not identified and deployed monies in any other Core business ~ although it continues to have some semblance of Operations at the Thane Plant ~ June Quarter FY 14 shows alarming drop in sales to under Rs 4 crs and continuing Operating Losses ~ It is only the Investment Income that is keeping the Company in the Black ~ The Haircut in the Share Price is pronounced
Another reason is the surfacing of Corporate Governance issues ~ Despite signing,without any qualification as such,the June Q 1 FY 14 results,the auditor M/s R N R Iyer has resigned ~ they owe an explanation to shareholders ~ Last year Rs 15.71 crs Bad Debts were written off in the Accounts without any explanation either by the Management or Promoters or the Auditors
The AGM is on September 30 and Shareholders must attend and ask some tough questions of the Promoters ~ the Mehta Family ~ the Doyen and Chairman,the late Mr Prataprai Mehta passed away in February this year ~ he had already handed over the baton to his sons the MDs,Mr Mukund Mehta and Mr Paresh Mehta ~ Mr Mukund Mehta’s son,Mr Bhavesh Mehta too has been inducted as a Working Director ~ while they hold 64.43 of the Equity of Rs 13.23 crs and therefore benefited by receiving @ Rs 30 crs as Special one time dividend last year on sale of Core Business to Akorn,thankfully the FY 13 Accounts show their remuneration has been modest though they are entitled for more
Adviced my Client to attend the AGM and ask some tough questions ~ push Company to delist so that Shareholders get Rs 90+ per share !
Perhaps jump Book Value near Rs 100 by a buy back exercise of @ 14 lakh shares @ Rs 22 to absorb just Rs 3 crs and to take Promoters stake to the allowed 75% and then delist ! ~ Shareholders would then get atleast the new book value of @ Rs 100 per share on a delist !
Then it’s worth buying it at Rs 22 instantly !
Mr Mehta,just privatise your Company !