May 16, 2017 04:26 PM IST | Source: CNBC-TV18

The stock which fell 74% in one month, here's what management has to say

The trading in the stock was frozen at Rs 60.90 today, down 5 percent and there were pending sell orders of 2,715,845 shares, with no buyers available.

Shilpi Cable Technologies share price continued to hit lower circuit for the 14th consecutive session on Tuesday, especially after overseas lender filed a petition against the company under Insolvency and Bankruptcy Code.

The trading in the stock was frozen at Rs 60.90 today, down 5 percent and there were pending sell orders of 2,715,845 shares, with no buyers available.

The share price lost nearly 74 percent in last one month from Rs 231.80 on April 13.

The company in its filing to exchanges, on April 30, said, "An overseas bank has filed a petition against Shilpi Cable before the National Company Law Tribunal (NCLT), under Section 8 & 9 of the Insolvency and Bankruptcy Code, 2016."

Below is the verbatim transcript of Manish Goel, MD, Shilpi Cable Technologies' interview to CNBC-TV18.

Varinder: We want to know what is going on in terms of all the creditors filing bankruptcy proceedings against the company. Who are these creditors? What is the amount they have against you? How much do you owe to these creditors?

A: I was just hearing about the company growth and all. You mentioned about 2013 our company called Shilpi Cabletronics, that was our parental company which was doing automotive trade. So, what happened, when we got listed, we had two companies, one was Shilpi Cable Technologies and other was Shilpi Cabletronics. So, the board at that time decided that we have two companies doing same business.

Varinder: No, we will come to that point later because that is also important, but first of all, in terms of the creditors. Who are these creditors? How much do you owe to these creditors? What is the status of that bankruptcy filing on the company?

A: The creditors based out of Singapore where we had some credit lines against which we used to get credits. So, it was a USD 10 million line which got pulled up and we were settling our account. So, we have already addressed this matter in the arbitration court where we have been discussing this part.

Varinder: So you are saying that the creditors who have filed case, the quantum is limited to USD 10 million?

A: Yes, approximately USD 10 million.

Reema: What is the total debt on your book and if you could give us an update on the receivables and the short-term debt? Just give us the whole picture – long-term debt, receivables as well short-term debt.

A: Exact figures, I do not have at the moment.

Reema: Even approximately, that would also do. Give us a rough idea.

A: We do not have long-term debt at the moment.

Varinder: No, there is a huge long-term debt which is nearly Rs 255 crore on the books of the company on a consolidated basis.

A: That is again working capital.

Varinder: No, I think short-term capital is Rs 295 crore which I am seeing on your balance sheet.

A: And the long-term debt which you are talking about, we say it is just a small number. It is not at Rs 225 crore.

Varinder: Rs 254 crore compared to Rs 92 crore. That is a consolidated balance sheet as of March, 2016. Before we come into that, as they say, they are making it clear that the bankruptcy proceeding is USD 10 million, but as a status they say it is still going on, please help me understand one small thing. Why there was huge surge in terms of sales which was only Rs 530 crore in March, 2012 to nearly Rs 4,000 crore right now? How much did Shilpi Cabletronics contributed to these sales?

A: I will just brief you. Again, we are not comparing apple to apple. Rs 530 crore was India's standalone sales and when you talk about, you talk about a consolidated sale which contributes from my trading offices in Singapore and Dubai. So, we have to compare standalone with standalone.

Varinder: No, but both are consolidated sales. These both are taken as consolidated sales for the years I have mentioned.

A: Prior to that we were doing only telecom business. We were quite pioneer in the telecom business, but when we got amalgamated, we had a lot of revenues.

Varinder: How much revenue did you have? I really want to know how much contribution of Shilpi Cabletronics is in this Rs 4,000 crore of sales which you threw up.

A: Shilpi Cabletronics was amalgamated in 2013. Prior to that, there was a small revenue company but we had a very good business stream, we were approved in a lot of automotive customers. They had dealer network sales. It was a small number.

Varinder: No, I want to know out of Rs 4,000 crore how much is contributed by Shipli Cabletronics.

A: Exact number, I need to go back.

Varinder: A rough idea, Rs 1,000 crore, Rs 1,200 crore or Rs 1,500 crore?

A: It was not that big a number, but I need to go back and check.

Varinder: I just want an idea - 10 percent, 20 percent, 30 percent, between 20 and 30 percent? How much is it?

A: Shilpi Cabletronics was a company amalgamated in 2013. The company existed from a long. The understanding was that the topline was not so big, but they had a good customer base, they had a good business line. When we got amalgamated, it went off.

Varinder: What was the reason in terms of you? The sales went up five times in the last five years. It is a complete trading business as you said your company Shilpi Cable Technologies. Who are your top five customers?

A: All telecom operators like Ericsson and Nokia, Idea.

Varinder: And how much they contribute?

A: Again, it is revenue. You have to understand the business revenues, what multiple business revenues. We have a dealer network, we have got automotive customers, we have got customers for wires, we have customers from telecom side.

Varinder: Correct me one small thing. The difference between the standalone and the consolidated was only the amalgamation of Shilpi Cabletronics? Am I right?

A: No.

Varinder: So, what all merged? Before 2013, if it is a standalone entity and post 2013, if it is a consolidated?

A: I will tell you what. When we got public, we had two business companies.

Varinder: 2010, you went public.

