Showing posts with label future outlook. Show all posts
Showing posts with label future outlook. Show all posts

Wednesday, July 4, 2018

MIDCAP & SMALL CAP CORRECTION - VAKRANGEE -A COMPLETE REVIEW - WHAT THE FUTURE HOLDS FOR VAKARANGEE

MIDCAP & SMALL CAP CORRECTION

VAKRANGEE

From January, 3rd week or so, of this year, market has been in a correction mode. Mid caps and small caps especially have undergone severe correction during this period.

This period, unfortunately coincided with some adverse occurrences in respect of companies like Vakrangee.

A news paper at Mumbai carried some adverse comments on Vakrangee. This was followed by severe reaction in the market on Vakrangee's share price.

There were some other rumours of Vakrangee purchasing some huge shares in PC Jeweller. This drew adverse reaction from Investors and others in the press etc.

All this was clarified by the Management of Vakrangee through Media reasonably logically. Vakrangee sought to sell off the shares of PC Jeweller early and never to do such purchases in future.

This was somewhat convincing and the share price recovered partially but not fully. The company also announced a capital allocation Policy for Buy Back of shares and paying dividend to investors. This boosted Investor confidence to some extent.

Then came the Bomb shell - in the shape of the Auditor's resignation. The Auditor stated that the company is not furnishing some information in the absence of which it cannot complete the audit. So, the Audit is resigning.

Nothing could be done by Vakrangee Management to persuade the Auditor to resume Auditing. So, it appointed another Auditor who completed the Audit eventually.

The audit certificate was unconditional. But the accounts themselves consisted of 2 items which reduced the net profits severely as below : 

"Other expenses includes Rs.220 Crores towards amounts written off as bad debts pertaining to the legacy business of e-governance, during the quarter ended March 31 , 2018." 

The cumulative loss recognised on disposal of equity instruments for the year ended March 31 , 2018 is Rs.3,086.34 lakhs. Dividend recognised during the year for the investment disposed off is Rs. 46.96 lakhs. 

These two items reduced the Net profits severely in Q4. On the face of it, these will not probably have any effect on the results of Q1 to be declared shortly. One good thing is, it seems to be giving up its legacy business of e-governance where it is unprofitable. 

The company postponed its capital allocation policy - including dividend indefinitely. This drew criticism from all.

But, it announced some restructuring Plan for its Business involving huge Capex on the part of the company and on the part of the Franchisees of Vakrangee kendras. 

This also involves re-working the ratio of sharing between the Franchisees and the company which will  alter the existing revenue sharing. Its effect on the revenues of Vakrangee is not known. We are unable to form any estimate or opinion on this restructuring and its effect on the company's revenues right now. 

Therefore, I am unable to form an opinion on how the company's profits will look like in Q1 and Q2 of this year.

In the mean time, the company's share price is relentlessly beaten down in the market to a low of 31.

At this stage, can we form an opinion on the company's future?  

The basic business model is of course intact and sound. The restructuring may possibly reduce the  company's revenues to some extent. We don’t really know this and have to wait to see this. But, the brand image of Vakrangee at ground level may improve a lot, which was also one aspect of criticism on whether so many kendras really exist. That criticism will go.

If so much capex is expected of the Franchisee, Proliferation of Kendras may not happen at the speed Vakrangee wants. Some slow down may happen. 

But, India is very Big. 72,000 Kendras is a small number. It might well happen. 

Vakragee seems to have taken RBI's approval for some 10,000 White ATMs or something but condition is, some of them must be in rural areas. Whether it will be profitable in rural areas remains to be seen. 

All in all, Vakrangee is improving its Business image and brand image on one side, but is moving into a slightly uncharted territory. If this Business plan succeeds as good as the earlier business plan, Vakrangee can build far larger number of kendras all over India. 

Even with a slightly reduced revenue share, Vakrangee can still succeed well. 

Current price of Vakrangee is at around Rs.60, which is ridiculously LOW. So, what is its correct level?  In my view, it can't be less than Rs.150. But, it is the Q1 results that can firmly tell us what level it deserves. It also needs clear Management commentary through Media and along with results on what it expects about the future. 

