Thursday, May 10, 2018

VAKRANGEE LTD - WHAT NEXT - AFTER SO MUCH FREE FALL

VAKRANGEE LTD

WHAT NEXT


VAKRANGEE LTD saw a market price of around 515 in its Hey Day but has now fallen to around Rs.70. Will it fall further? May be.

There were all sorts of rumours spreading around Vakrangee by some motivated parties and many denials also came from Management. In spite of all this, the Free Fall of the Market price of Vakrangee continues unabated. This free fall is not understandable the retail Investor any more.

On most days, there are only SELLERS and no BUYERS and yet the price falls everyday by 5%.

The Auditor’s recent statement is that while they repeatedly sought information on matters related to ‘election books, bullion and jewellery businesses’ of the company, they failed to get any relevant information. So, what exactly the Auditor sought and what the Management failed to provide is still not very clear. But, this has become the reason for Price water house to opt out of its engagement as Auditor of the company,

This is definitely an unwelcome development and perturbing. After PriceWaterHouse has resigned as Auditor, a New Auditor has been appointed. Now, the company must provide the new Auditor with all relevant information on matters raised by previous Auditor also apart from any new points likely to be raised by the new auditor  and clear the mysterious Air around the company’s books of accounts. This, the company must do with ALL-OUT EFFORTS that it can muster. It cannot remain half hearted in its approach.

It is also said in various News that SEBI and Government have ordered some sort of surveillance on the company. 

Some News says –
 “The financial statements present the true and fair view of the state of affairs of the company,” a Vakrangee spokesperson wrote in reply to an email query. 

“The audit committee has also reviewed the financial statements and has been fully satisfied with all the information and explanations provided by the company.”

The company had on May 5 appointed A.P. Sanzgiri & Co. as statutory auditor, the spokesperson added.

There are also other News in the Press :

“There was always a doubt on the number of seva kendras that the company claimed it had,” said an investor, who did not wish to be named. “Now the market will doubt the company’s financials as well.” 

“There has always been a buzz about a prominent market operator being active in Vakrangee stock. It is not unusual for such stocks to see such see-saw trends in the market at intervals as conflicting vested interests might be in play,” said another market participant on condition of anonymity.

Denying that store numbers had been inflated, the spokesperson of the company said Grant Thornton had been hired to do an outlet quality analysis of the firm’s kendras.

Vakrangee had earlier declared a CAPITAL ALLOCATION POLICY which, it has not implemented so far. It includes, dividend distribution, share Buy Back and so on. When exactly it proposes to implement all this is not clear.

Obviously, when the Vakrangee shares are in for a FREE FALL, it is not the right time to implement the capital allocation Policy. Stability of price needs to be restored first.
If the share price fall is being engineered by some market operators, SEBI must find out those operators and BAN them from operating in Vakrangee shares. SEBI must not allow this manipulated free fall in share prices in the stock market but must arrest it forthwith.

Vakrangee shareholders have lost a lot of money due to the unjustified price fall. SEBI must definitely protect their interests, as the price fall is not related to any cogent, price related company information or performance.

In particular, it must identify the operators who are manipulating the price and BAN them from market operations.

From the various Media appearances of Mr.Nandwana, I felt, that while the price fall was engineered by some market rumours and market operators, the Management and the Company are still doing well. Till the December results, the company really projected its performance well. What has happened after that is not known.

Why the company has not given some Books and information to the Auditor when sought by the Auditor is not known. The company cannot and must not deny access to any such Books or Information sought by the Auditor. 

I don’t know if Vakrangee at all has any Bullion and Jewellery Businesses as part of Vakrangee. I am not able to find any such reference in its web site. Probably, it is a small part of some service offered by the company. If so, any problem in that small part of the business cannot affect the overall business of the company as a whole, to any significant extent, even if Audit passes an adverse observation on some irregularity in that part of its Business. Mr.Nandwana swears a lot by Corporate Governance. He must live by his words now.

So, what next? 

Vakrangee must definitely and conclusively satisfy the SEBI and the Government who are said to have initiated some surveillance on the company. 

Vakrangee must seriously sit with the present Auditor, provide all Books and information, complete the Audit satisfactorily and publish the results and Audit observations fully. 

It must clear itself from all market rumours as fast as possible. It does not really matter if there are some observations on Bullion, jewellery Businesses etc. This has to be cleared quickly and confidence in the company must be restored.

All this can take anything up to 60 days Maximum and one Month optimum.

As per the Capital allocation policy, Dividend must be declared along with the declaration of Audited results. It must be an excellent dividend, because, Company is in possession of huge cash reserves and must reward Investors who have lost a lot of their capital itself. 

Buy Back of shares must wait for Better and stable days for the stock price. Company must not give the impression that it is somehow welcoming the free price fall so that it can garner large number of shares at cheap price.

There are some doubts about the Number of vakrangee outlets. This must also be cleared by the company with some factual, statistical information.

I too hold about 4950 shares at an average cost of around 210. So far, I have refused to sell the shares based on market rumours but then, I also refused to buy further, until the air clears. There are too many rumours afloat and now, the Auditor has added a fact which is adverse to the company. Many Investors may be in similar dilemma and may have lost good amounts of their capital in Vakrangee due to this free price fall.

It is for the SEBI and the company along with the New Auditor to bring the company back into normalcy quickly.

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