Studying a Turnaround and Restructuring Bet in Promising Sectors with a Proven Promoter
Part 1 of 2
We are studying an investment opportunity that demands our attention. The company's management has recently undertaken substantial operational and structural changes, positioning it for a robust comeback.
Operational Restructuring:
The company has relocated its operations to Chennai, enhancing operational efficiency and saving substantial fixed costs.
This move has significantly improved operating margins and management oversight, setting the stage for enhanced profitability.
Financial Realignment:
The company's financials have faced challenges, with a negative net worth on a consolidated basis and within its subsidiaries.
To address these issues, the company plans to raise funds through a preferential issue, aimed at repaying loans totaling approximately INR 30 - 50 Crore. This step is critical to restoring positive net worth and mitigating constraints on bidding for large tenders and improving banking relations.
Strategic Acquisitions:
The company will acquire a minority stake in one of its subsidiaries, consolidating complete ownership and ensuring a transparent and focused management structure.
Additionally, the acquisition of 100% stake in an automation technology company specializing in the metal sector is underway. This acquisition is expected to be immediately EPS accretive and will leverage the automation expertise to create synergies with the company's established market reach.
Leadership Reinforcement:
A seasoned industry veteran has been appointed as the Group CEO and MD. With over 30 years of experience, primarily at a leading multinational corporation, he brings a wealth of knowledge in T&D and Automation businesses. His leadership is poised to drive the company towards improved performance, profitability, and shareholder wealth creation.
Recent Developments:
The Managing Director (MD) recently completed the sale of another company he was leading, securing significant investment from a prominent investment firm. This highlights the MD’s capability to attract substantial investments and successfully navigate corporate transaction.
Over the next few weeks we will be deep diving into this and opportunity and doing our scuttlebutt. We are still in the evaluation phase but it looks like an interesting opportunity.
We want to emphasize that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. Readers must conduct their due diligence and exercise caution. Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss this in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reach out at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com
Great write up as usual. 🙏🙏