Will it declare results quickly? Will it declare reasonably good results, even if slightly less than earlier due to restructuring and due to the fixing of new revenue sharing formulas. Vakrangee should build up its investor confidence levels now through all these and by clearly telling us what it expects from future through its current initiatives. 

All market uncertainties will be laid to rest when results get announced. Rs.60 levels are too low for a company which had reached over Rs.500 too. Everybody expects quick results and clear Management commentary about the future. 

All said, I firmly believe that the company still has a bright future. India is too big and the company’s business model cannot fail in India. The scope for expansion of Vakrangee is almost infinite.

Friday, May 7, 2010

BANK OF INDIA - BUSINESS GROWS - BUT NOT PROFIT - IN FY 10

Bank of India


BANK OF INDIA
RESULTS COMPARISON
FY 10 VS FY 09
Interest on Advances/Bills has increased to  Rs. 13103.23 Cr in FY 10 from Rs. 12539.25 Cr in FY 09, an increase of Rs.569 Cr YOY.


Total interest  Earned has also shown a similar increase to Rs.17877.99 Cr in FY 10 from Rs.16347.36 cr in FY 09,an increase of Rs.1531 cr.


Total Income has grown to Rs.20494.62 cr  in FY 10 from Rs.19399.22 cr in FY 09, an increase of Rs.1095 Cr ,YOY.


On the other hand, Interest Expended has also increased to Rs. 12122.04 Cr  in FY 10 from Rs. 10848.45 Cr in FY 09,Rs.1274 Cr, thus more than neutralizing the income growth.


Total Expenditure excluding provisions  has gone up to Rs. 15789.86 Cr in FY 10 from Rs. 13942.42 Cr in FY 09-  an increase of almost  1847 crores YOY.


Provisions has again gone up to Rs. 2210.93 Cr in FY 10 from Rs.1292.37 Cr in FY 09, an increase of Rs.918 Cr, which is considered to be quite High.


Net Profit has therefore come down  to Rs.1741.07 Cr in FY 10 from Rs. 3007.35 Cr in FY 09, a decrease of Rs.1266 cr or 42 percent YOY.


Dividend (%) has therefore been reduced to 70% in FY 10 from 80% in FY 09.


Capital Adequacy Ratio has come down slightly during the year to 12.63 from 13.21 in FY 09.


% of Gross/Net NPA has gone up steeply during the year to 1.31% from 0.44% in FY 09.


Basic EPS has come down in FY 10 to Rs. 33.15 in FY 10 from Rs. 57.26 in FY 09


The Market Price as of now is Rs.348, on which the P/E ratio comes to 10.5.


The quarterly results indicate the qtrly EPS of 8.15 for q/e 03/10; 7.72 for q/e 12/09; 6.16 for q/e-9/09; 11.13 for q/e 06/09 and 15.43 for q/e 03/09. It is nowhere near the highs of 2008 etc.


The bank is aiming for huge expansion and high profitability in current year. It is not clear of the NPA provisions have been completely taken care of. The next quarter wil give the indication if BOI has put an end to the huge NPA story of last year. Or, the Management may come out with its detailed expo on the Road ahead. While, it is a good bank, growing at very good speed, profitability needs to go higher up – to its own  earlier levels and  higher than that.


Next Qtr will give us a clearer indication of current profitability levels.
Note : As always, readers are welcome to offer comments, suggestions and corrections - which will be gratefully taken note of. 


