Deepak Jain inquires about what to do with Alok Industries at Rs 21 as he’s sitting on a huge loss having bought at Rs 32….Interesting case

Alok Industries at Rs 21…Interesting case….Deepak Jain asks what should he do as his Purchase price was Rs 32 and he’s sitting on a huge loss

Well Deepak,Alok Industries has not exactly set the bourses on fire as it has not delivered to shareholders for years….but I noticed that it was only in November 2010,a few months ago it touched a 52 week high of Rs 35 and since then has slid to Rs 20 levels….I am therefore assuming your entry into Alok Industries is fairly recent….you are concerned at this ‘huge’ loss as you put it…clearly your Risk Profile should not have allowed you to begin any big exposure in Alok….as you seem to be sweating on this fall inside months

You have four options before you and I suggest you consider them keeping in mind your risk appetite

  • Immediately Exit fully at a Loss
  • Immediately Reduce Exposure by exiting partially at a Loss
  • Hold and Hope
  • Exit fully or partially when a nice Switching Opportunity presents itself

I would seriously consider the fourth Option

An Insider…with Decades of Experience in the Textile Industry…had warned me about Alok Industries several years ago….they simply do not have any USP Product Line and have to compete at extremely tricky margins that cannot become a sustainable model even if they attempt to play the Volumes game

This is what Alok Industries appears like to me…..it exists to just about survive and earn for all stakeholders,except for Non Promoter Shareholders !…it’s got into this warp and mindset functioning and will find it difficult to exit from it and start really adding genuine value to all Shareholders who are also part owners of the Company…so simply disregard all their ‘greening’ up of the Annual Report….In fact can you recall any Alok Brand !

The Promoters,Jiwrajkas continue to remain overly optimistic and even make tall claims and boasts despite conflicting realities….have a look at their Annual Report for 2009/10….”Doing More for Less” is their assertion…Hardly…..”Doing Less for More” is more like it….”Created value beyond economic profitability for all stakeholders ” is their other assertion…judge for yourself from below

 

Payouts in Rs Crs to Stakeholders in FY 2009-10

 
 

Stakeholders

Rs Crs Payout

 
 

Lenders

535

 
 

Government
(Direct Taxes)

127

 
 

Promoters
Salaries & Commission
(see below table)

12

 
 

Employees

154

 
 

Shareholders
Dividend of 2.5%=> Rs 0.25/share => less than 8% of Net Profit of Rs 247 crs

19.69
(of which 5.58 crs go to 20 Promoter Group Shareholders as they hold 28.35% of the Equity)

 

 Payouts in Rs Crs  to Promoter Directors

Director

Salary

Commission

Total

Mr. Ashok B. Jiwrajka  ,
Promoter Executive Chairman

1.8

1.25

3.05

Mr. Dilip B. Jiwrajka ,  Promoter
Managing Director

1.8

1.25

3.05

Mr. Surendra B. Jiwrajka , Promoter
 Joint Managing Director

1.8

1.25

3.05

Mr. C.K. Bubna ,Executive

1.8

1.25

3.05

 

7.2

5

12.2

             

    There are over 177000 shareholders ! and Deepak you are in good company as several FIIs,DIIs and Banks and MFs are shareholders…have a look at some 

ALOK INDUSTRIES LTD.

 
Scrip Code :  521070

Quarter ending :  December 2010

 

Shareholding belonging to the category
“Public” and holding more than 1% of the Total No.of Shares

 
Sl. No. Name of the Shareholder No. of Shares Shares as % of Total No. of Shares

1

 Caledonia Investments PLC

47,825,714 

6.07 

2

 Caledonia Investments PLC FDI

45,184,354 

5.74 

3

 Life Insurance Corporation of India

26,964,136 

3.42 

4

 IFCI Ltd

21,440,823 

2.72 

5

 Axis Bank Ltd

19,650,000 

2.49 

6

 Sloane Robinson LLP A/c SR Global(arutius) Ltd (Class B Asia)

15,821,592 

2.01 

7

 CLSA Mauritius Ltd

13,217,102 

1.68 

8

 State Bank of India

12,790,823 

1.62 

9

 IL&FS Trust Company Ltd A/c IL&FS Pvt Equity Trust – Leverage India Fund

12,602,457 

1.60 

10

 IDBI Bank Ltd

10,788,161 

1.37 

11

 LEGG Mason Southest Asia Special Situation Trust

9,500,000 

1.21 

12

 Macquarie Bank Ltd

8,330,000 

1.06 

 

 Total

244,115,162 

30.99 

On the face of it all the above seem genuine Investments and not fronts…maybe ,Deepak,if you have access to anyone of these above shareholders,ask them why they are holding Alok Industries !?……. but it was amusing to note that in April 2009 when Alok Industries launched a huge Rights Issue of Rs 450 crs for just Rs 11 per share in an 83:40 ratio,it was subscribed just about 1.15 times !….In March 2010 it was able to do a QIP at Rs 23.32 per share for Rs 425 crs….In the Heady Years before of 2007-8 the FCCB Conversion was done at Rs 61.5875 and Preferential Allotments to Promoters  at Rs 102 per share ! read more