Arshiya down 50% in 3 days: Here`s what mgmt has to say
Emkay Global Financial Services has come out with its report on Arshiya International. According to the research firm, the business at Mumbai FTWZ is doing well although the client conversion rate is below expectations. Strong word of mouth in international markets have generated positive client response although most of it are on the fence.
January 11, 2013 / 16:16 IST
Emkay Global Financial Services has come out with its report on Arshiya International. According to the research firm, the business at Mumbai FTWZ is doing well although the client conversion rate is below expectations. Strong word of mouth in international markets have generated positive client response although most of it are on the fence.
AIL management has denied all the allegations pertaining to financial governance but stated that there has been some delay in the payments towards employees salary and vendors payments, which is part of the usual business and not alarming in natureAIL has fired 290 people out of its 1700 people work force mainly on the grounds of performance. Most of these employees are at supervisory level with some senior managers from their 3PL business and Sales team.Business is running as usual with some interruptions due to protests at Mumbai FTWZ due to employee retrenchment. But, there have been no delay in the goods movement or lag in delivery timeline despite of some workers on the strike at Mumbai FTWZCompany’s cashflow condition is on stress due to increase in working capital cycle and rejection of financial closure of phase 2 of Khurja FTWZ, leading to blockage of capital. Debtors’ days have increased from 2 months to 3 months mainly due to slowdown in logistics sector. Also, company has blocked capex of Rs 1.6bn towards phase 2 of Khurja FTWZ which it had intended to release through financial closureFor now, capex plans of Khurja project are stalled but phase 2 expansion of Mumbai FTWZ will be as per schedule due to financial closure of the same.Company intends to release the pressure on the cashflows by rationalization of employee cost, raise short term capital from financial institutions, utilization of promoters’ capital infusion and lastly cash generation from debtorsOn business front, company stated that Khurja Distripark and Rail sidings operations commencement have delayed due to a technical glitch in regulations. No results on the bottomline will be seen for atleast next 3 months from the same, although the client acquisition will continuePromoters have pledged 18.9mn shares, which is 30.5% of o/s equity shares and 67.9% of promoters holding, to the financial institution for capital raising. Management stated that all the lenders are taken under confidence and as per them no lender is out in the market to monetize the shares.Emkay Global’s StanceWe agree with management’s stance that things are blown out of proportion. There are some decision where the company has gone wrong leading to much more harsh decisionsOur channel checks state that the business at Mumbai FTWZ is doing well although the client conversion rate is below expectations. Strong word of mouth in international markets have generated positive client response although most of it are on the fenceDelay in commencement of operations at Khurja Distripark and Khurja rail sidings have been a big disappointment as capital infusion of Rs 8.5bn is not seeing any revenue generation. With further delay expected, the financial health of the company would be under pressureFor now, we would like to keep our coverage on the stock Under Review till more clarity on the business side emerges as there would be downgrade in our estimates and target price owing to lower growth tractionAlso Read: Infosys surprises with better-than-expected Q3; guidance upDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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