How Promoters acquire stocks for free at the cost of retail investors ?
A thread 🧵 on new way of making free money by promoters by issuing Right Shares at steep discount
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#rightissue #redlfag #corporategovernance
Right issue is generally a fundraising from existing investors by issuing right shares price lower than market price.
This is not like bonus / split where investors don't need to do anything. In right issue if you want to get benefit of acquiring shares at lower price you must need to apply and pay right issue amount.
Everything is fine if shares are issue at reasonable discount to then CMP as in case of Reliance(14%) and Airtel (26%)
BUT INVESTORS CAN LOOSE MONEY SIGNIFICANTLY IF RIGHT ISSUE PRICE IS AT STEEP DISCOUNT HERE IS HOW
Sandur Manganese issued 2 right shares at ₹10 each for every 1 share hold which was worth ₹4000 when right issue was announced. Its almost like a bonus issue.
This smart trick becoming common as there is no rule by SEBI to decide on the pricing of right issue while in case of other fundraising like QIP & Private Placement there are defined rules for pricing.
Here are more examples
Example 1
Asian Granito right issue priced at 46% discount to then CMP, those who didn't applied lost 56% of their capital
Interestingly this co has history of corporate governance issues and fund diversion too
What's the solution then & how to save such huge loss?
#1
Sell your right entitlements (RE) during period of right issue. These are the instruments allotted by co to eligible investors
More⬇️
#2
Apply for right shares but which is cumbersome process
We have been alerting investors in all 4 instances above much before actual capital loss.
But with country where 82000 crores worth of instruments lying unclaimed and many non active investors missed to take action resulting in wealth erosion
Thats how retail investors loss is promoters or institutional investors gain
End of thread
How Promoters are MAKING MONEY from RIGHT ISSUE ?
New way of MAKING MONEY by fooling investors
Sandur Manganese Right Issue Scam
How retail investors are getting fooled by Right Issue ?
What to do?
#scam #fraud #corporategovernance
#promoterfraud
PTC Industries
Another Right Issue Fiasco by issuing stocks at steep discount (at face value)
Promoter stake
B/f right issue issue 67.80%
After right issue 69.40%
Gain to Promoters = Loss to retailers = ₹60 crore
Fundamental Problem - Why it's a Ponzi Scheme for VEDL Shareholders
To service its own debt burden, VRL is systematically draining VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors.
VRL forces VEDL to declare disproportionately large dividends, which are funded not by free cash flow but by taking on more debt and draining its balance sheet
VEDL has incurred a $5.6b free cash flow shortfall against dividends paid in the last 3 years..
This arrangement has pushed the entire group to the brink of insolvency, propped up only by a continuous cycle of new debt, accounting tricks, and the deferral of massive, undisclosed liabilities.
Major allegations/red flags:
Bait and Switch Funding Model - Raise fresh capital to service debt in the name of new projects like Semiconductor
Irreconcilable Interest Expenses
Inflated asset values of non-operating subsidiaries exceed the value of debt
CAPEX Fraud - Expenses across operating subsidiaries are systematically capitalized, artificially inflating profits and asset values. This is a material misrepresentation.
Off-Balance Sheet Items – Billions of dollars of disputed expenses are kept off-balance sheet and undisclosed in financial reports.
Governance failures across management and auditors, including inappropriate auditor choices
Listed at ₹3000, now trading at a deep discount,
yet no buying interest.
A Thread 🧵
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Learning: "Not every special situation is worth looking."
I request you to read all tweets to understand the full story of value destruction and how we can learn from the same.
The story began with big restructuring at Raymond Ltd. In FY23, they sold their FMCG business to Godrej Consumer for ₹2825 Crs, mainly to cut debt. Net debt significantly reduced.
This sale was supposed to leave a net surplus of ~₹1500 Crs on the balance sheet for growth capital after clearing debt.
Let's start with what SEBI found : Gensol actually submitted false documents about debt servicing to Credit Rating agencies concerning two lenders (IREDA and PFC).
Interesting charts, data points and investing perspective
A data-backed thread 🧵
Favourite: There is always a reason to sell
Whenever such events occur, we feel it is a time to invest through mutual funds (Why not equity? Because you don't need to worry about ab konsa stock/ sector chalega)
Despite several intermittent crises, Indian Equities have gone up over the long run mirroring earnings growth