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September 14, 2015

Olympia Industries Ltd : Annual Report and preferential allotment update.

As you know I have already invested in Olympia Industries ltd and I have covered that here 

Annual report of Olympia Industries Ltd is now available on BSE website . Recently they had announced "Subject to the approval of members of the Company and appropriate authorities, the Board has decided to issue and allot 30,00,000 Convertible Warrants of Rs. 10/- each to Promoters and strategic investors on preferential basis pursuant to Section 62 of the Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirement) Regulation, 2009. "

I was very much impressed with this announcement and I had given thumps up to promoter for showing courage in falling stock price to allot convertible warrants . I was calculating price by the following formula which was giving price more than 180.

Pricing of equity shares.
76. (1) If the equity shares of the issuer have been listed on a recognised stock exchange for a period of six months or more as on the relevant date, the equity shares shall be allotted at a price not less than higher of the following:
(a) The average of the weekly high and low of the closing prices of the related equity shares quoted on the recognised stock exchange during the six months preceding the relevant date; or
(b) The average of the weekly high and low of the closing prices of the related equity shares.

But when I saw annual report I just return to reality from a daydream . There is one more addendum to above rule for case of infrequently traded shares where total volume for last one year is less than 10% shares of total paid up capital of the Company .

Pricing of equity shares of infrequently traded shares:.
The price determined by the issuer shall take into account valuation parameters including book value,comparable trading multiples, and such other parameters as are customary for valuation of shares of
such companies:

Provided that the issuer shall submit a certificate stating that the issuer is in compliance of this regulation, obtained from an independent merchant banker or an independent chartered accountant in practice having a minimum experience of ten years, to the stock exchange where the equity shares of the issuer are listed .

So , annual report has special resolution no. 11 as per that

I don't say it is illegal to issue preferential Convertible Warrants at 45 when market price was more than 150 but surely as minority investors I am not feeling comfortable with management . Recently , one of the micro finance company Satin Creditcare (listed on NSE SME platform) raised 51 cr on preferential allotment from SBI cap where min price as per formula was around 105 but they have decided pricing as 130. This is not only one example of higher than min price, there are many .This is the world of small micro cap stocks you can't do much .  I can do voting against this resolution item no. 11 but as minority investors I can not achieve much . So , I will have to think 360 degree and vote. Not decided yet.  If this resolution get passed and all warrants get converted then I may feel betrayed as minority investor because I got this share cheaply but they will get dirty cheap but there are couple of positive things will emerged in this counter due to this.
1. It will more closer to get out from P group , It will be just 2 lakhs demat shares away from getting 50% public shares in demat format .Once , it get out from P group there will be more buyers.
2. Promoter shareholding will increase from 60 to around 72 % . That will show confidence of promoter in this company and lot investors this is one of the parameters to enter in this type stock . I am still sure this company will create lot of wealth specially for promoters . And If they learn consider minority shareholders as equal partner then It will create lot of wealth for us as well. keep watching .
3. They are injecting new young blood in promoter group which can understand current world of e-commerce properly and can bring some innovative ideas .
4. They are allotting warrants to Paresh Baghat of mangal keshav Securitues  and Meenakshi Kanoongo. I have not done much research on them but Paresh Baghat looks like stock picker . You can read one of his a interview . I believe they are are here not just because of short term gain play by getting allocation at dirt cheap rate and sell on conversion and vanish. I hope if they are not fly by night operators then they can also bring some investors along with this . Keep watching them as well .

Another point that bothering me how they can avoid Open Offer on conversion warrants into equity share since they can't increase more that 5% in a year without open offers to other shareholders .
There are some exception like CDR cases but not sure If they got such exception , they will have to clarify else you need to drop a email to them if existing shareholder .
To be frank, I didn't like their corporate governance practice even though we don't expect much from small companies . They have not communicated on the following points to exchange announcement board.