A: Yes, 2011 we went public, so there were two business companies. We amalgamated the companies because we wanted to add more of the production baselines, more of the business to the main company, to give wealth to the investors and after 2011, we went overseas. So, we had operations coming up from Dubai, we had operations coming out of Singapore which got reflected into the consolidated balance sheet. So, the numbers went up.

Varinder: I am with you on that. Why I am stemming out this point again and again is that in your draft red herring prospectus (DRHP) which I read, you clearly mention that you bought 51 percent of Shilpi Cabletronics for only Rs 3.8 crore as per the data on the DRHP. I am just surprised that from 2012, as the numbers are stating, how come a small amalgamation which the total cost, in 2010 was roughly Rs 8-9 crore as a full company, why the sales could jump from Rs 530 crore to Rs 4,000 crore in the last five years.

A: You have to understand. It is not the number. It is not Rs 3.8 crore or Rs 9 crore you bought out a company. It was a business stream which can be expanded.

Varinder: So, please help us understand how much the sales for those Rs 8-9 crore company, Shilpi Cabletronics.

A: On the number front, because the company got amalgamated, I am not handy. If you send me the questions, I will reply you back, but I am not handy at the moment.

Nigel: How much stake do you have in your own company? What is the promoter stake in the company? The last time we have, that is March, 2017 that is put on the exchanges, it is showing that you have 41 percent stake in the company and more than 70 percent is pledged. Is this fall because the pledged shares are getting sold in the market? Can you tell us that? Where are the shares pledged?

A: Not exactly.

Nigel: Not exactly, but some pledged shares are being sold?

A: I do not know if pledged shares are being sold because the pledge is given to the financial institute who has given the working capital.

Nigel: So, your promoter holding is that 41 percent?

A: The promoter holding entire 41 percent.

Nigel: What about the board? Has the board met? The last couple of times, you said you were meeting on April 'x', April 'y' and then you did not meet at all. Have you met? When is the last time did the board meet if you could tell us? And why so many resignations in the last one month? Something is going wrong?

A: No, nothing is going wrong. It is just again a strategy move to overall, to get more new talent on the company side, so it is part of our strategy. It is not like something is going wrong.

Reema: You fired these people as a part of your strategy or these were voluntary resignations?

A: No, it was part of the strategy. It was not voluntary resignations.

Reema: So, you fired these people?

A: You cannot use that word because they are quite senior people. It is a part of the strategy and regarding the board, people are travelling.

Varinder: Please help us to understand why are the receivables so high for the company? Nearly 40 percent of your sales is into the trade receivables, why is that?

A: That is a cycle what we have justified with our working capital.

Varinder: But you are dealing with companies like Nokia and Ericsson, right? You are not talking in terms of the public sector companies.

A: I will tell you what. It is one of the part of Nokia and Ericsson. We work with a lot of corporate where we extend credit lines, we extend credit period to them.

Varinder: How much Nokia and Ericsson are, could they form 10-20 percent of your sales?

A: Exact numbers I cannot tell you, but yes, telecom, I work with Idea also. So, everybody has a trade cycle.

Varinder: As I understand, most of the earnings of this company are export oriented. I read in your balance sheet and please correct me because if you export things that means that you do something to earn money in any business. So, the foreign exchange outgo in 2016 was Rs 952 crore but foreign exchange earnings was only Rs 200 crore. So, the exchange outgo is Rs 1,000 crore, but income is only Rs 200 crore. Why is that?

A: These numbers cannot be verified.

Varinder: I am reading from your balance sheet.

A: I agree with you. But the number that you are talking about, how you calculated it, I have to see it.

Varinder: I am reading the same number on your balance sheet. I am surprised that how come the exchange outgo could be five times of your income.

A: Again, this is import against export right? We used to import a lot of materials, so it might be the import is more because we manufacturing is in India. We used to import copper from the Middle East market, which is used in manufacturing in India. So maybe the import numbers are higher than export numbers.

Varinder: But if you import something, you will process it and send it back so that you earn money right?

A: No, suppose I have got five plant in India, so I import copper, I will convert into a cable and sell because we get price advantage when we import. So, definitely my import numbers are higher.

Varinder: But it cannot be five times of your outgo, but one more thing there was a board meeting where it was postponed or it did not held up. Tell us about these warrants. There are still 70 lakh warrants which are up for conversion, right? What was the price of conversion of these warrants and when were they issued? I believe some 1-1.5 years back?

A: Almost 18 months back.

Varinder: And what was the price of conversion of these warrants?

A: Rs 70.

Varinder: I am failing to understand this promoter shareholding pattern since the last 5-6 years. In 5-6 years, the promoter shareholding was only 3.2 crore share with 75 percent promoter holding. It went to as low as 38 percent and now 11 crore shares. It seems like promoters are every stage, at every point, have been putting in lesser money and allocating more and more equity to them.

A: No, it is not like that because 11 crore shares is comprising of 1:1 bonus also.

Varinder: This change from 4.4 crore shares in March, 2014 to 10.26 crore shares happened in March, 2014 to March, 2015 and that only happened when you amalgamated Shilpi Cabletronics with yourself right?

A: No. the numbers is not what you see. We have got capital given to the foreign institutional investors (FII) who are still holding stocks and they have been intact. So, that also came in. Then we had bonus.

Nigel: You are going to be meeting on the 20th of this month; can you tell us that at least?

A: 28th of this month.

Nigel: But you are meeting for sure?

A: Yes, we are meeting for sure.

Nigel: And you are going to do another bonus shares is what we understand.

A: That was just a suggestion by one of my board members. We are meeting on May 28 with a new board. Let them see about it.

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