NOT A RECOMMENDATION ,JUST AN INFORMATION

 

 

Reading the stories of companies came back to glory  from the brisk of collapse is always interesting ,encouraging and thrilling. Other investors can learn many lessons from such stories. But in many such cases ,promoters of such companies are unwilling to share their experience in bad days with media or even to the minority share holders. We can find many such companies in listed space like Jain Irrigation, Orchid Chemicals, Diamond power infrastructure..etc. Recently I came across an article about a company which is going through rough weather for past many years, in a financial journal. I am unable to predict whether this company will come back to black in near future or not,but I consider the willingness of the MD to face the media after a long gap is an indication of some favorable developments in the company. Don’t consider it is a recommendation to BUY the stock of this company ,but ,just take it only as a sharing of  information to those who could not read the article. I know ,many of you will stop  reading  this post ,just after hearing the name of the company .Anyway it is INDAGE RESTAURANT AND LEISURE LTD.

STORY IN NUTSHELL

Most of the investors are aware that the happenings in debt ridden  Indage Group – mainly Indage Vintners Ltd-which is now  fighting for survival. Indage Vintners  is managed by Renjith Chougule  sibling of  Vickrant Chougule the MD of Indage restaurant and Leisure Ltd . No doubt, both are running independently .Indage Restaurant and Leisure is running restaurants in five genre viz, Quick Service Restaurants(QSR),Casual dining, Wine Cafes and Bistros, Fine Dining and Pubs, and Resorts and Hotels.Under QRS it is operating Gracia’s Pizza Chain with 20 outlets (Remember ,the market leader Jubilant Foodworks having 300 +) .In casual dining ,it has a master franchise agreement with South African dining chain  NANDO’S  and running three  restaurants in this brand name. under ‘ Wine Cafes and Bistros’ it is running ‘IVY’- in  Seven different locations. Under ‘Fine Dining and Clubs’,company running  Japanese restaurant ‘Tetsuma’ and ‘Athena’ and ‘Prive’ clubs in Mumbai and ‘Zaha’in Pune.Under ‘Resorts and Hotel’ segment ,company running ‘Hotel Shalini Palace in Kolhapur(only palace resort in Maharastra) and ‘Tiger Hill’ resort in Nasik. Positioning in these different segments clearly indicating that the company operating in almost all levels of hospitality industry.

Then what is wrong with ?

In FY 2008 ,company posted a turnover of Rs.24.6 Cr and a net profit Rs.3.1 Cr. Thereafter company’s operations de railed , and it could not service its debt of close to  Rs.30 Cr. Reduction in  spending of people due to the fear of  recession in that period added fuel to the fire. Even if it is working as a separate entity ,the bad image of Group mainly due to the problems of Indage Vintners adversely affect companies business plans and further expansion. In FY 2009 ,company posted a turnover of Rs.25.3 Cr and a net loss of Rs.12.35 Cr.

Current Situation

As mentioned in the beginning ,there was no information about the company’s financial plans or results in public domain after the declaration of December 2009 results. In the above mentioned article ,the author indicates that the company posted a loss of Rs.8 Cr in March 2010 full year which is a reduction from the loss of Rs.12.35 Cr in FY 2009.Now company is trying for a  debt restructuring and induction of a strategic partner. It also changing its business model  and trying to expend through franchise route pan India. Company is also  going to start two Nando’s outlets one each in Bangalore and

Chandigarh  in November 2010. Management expecting a turnover of  Rs.40 Cr in this FY and back to black in FY 12 provided the debt restructuring is cleared .

My opinion

1)      Company have lot of problems and the opportunities are equally big

2)      MD of the company is young (38 years) and enough time to learn from the mistakes and prove himself.

3)      The Industry in which company is operating have huge potential in India and companies from such a sector may get premium valuations in stock market going forward.(After the publication of the mentioned report itself share price rallied from Rs.8/- to Rs.14/-)

4)      Managements willingness to share information with the public after a long gap  is really a positive sign

5)      The franchise model business development in food chain business have great potential in a country like India

6)      If the company is not able to restructure its debt in reasonable time ,its net worth may be in a pathetic situation going forward.

7)      It is not easy to find out a good partner before the image of the group improves(after emerging a clear picture about Indage Vintners)

8)      MD’s five is target is a sale of Rs.200 Cr and a net profit of Rs 55-60 Cr is really ambitious and no chance to materialize.

9)      At present management has  reached a stage where they can at least imagine and dream something about future -is really positive.

10)   Non filing of information like financial result  to stock exchange may invite penal action

Conclusion

I personally believe that , if setbacks in business happened even after the hard work of management and only because of some reasons beyond the control of  management ,god will give atleast one chance to come back, provided such a collapse is not  purposefully created by the management to cheat other investors or related parties.

ALL THE INFORMATIONS AND ASSUMPTIONS ARE BASED ON A REPORT WRITTEN BY Mr V KESHVDEV IN OUT LOOK PROFIT

COURTSY : OUTLOOK PROFIT

Once again  I would like to indicate that this is not a recommendation to BUY or NOT TO BUY ,Study yourself  and take a decision .CMP is Rs.14/-