1. Whatever information they have given in annual report that should have been communicated to exchanges . So , far they have not announced investors details and quantity to exchanges . They should have done it with all details including their PAN number .
2. How these 2 new non promoters are strategically fit for company . I am not convince .
3. Soft copy of valuation of Rs 45 should be submitted to exchanges . I am not convince . May be after seeing it I can get convinced .
4. I have not received Annual Report on my email account of demat account yet (14 Sep) when annual meeting is on 27 th Sep .

Olympia Industries Ltd is now new economy e-commerce stock and the person who still valued all the companies on old parameters, we can not get right valuations from him. We need check how valuation of Rs45 (mcap 15 ) came . Do you know initially just dial was valued at 15-20 lakhs by their own CA during first round of funding? . Read this article 

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  1. its grossly wrong to compare intrasoft and this one….intrasoft is proper e-commerce company whereas this is just a channel partner… absolutely not comparable??

  2. Hi Pramod ,
    It may not be pure e-commerce if you think only IT enabled companies are e-commerce companies with very low inventory model . It is also e-commerce company or you may say proxy to pure e-commerce players . Some of the big investors prefer to invest in proxies of next trend instead of actual companies e.g. logistic player Blue Dart is considered as proxy to e-commerce .
    In fact proxies has better chance to remain profitable with good ROE, ROI and other ratios . Warrant price will have some time hangover then It will again starts zooming . I may have to do some avenging below 100 since even with this warrant price and equity dilution issue, I believe if growth come backs with coming festival season then new investors will not give much weightage to this issue . Small cap with huge growth potentials are like spouse, you have to ignore some of the negatives and stay with them , if negatives are not tolerable then give divorce at loss . Everybody has their own tolerance level .

  3. Sir Can you share your view on Patel integrated Logistics..Looking forward to buy 600 olympia shares and 600 patel shares...For a time frame of atleast 2 years..As i see a growth in e-commerce and logistics in future..

  4. Hi Pramod,
    Unfortunately, I couldn't attend the AGM, since one of my family members got admitted to hospital. In fact, I had taken leave from my office for AGM day and prepared questionnaire. If somebody has any update then give us. This is a long term story of two recession proof segments i.e. FNFG and eCommerce, now at current rate available at very cheap rate, our time horizon should be at least 3-4 years since It is not going out from the P group soon and without that we can't see much price improvement. Don't buy more than 3-4% of your portfolio, but It must be part of your portfolio. I may take doubt on management minority shareholder friendliness, but I don't have any doubts about business prospects. Olympia Industries is the second biggest seller on Amazon India and this is the segments where foreign FDI is eying because of growth prospects but so far Govt has not allowed foreign FDI. Paresh Bhagat is investing some more to follow. Rakesh Jhunjhunwala says "If a girl is beautiful a suitor will come. If a stock is beautiful, a suitor will come. So I don’t search for suitors when I buy the stock"

    It is just buy in small quantity and forget type of share.

  5. Sir, When will you coming with your next multibagger idea in this blog. We are waiting eagerly for that. Hoping it will be sooner than this Diwali.
    Please comment sir.

  6. How to know the latest number of demateralised shares?

    1. HI Ricky ,
      As per latest shareholding pattern disclosed on 20th Oct public Shares held in Dematerialized Form increased from 1.2 lakhs to 2.02 lakhs out of around 12 lakhs. So , new equitation if Paresh Bhagat and Meenakshi Kanoongo decided to convert warrnets in equity shares will be equal to 7.02 lakhs total public Dematerialized shares ( 2.02 + 2.5 + 2.5) out of total 12+5 = 17 lakhs . So new magic figure will be 8.5 lakhs , shy away with just 1.5 lakhs with magic figure .
      Secondly , Olympia Industries will be out of monthly, quarterly , yearly circuit introduce by BSE since it has more than 10000 public shareholder .

    2. Sir, Whats the circut introduce mean?

    3. Hi Ricky ,
      See more details at .



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