Rei agro----a mysterious stock to understand.

#1
I am furnishing below relevant information having bearing on the valuation of the stock:

1. Promoter increasing their stake continuously (37.89% in March 2010 to 53.39 in Sept 2013) at all price levels buying in the open market over the years evident from SEBI SAST disclosures and quarterly SHP changes.

2. FIIs have been consistently holding substantial equity with intermittent increase/decrease quarter to quarter----Current holding 35.60% in Sept 2013, which is an increase from 23.64% in March 2010.

3. Retail holding (Individual) has declined from 15.31% in March 2010 to 5.14% in Sept 2013.

4. As at Sept 2013, the aggregate holding of Promoter/FII combine is about 89%. If one were to add the Bodies Corporate holdings under Public category, as these can be entities indirectly under promoter control, Promoters exercise control over almost 95% of the equity.

5. Equity of the company has been expanded in 2010/11 by way of Rights and GDR issues at Premium of 18.50 per equity share of Rs.1 face value. About 15% of right shares were subscribed by FIIs by way of rights renouncement.

6.There are outstanding FCCBs whose position is as follows as per AR of 2012-13:
“5.5% Unsecured Foreign Currency Convertible Bonds: The Company issued on 13.11.2009, 5.5% 105000 Foreign Currency Convertible Bonds (FCCB) of US $ 1000 each aggregating US $105 million [ ` 493.71 Crores] at par. The bonds are redeemable on 13th November, 2014 unless previously converted; these bonds are convertible into equity shares at an initial conversion price of ` 46.70 per equity share with existing fixed rate of exchange on conversion @ ` 47.02 = US $ 1.00 at the option of the bond holder at any time on or after 22nd December, 2009 and prior to the close of business on 13th November, 2014. The outstanding 104,650 bonds when fully converted would result in issue of additional 105,367,088 equity shares of ` 1/-each. Apart from this, FCCB holders retain the right to subscribe in Equity Shares to the extent of 210,734,176 Equity Shares of the Company as per Letter of Offer issued by the Company for Issue of Right Equity Shares in the ratio of 2:1 at a price of ` 19.50 (Including Share Premium of Rs. 18.50 per share) at the time of conversion into Equity Shares on or before 13th November, 2014.”
Due to rupee depreciation the amount to be paid to the FCCB holders, as on 31st March 2013, was Rs.569.18 Cr, as against the initial borrowed amount of 493.71 Cr and the redemption amount will increase/decrease depending on the exchange rate at the time of redemption in November 2014 or earlier as per redemption stipulations. In the event of conversion into equity and exercise of RIGHTS reserved in their favour , FCCB holders would have subscribed to 28.41% in the expanded equity(from the present 95.80 Cr. to 127.41 Cr) resulting in corresponding changes in the Promoter holding to 40.14% and FII holding to 51.57%, based on holding as per Q2 2013-14 SHP. As per SEBI SAST disclosure dt 19th July 2013,BlackRock Global Allocation Fund ,Inc. has acquired 88715000 Convertible Warrants on 3rd July 2013 which represents 8.34% w.r.t expanded equity capital of the company in the event of conversion.

6. REI has embarked on a capacity expansion programme in the recent past with considerable Capex .There is appreciable improvement in its top and bottom line and the operating cash flow since the last three years and the significant thing is that a major part of the REVENUE and PROFITS are contributed by its overseas subsidiaries.

CONSOLIDATED FINANCIALS
Particulars-------2012-13--2011-12----Change
Total Revenue-----9,548-----5,411-----76.4%
EBIDTA----------- 1,490-----1,025------45.3%
PBT---------------- 763-------446------71.2%
PAT---------------- 701-------398------76.1%

STANDALONE FINANCIALS
Particulars-------- 2012-13----2011-12---Change
Total Revenue------5,101-------4,255----19.9%
EBIDTA--------------933---------862-----8.2%
Borrowing Cost--------609--------540----- 12.9%
PAT------------------211------- 226------6.7%

The EPS for 2012-13 was Rs.2.18 on Standalone basis and Rs.7.30 on Consolidated basis (Equity Share FV Rs. 1). The company is highly geared on debt reported to be due to working capital intensive nature of the Basmati Rice industry requiring ageing of Rice for 18-24 months after procurement. The company’s increasing debt year after year and huge inventory are negative factors though financing cost as a percentage of Revenues has not increased implying that the company has been able to generate revenues to cover such increases. The performance during Q1 of 2013-14 is also good and the Basmati rice industry as a whole is doing well. The company has paid a dividend of 50 %(50 paisa) for FY 2012-13 on 30/10/2013.

