[BCG4LongTerm]

Hi Friends,

As per notification to stock exchanges in 2018, Board approved raising upto 60 crores. I believe this was meant for clearing the debt of the Indian banks.

1. Now that debt of SBI and Canara is cleared and Axis(assuming it was cleared by Sep 30), is there a need for preferential equity?

2. If SKR goes for preferential allotment, how much would be dilution?

[VALUEBUYER001]

Since these loans were cleared with personal money of the promoter preferential issue of shares will be done in lieu of the money they have repaid personally this way I have understood

[BCG4LongTerm]

Thanks VALUEBUYER001 for your response. I am under the impression that the debt is paid using internal accruals.

If SKR is paying the debt, can it be paid directly to the bank?
If SKR is funding the debt clearance, in my view, he would give an unsecured loan to standalone entity. And, standalone would clear the debt. In Mar-19 quarter, SBI close was closed, approx payment of ~10 crores. However, there is no mention of loans in the balance sheet or related party transactions in the FY19 Annual Report.

[m4max1979]

I agree with you BCG4LongTerm, I think in order to take loan from promoter, company needs its Board’s approval first. No such approvals have been taken so the loan I guess has been repaid from internal accruals.

[Sobha]

There was a mini conference call with some retail investors. Once Ian send its sound record. In that SKR claimed that the bank loans are cleared by his personal loan to the company. In return he will take preferential issue. Further indicated, he is happy to buy it for 10 rs.

[BCG4LongTerm]

Will be interesting to find how this personal loan is disguised in the financial statements. If the personal loan is true, there is a serious disclosure issue.

[m4max1979]

Well, as per section 179(3) of companies act, board needs to pass a resolution empowering the company to borrow money even from its directors. Normally most companies do not publish board resolutions for the purpose of taking loans. However, in case of loan from promoters/ directors, form MGT-14 needs to be filed with ROC within 30 days. I did not find any such filing in index of charges on MCA site. I am assuming that maybe SBI loan was paid by company and for Canara Bank loan, 30 days are not over yet.

[Avi]

M4M… Letter to exchanges dated 9 Nov 2019.

This is to inform the Shareholders of the Company through Stock Exchanges that the
Company has cleared the outstanding debt with Canara Bank and

ready to file the required
no objection certificate (satisfaction of charge) with Ministry of Corporate Affairs to
remove a charge of Rs. 49.50 Crores against the company.

Seems the procedures is still in progress…. Says READY TO FILE

[BCG4LongTerm]

If we look into cashflow statement (Standalone) for FY19, there is no cash outflow towards bank loan payments, while they have closed the SBI loan of 9.9 crores in March 19.

At the sametime, the cashflow of consolidated statement shows payment of 9.93 crores towards loans clearance.

So, it appears that the SBI loan was cleared from another entity. I am guessing its LIL projects.
Source : Annual Report FY19

[BCG4LongTerm]

m4max1979, SKR mentioned that Canara bank loan was cleared in Q1 confcall. Assuming SKR funded the loan repayment, 30 days time for MGT-14 should be over by now. Isn’t it?

[m4max1979]

Hi Avi, I saw that notification from BCG but I think it means nothing till the company shares a no dues certificate from bank or at informs that bank has issued one. Normally what happens is that once company pays the entire dues, Bank gives a no dues certificate/ loan closure letter. Company then files for release of charges on MCA site which usually takes a few weeks.
However, we are discussing the source of cashflow for canara and axis bank. I think the loan is from some subsidiary which may or may not have taken loan from director/ promoter. Only time can tell. Sometimes this hiding of information really pisses me off.

[BCG4LongTerm]

Agree m4max1979, Yes, there are lot of things that are hidden for reasons best known to SKR. I am hoping they will publish cashflow for H1(as per new regulations) along with Q2 results.

The balance sheet and cashflow should throw some light into the source of the cashflow.

[108BULLGURU]

I asked for 1 qrtr free cash flow and i got a email response that when they present 2nd qrtr numbers they will give free cash flow numbers too for first 6 months.
Looking forward to that.
It is a public limited company and every thing should be transparent.

[BCG4LongTerm]

108BULLGURU, As per new rules, companies have to publish cashflow on half-yearly basis. If they do that, we will understand the source of cash for loan repayment, free cash situation and possibility of dividend.

For FY19, consolidated cashflow from operations is pretty good at 510 crores. It’s the investments which they are further making reducing the free cash.

For H120, I would expect at-least 200 crores of cashflow from operations. The level of investments will determine the freecash available.

[108BULLGURU]

I think dear you are considering net profit as FREE cash flow.
Cash flow from operations and free cash flow are very different animals.
Free cash flow out of which dividend is going to be paid is very minimum just few crores and
that too only 15%
of it to be distributed as dividend.I questioned the company re this policy to which they gave a reply.

[BCG4LongTerm]

As I understand, free cash definition for dividend policy

Free Cash = Cashflow from operations – Investments(New products or acquisitons)

For FY19, freecash 510-387 = 123 crores.

15% of 123 = 18.45 crores available for dividend for FY19. Obviously, dividend will be small(32 paise).

My point is that the level of investments they are making is quite huge. As a result, free cash is very low.

[Sobha]

Is it not the 510 crores before tax?

[m4max1979]

Profit before tax is Rs. 608 crs not 510 crs. BCG4longterm is right, free cash flow is around 123 crs. However, I would prefer the company spend it on closing daum and settling banks instead of dividend. Would prefer cmp around book value for a start rather than dividend.

[108BULLGURU]

I am not sure about the accuracy of free cash flow of 123 crores/. Let us wait for the 1 H numbers.When i had a look at the balance sheet for year end March 2019 i did not see 123 crores of free cash flow.
I think it was 15 crores or so.
Dont rememeber the exact number though.

[Lycos_Investor]

BSE Notification: Board meeting on 3rd Dec – The agenda of the meeting is to consider and approve the Preferential Issue of Equity shares to specific individuals and entities subject to shareholder and regulatory approvals.

[Author]

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