Poddar Developers Ltd…Self Development gone awry ?

Earlier called Wearology, and before that Monotona Exports,Poddar Developers has been a huge rollercoaster ride in the Movements of it’s Share Price on BSE in 2007 and 2008…In 2007 itself, from a low of Rs 23  it literally was pulled aggressively to an all time high of Rs 320 ….SEBI even issued a Show cause and cautioned the Promoters,the Poddars to cool off..it was more a let off ! 

It has fallen on Friday  to a new low of Rs 34 in 2008…Investors have lost  90% from peak

Have a look at the Trading Statistics in 2007 and in 2008 till date

PODDAR DEVELOPERS LTD

TRADING STATISTICS ON THE BSE

Year

Open

High

Low

Close

Volume

No of Trades

Turnover Rs Crs

2007

23.40

319.80

23.40

150.35

7843463

34361

100

2008

152.05

167

34.10

36

1871887

8542

19.3

The Company has an equity of Rs 5.2 crs and earned a Net of Rs 24.6 crs in FY 08 on the back of the sale of Gopi Resorts Pvt Ltd for Rs 34.55 crs…They declared a 15% dividend and also paid tax of Rs 6.5 crs on gains on sale of Gopi Resort Pvt Ltd.In the June quarter in FY 09 they have notched up Rs 49 lakhs in profits again on the back of other income…Reserves are Rs 44.1 crs showing a Book Value of near Rs  95 at March 31,2008…so P/BV looks great at below 0.4

The Board of Directros have empowered themselves to decide on Company lending or investing upto Rs 100 crs…Their Garment manufacturing Unit at Rabale has been sold for just over Rs 2.2 crs and now they only trade in garments…perormance shows that even this is a losing proposition…They have a 100% Subsidiary in the USA already for Garments Trading  and plan to launch two others,one is USA and the other in Sharjah 

Their focus on the new real estate division is what caused the Change in Company name….They have a 100% subsidiary Makara Real Estate

And sources state that the Net Profit in FY 09 will exceed that shown in FY 08 !..so P/E which already has fallen below 1 on FY 08 EPS should be even lower on a Forward basis

So all this should make Poddar Developers at Rs 34 to Rs 40 a very compelling Investment…Right ?

Problem is the Negative Vibes emanating from this Company…the lack of clear transperancy in operations and lack of adequate corporate governance creates question marks on the credibility and intentions and even  genuine business acumen of the Promoters….why did they sell off Gopi Resorts when they planned to develop the near 100 acres it owned near Mumbai ? Did they transfer it internally as it showed huge potential and promoters wished to corner all of the gains ?…a plan that may now seem to have gone awry !…. What will they do with this Cash in Hand Now ? Why did they empower the Board to invest or lend upto Rs 100 crs ?…are they planning leverage in this Flagship to be diverted then to other business ventures where Poddars hold an interest,or invest in or lend to subsidiaries? …There are just too many questions     

How will they show Higher Profits than the Rs 24.6 crs they showed in FY 2008 ?…Something just does not smell right here

Merill Lynch Capital Markets Espana SA had purchased a huge chunk of shares from the Promoters in 2007.On June 30,2008 their holding was 309927 shares (5.95% of the Equity).In the next Seventeen days till July 17,2008 they had sold all but 10149 shares at a huge loss to a few others who now figure in the 1% + Shareholders list as on September 30,2008. 

With Garments losing Money and the Real Estate in the Doldrums it would make more sense for the Company to distribute the surplus funds to shareholders rather than deploying them in Real Estate Ventures

But the Promoter Group ,who continue to hold 57.56 % of the Equity, will not do this ! …I would take a bet on this !…It would not serve their Interests !…shareholders be damned !

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