7. The stock is in downtrend after reaching Rs. 15 levels in May/June 2013 and is now making new lows almost every alternate day .The CMP is 6.35.It is widely believed that the movement of the stock is manipulated and is totally under the control of the promoters, who continue to buy the stock at current level too, as seen from a recent SEBI SAST disclosure dt29/10/2013. There is no rational explanation for the stock to be trading at the present level given its consistent growth in top and bottom line, good performance numbers, dividend track record, strong SHP, visible brand building through media ads for its Rain Drop basmati rice and the Basmati Rice industry itself doing pretty well currently with good export earnings due to rupee devaluation and higher price in the domestic market as well. It is also surprising, however, that no DII/Mutual fund has evinced interest in the stock.

Can anybody throw light on the drastic decline in stock price which defies logic in the light of the details furnished above?
 
#2
It may start moving from circuit to circuit. If the current bull phase continues, then the smallcaps and midcaps will chime in too. I will buy a big chunk and sit on it:cool:
 
#3
Hi, bearishbul

Can U kindly watch the trading of this stock and comment who keeps buying and selling at such low level, may times in bulk quantities. This is happening continuously with difference of 5-10 paisa in a day. I am sure it is not the retail holders who are buyers/sellers in such quantities. Looks like change of hands has been taking place between promoter controlled entities/FIIs in open market transactions at all price levels through out the downward movement of the stock interspersed with circular trading. Despite such bulk trades one sees every day , there is little change in category wise holdings in SHP quarter to quarter, as I noticed comparing changes in SHP of June and Sept 2013 quarter. Can U comment on the eye striking divergence between the CMP and the valuation based on its performance/fundamentals and what can be the reason for this kind of continuing slide in stock price?
 
#4
I don't follow this stock, but if things are happening as you are saying then it is a wholly operator driven stock. Since we are in a liquidity driven market that is about to breakout, the operator may run it to make a new high. Driving it down to make new lows could be a ploy to make the investors run away so that the operators and other big fish can grab it at low prices and then sell it at all time high to the born to be bakra investors.
 
#5
Dear bearishbull,

Thanks for responding. I am sure U may not find an identical stock and situation that REI is in. The point is either the published numbers are FAKE or there is something FAKE about what is going on. Such performance numbers and CMP can rarely co-exist. The manipulation of price and movement of the stock is going on for years giving the impression that this is a long term strategy of the promoters who have a strangle hold on the stock because of low retail holding and tacit understanding with the FIIs their long term companions. U will find that unlike in may companies which issued GDRs and have gone bust after promoters have reduced their stake drastically dumping the stock on retail holders, U find a reverse situation here as price is dragged down and promoters have increased their stake.
 
#6
The proposal of REIAGRO taking a controlling stake in the Singapore based GEM TV company in a REVERSE MERGER deal involving one of its wholly owned subsidiaries may have had a bearing on trading of the stock since the last few months. REIAGRO has made a disclosure to BSE on 31st October 2013 which seems to be a belated disclosure as compared to the GEM TV which seems to have made the initial announcement in this regard on 29th August 2013. The impact of this proposal on the fortunes of REIAGRO is to be evaluated and understood......http://www.btinvest.com.sg/markets/news/71197.html?source=si_news
 

Rish

Well-Known Member
#7
In way back 2008, it was a operator script..... purely manipulated....

Analysis the Shareholding pattern movement in 2007 to 2008, you will understand, what i mean......

Fundamentals will never work out in operator scripts.............

Old operator scripts............. MLL, KSOIL, Atlanta, Tantia Const, Suzlon, HCC, HDIL, Bhusan Steel................... etc.....

Present operator scripts......... Bata India, Jubilant Foods, Mcdowell..... this scripts will be killed in next bull market...

So, don't see the Balance Sheet (EPS/BV/Dividend- All put it into Dust Bin), it will never works out in Rei Agro... Any rise you can sell Rei Agro....
 
#8
pradosha bro, thank you for sharing your research work on Rei Agro.

I personally do not track this stock and have not studied it in any way yet. But based on the information that you have provided, it clearly seems to be an "Operator Script". And I agree with Rish, that in the cases where Operators are involved, one should throw all the Balance Sheet related stuff into the dustbin. Because all that data is cooked up and does not represents the real picture in any way. If you pay too much attention to the balance sheet related values then that will create more and more confusion inside your brain.

The real challenge in dealing with such stocks is to decide about the right Entry Timing. Because otherwise if one jumps in blindly then he might have to endure a long period of time being in the loss side. It is currently down 44 % in the last one year. And it went near to 300 in its boom days of 2008. And has crashed nearly 98 % from its peak !

No doubt that some day it will rocket up like anything, but it is hard to guess when that phase will start. No fundamental or technical analysis will help in this thing as it totally depends upon the Operators who are active in this stock currently. They only will decide when to make it a Rocket Again. :thumb:

Since you have been tracking it closely for long, I hope that you will be able to make a good entry into it. Such operator stocks can give Mind Blowing Returns if one is able to enter in the initial stage of the party. But if one enters prematurely then such stocks can give huge pain as well. Entry is the key.

