We have released 23rd May’23: Special situation opportunity on the proposed delisting of shares of Shreyas Shipping & Logistics (NSE Code – SHREYAS). The same has also been produced below. For details and other updates, please log into the website at the following link – http://katalystwealth.com/index.php/my-account/
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Date: 23rd May’23
CMP – 330.55 (BSE); 331.35 (NSE)
Rating – Positive – 4% weightage; this is not an investment advice (refer rating interpretation at the end)
Shreyas Shipping & Logistics (NSE – SHREYAS)
Shreyas was incorporated in 1988 by late Mr. R Sivaswamy to own and operate vessels for container feeder operations between Indian and international container trans-shipment ports.
The company is one of the leading shipping companies in India, with strong legacy of more than three decades in owning and operating ships.
De-listing Offer from the Promoters
On 21st May’23, there was an initial public announcement on behalf of the promoters expressing their intent to acquire all the equity shares held by the public shareholders of the Company and voluntarily delist the Equity Shares from the Stock Exchanges.
The promoters hold 70.44% stake in the company.
The Board of Directors will meet on 24th May’23 to approve/reject the delisting proposal and consider other matters related to the same.
Important points with respect to the company
Shreyas has a fleet of 14 vessels (12 container and 2 dry-bulk [DB])). The fleet has a total capacity of 26,085 TEU, for container vessels, and gross registered tonnage of 3,21,500 metric tonnes.
The company recently acquired three container vessels as replacement for three of its ageing vessels.
The average fleet age has reduced to 19.1 years from 22 years with the acquisition of three new vessels.
The company has chartered all its 12 container vessels under the framework chartering agreement (FCA) to Transworld Feeders Pvt Ltd (TFPL). The two DB vessels purchased in fiscal 2022 have been chartered externally.
For FY 23, the company registered sales of Rs 484 crore and PBT of Rs 199 crore. The last 2 years were good for the company on the back of higher freight rates.
At the end of Mar’23, the net worth of the company was Rs 819 crore against borrowings of Rs 498 crore. Further, the company had unencumbered cash and bank balances of Rs 96 crore as on March 31, 2023, and other lien marked FDs of Rs 55 crore.
Rationale behind this opportunity
The current market cap of Shreyas is around Rs 725 crore against book value of Rs 819 crore.
In the last 3 years, the stock scaled highs of 400 odd levels while back in Jan’18, it even scaled highs of 600.
Unlike a lot of other delisting cases, Shreyas is fundamentally strong and has been a consistent dividend paying company.
While the company is yet to announce the floor price, we expect it to be around 260 odd levels.
In the past many de-listing cases, shareholders have tendered shares at 50-100% + premium to the floor prices and in some of the cases promoters accepted such prices.
In delisting cases, it’s difficult to predict as to what the discovered price will be and whether the promoters will accept the price or not.
However, here again, we would not like to participate in the reverse book building (RBB) and rather take advantage of the appreciation in the stock price (if at all) in the run up to RBB.
We expect the downside to be capped at around 250 per share.
We are still some steps away from the reverse book building; the Board’s approval is yet to come through and thereafter the company will have to seek the shareholders’ approval.
Earlier, there were not many rejections by shareholders; however, in the past 2-3 years we have seen a few cases of rejection by shareholders.
If the Board or the shareholders reject the proposal, there would be a rush to exit from the stock and one may not be able to exit before the stock has corrected by 15-25%.
Last 2 financial years were good for the company on the back of higher freight rates; since then, freight rates have come down and the company has taken on additional debt for the acquisition of new vessels.
Disclosure: I do not have any holding in Shreyas Shipping & Logistics.
Positive – Expected return of ~15% + on annualized basis in medium to long term for investment recommendations and in short term for Special situations
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – allocation in the subject stock with respect to equity investments
Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Analyst ownership of the stock: No
Details of Associates: Not Applicable
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