Jubilant Industries Ltd

1^st day, 1^st Show and intention is out and clear.

Today, Jubilant Ind Ltd has reported its 1^st post merger result for FY12 and the stock is locked in 20% down circuit. Probably we may see few more.

While assessing the impact of merger of unlisted retail business of promoters in the listed Jubilant Industries Ltd, I had all my doubts about the rational and real intention of the management behind the merger.

A company which had an EPS of Rs 35.70 in FY11 has reported a loss of Rs 47.85 per share in FY12. The reason for this upside down is only one. Merger of hugely loss making privately owned retail business with the company.

Retail business continued to bleed and has reported an even larger loss of Rs 98.59 cr this year on a sale of only Rs 359 cr. This loss is more than 8.3 times of equity capital of Jubilant Ind Ltd. I see no hope and possibility of this retail business coming to even break even level at any point soon. Profit from this business should be a distant dream.

Till such time management finds some magic of turning this huge loss making business  into even no loss situation, shareholder will continue to suffer and see their wealth being eroded.

We, shareholders are very accommodating and seldom question the management and pay the price.

Camson Biotechnologies revisited

I last wrote on Camson Biotechnologies Annual Report of FY 09-10.

Taking clue, the company tried to make amends in their annual accounts for FY 10-11. But these did not change investor heart and share price continued to slide. During the present bull run also, when most of the small cap stocks recovered, Camson stock continue to languish at around Rs 60 (though recovered  a bit from its low)

Having gone through recent 3 qtr’s results published by the company, some of my observations are:

1. Manufacturing activities are dwindling as can been seen from raw material consumption. During Q3FY12 while sales have been maintained at around Rs 33 cr as against Rs 32 cr in Q3FY11, raw material consumption is down from Rs 6.12 cr to Rs 1.29 cr. Most of the sales may have been accounted from selling out of stocks.
2. Similar trend was also seen during Q2FY12 as well, in which raw material consumption was only Rs 1.85 cr vs Rs 3.00 cr in Q2FY11 while sales were at the same level of Rs 23 cr. Here again there was significant decrease in stocks which signifies sales made out of stocks only.
3. Thus last 2 qtr’s raw material expenses clearly show that there have been considerable slow down in manufacturing activities by the company which does not indicate bright future. One can argue that there has been conscious effort by the company to liquidate the inventories but fall in raw material consumption has been rather steep.
4. What is also surprising is that research expenses keep fluctuating in line with the sales. Last 3 qtr’s research expenses are Rs 5.69 cr, Rs 3.46 cr and Rs 6.73 cr. These expenses keep on increasing and decreasing in line with increase and decrease in sales. This clearly indicates that these are more like a sale expenses but disguised as research expenses.