Regards
 
#9
Thanks for ur advices @Rish and @00fnotrade which gives a clear perspective on the stock that I too have understood by now.

Anyway having dealt with this stock in some depth for a pretty long time I though of keeping this thread alive with relevant information on a "for whatever it is worth basis" in case it is of some help to anybody who is stuck and happens to go through this thread.

Despite issue of Right Shares and GDRs at Premium ofRs.18.5 per Share while expanding equity and the substantial growth in the top and bottom line of the company, the price of the stock is on continuous decline from the level Rs.28 in October 2011(Diluted EPS for 2010-11 Rs.3.08) to the CMP of around Rs.6 now (Diluted EPS for 2012-13 Rs.6.57). THIS MEANS THAT WHILE EPS INCREASED BY MORE THAN 100% THE SHARE PRICE HAS FALLEN BY 80%. The increase in promoters holding (16%---from 37.99 % in September 2010 to 53.38% in September 2013) during the period of decline in the stock price casts serious doubts about control of price level by vested interests through manipulation. Promoters’ acquisition of additional equity includes GDR based shares at heavy discount to the issue price, which itself should be a matter for investigation from applicable angle in financial dealings.

Comparison of changes in the various categories of SHP on quarter to quarter basis will bear out that the huge quantity of the stock traded do not reflect in any significant changes in the Category wise holdings, particularly in the period of steep downfall, indicating circular trading/accommodated trades with the connivance of vested interests.

The above gives the irrefutable impression that either the reported numbers are cooked-up or there is rampant manipulation in trading, both of which are a cause for immediate investigation given the track record of REIAGRO management having already been penalised by SEBI, vide its ADJUDICATION ORDER NO. EAD-2/AO/ 112 /2012 Dated December 31, 2012 for trading irregularities.

As regard the proposal for reverse merger involving the Singapore listed Gems TV Holdings mentioned in my earlier post, I have understood the following by going through the said proposal:

1. It does not cause any cash outflow from REI

2. Gem TV Holdings, the company in which REI/ AMMALAY would acquire controlling stake, it seems, has no operations or any major debts. The agri business of REI`s wholly owned subsidiary, AMMALAY, will get transferred to another company to be incorporated in UAE, which again will be a wholly owned subsidiary of the acquirer company Gems TV Holdings in which REI/ AMMALAY will have controlling stake. So the result is the controlling owners of REI will also control the new company to whom AMMALAY`s business would be transferred. That would not materially affect REI`s business, in as much as what AMMALAY was doing hitherto will be done by the new subsidiary.

3. The proposal envisages disposal of existing business of Gem TV Holdings including that of its subsidiary which will provide cash of US$4,583,000 to Gem TV Holdings that is being acquired by REI/ AMMALAY. It would thus appear that the acquired company, Gem TV Holdings will be just an investment company under control of REI/ AMMALAY without any operations of its own excepting the investment in the NEW subsidiary.

4. The proposal has placed a market value on ONE of the REI’s wholly owned subsidiary AMMALAY at S$571,375,000 or US$ 457100000 or Rs. 2788.31 Corers.(Calculation: 571,375,000/1.25X61).

5. The proposal looks more like a tax planning measure at the same time bailing out a sinking company which is on the verge of being De-Listed by the Singapore Stock Exchange.

6. In their announcement filed with BSE, REI management have already stated that "As a result, our overseas subsidiaries may undergo a reorganisation of their business without any changes in Rei`s ownership of the existing wholly-owned foreign subsidiaries"

And what should we understand from this? REI`s market capitalisation at CMP is Rs.600 Crores and the value of the business of one of its subsidiary is RS. 2788 crores. The expectation is that REI will slide down further .The extent of manipulation and the manner in which the operators are able to sustain it is mind-boggling
 
#10
REIAGRO undoubtedly is an operator driven stock.....but not necessarily the one whose numbers are LARGELEY cooked up, which may be the case with other stocks mentioned in earlier post of learned members......one may get some insight into the plans and ethos of its Chairman (Trading manipulation through operators not withstanding) finding expression at the previous AGM of the company(not of the current one held on 30th Sept 2013)

http://t.in.com/5D0F

Today the stock has risen 17% closing at Rs.6.95, touching the UC figure of Rs.7.20 with reasonably good volume.....Pl watch whether it sustains or it is another operator stunt.
 

Similar threads

Broker Special Offers

Intraday Higher Leverage

Save up to 90% in brokerage and get higher leverage for intraday trades.

Name:Phone:
Email:City:
State:
Are you a day trader?