PERFORMANCE HIGHLIGHTS
Business touched Rs. 4,01,079 Cr
•Aggregate Deposits stood at Rs. 2,29,762 Cr (Growth 21%)
•CASA improved to 31.75% from 30.76% YoY
•Advances at Rs.1,71,317 Cr (Growth 18%)
•Net Interest Margin for YE Mar 2010 is 2.51%
•Net Profit for YE Mar 2010 Rs. 1,741.07 Cr
•Gross NPA Rs. 4883 Cr( 2.85%) and Net NPA Rs. 2242 Cr(1.31%)
•Provision coverage ratio 65.51%
•Basel II CRAR 12.94%
•Net worth improved to Rs. 12,456 Cr  

  • Net interest income has gone up by 5% YOY and 8% QOQ.
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 OUTLOOK FOR FUTURE - FY 11




Bank of India expects loans to grow 25 per cent and deposits to rise 23-24 per cent in  FY 2011. (vide a Report dt 7th,May,2010)

Its CMD says - "Demand is expected from mid-corporates, retail, SMEs (small and medium businesses) and infrastructure."


The bank with a capital adequacy of 12.94 per cent, and adequacy of 8.48 percent in the Tier-I segment, has a headroom to raise over Rs 70 billion in case of need to fund loan growth, he said.


The bank with a provision coverage ratio of 65.51 percent as on March 31, 2010, needs to set aside about Rs 2.8 billion to achieve Reserve Bank of India's norm of 70 per cent provision coverage ratio by September.


The bank has sanctioned loans worth 290 billion rupees that are yet to be disbursed.

RESULTS IN FIGURES

AUDITED-CUMULATIVE-NON CONSOLIDATED
Description :: FY 10(Rs. in lakhs)  ::  FY 09 (Rs. in lakhs)
Interest on Advances/Bills :: 1310323 :: 1253925
Income on Investments:: 446430 :: 337031
Interest on Balances With RBI ::  24940 :: 37376
Others :: 6106 ::  6404
Interest Earned :: 1787799  ::  1634736
Other Income    :: 261663  :: 305186
Total Income :: 2049462 :: 1939922
Interest Expended :: 1212204 :: 1084845
Employees cost :: 229607 :: 193741
Other Operating Expenses :: 137175 :: 115656
Operating Expenses :: 366782 ::  309397
Total Expenditure excl.provisions : : 1578986 :: 1394242
O P T ::  470476  :: 545680
Provisions ::  221093 ::   129237
Tax Expense       75276    115708
Net Profit (+):: 174107  :: 300735
Dividend (%) ::  70  :: 80
Face Value (in Rs.):: 10 :: 10
Paid-up Equity :: 52591  :: 52591
Reserves ::  1193008 ::    1061766
Capital Adequacy Ratio :: 12.63 ::  13.21
Basic EPS : 33.15 ::    57.26

Gross/Net NPA :: 220745 :: 62821
% of Gross/Net NPA ::  1.31 :: 0.44

ANNOUNCEMENTS TO EXCHANGE

7-05-2010            Bank Of India has informed the Exchange that the Board of Directors of the Bank at its meeting held on May 07, 2010 has recommended dividend of 70% i.e. Rs. 7/- per share on the face value of Rs.10/- each for the year 2009-10.          -

07-05-2010          Bank of India has informed the Exchange regarding the standalone Results for the year ended on 31-MAR-2010 as follows: Interest earned of Rs. 1787799 lacs for the year ending on 31-MAR-2010 against Rs. 1634736 lacs for the year ending on 31-MAR-2009. Interest expended of Rs. 1212204 lacs for the year ending on 31-MAR-2010 against Rs. 1084845 lacs for the year ending on 31-MAR-2009. Net Profit / (Loss) of Rs. 174107 lacs for the year ending on 31-MAR-2010 against Rs. 300735 lacs for the year ending on 31-MAR-2009.       -

07-05-2010          Bank of India has informed the Exchange regarding the standalone Results for the quarter ended on 31-MAR-2010 as follows: Interest earned of Rs. 452505 lacs for the quarter ending on 31-MAR-2010 against Rs. 449310 lacs for the quarter ending on 31-MAR-2009. Interest expended of Rs. 297336 lacs for the quarter ending on 31-MAR-2010 against Rs. 305975 lacs for the quarter ending on 31-MAR-2009. Net Profit / (Loss) of Rs. 42791 lacs for the quarter ending on 31-MAR-2010 against Rs. 81037 lacs for the quarter ending on 31-MAR-2009.


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