VKS Projects Ltd 31 st May, 2016 TABLE 1 - MARKET DATA (STANDALONE) (As on 30 th May, 2016) NSE Code - VKSPL NSE Market Price ( ) 0.05 NSE Market Cap. ( Cr.) 5.67 Sector - Capital Goods-Non Face Value ( ) 1.00 Equity ( Cr.) 63.00 -Electrical Equipment 52-week High/Low ( ) 0.25/0.05 Net worth ( Cr.) 69.72 Business Group - Indian TTM P/E N.A. Traded Volume (Shares) 3,114 Year of Incorporation - 1998 TTM P/BV 0.00 Traded Volume (lacs) 0.00 Source - Capitaline Corporate Office: 507 B Wing Sai Sangam, Sector 15 CBD Belapur (E), Navi Mumbai - 400614, Maharashtra Company Website: COMPANY BACKGROUND VKS Projects Limited operates as an engineering, procurement, and construction company in India. The company undertakes EPC contracts of S/SS/alloy steel turnkey piping, civil land development, industrial/commercial infra projects, structural fabrication and erection of equipment, firefighting projects, commissioning of chemical plants, structural construction, tankages, cross country pipelines for oil and gas, mechanical shut down jobs, erection and alignment of static and rotary equipment, and pharma-turnkey projects, as well as effluent, water, and sewage treatment plants. VKS Projects Limited was incorporated in 1998 and is based in Navi Mumbai, India. TABLE 2 - PRICE PERFORMANCE 30 th May, 2016 29 th May, 2015 30 th May, 2014 % Change CAGR for 2 2016 vs 2015 2015 vs 2014 years Price ( ) 0.05 0.15 0.50-66.67% -70.00% -68.38% Trading Volume (Shares) (yearly avg.) 4,68,372 33,83,178 4,70,829-86.16% 618.56% - NSE Market Cap. (in Cr.) 3.15 9.45 31.50-66.67% -70.00% -68.38% Source - Money Control, price figures are adjusted to corporate action of stock split/bonus issue/stock merger The Company in the month of February, 2013 has sub-divided Equity Shares of 10/- each into 10 (ten) Equity shares of 1/- each. Further, the Company has allotted 45,00,00,000 Equity Shares by way of Bonus issue to the shareholders in May, 2013 in the ratio of 5:2 (i.e. 5 new Equity Shares issued for every 2 Equity Share held). 1 P A G E
TABLE 3 - FINANCIALS ( Cr.) 2015 2014 2013 % Change CAGR for 2 years 2015 vs 2014 2014 vs 2013 Turnover 2.83 69.21 205.85-95.91% -66.38% -88.27% Net Worth 69.72 70.49 75.68-1.09% -6.86% -4.02% Current Assets 122.62 122.98 184.61-0.29% -33.38% -18.50% Non-Current Assets 12.81 14.00 16.87-8.50% -17.01% -12.86% Total Assets 135.43 136.98 201.48-1.13% -32.01% -18.01% Investments 45.79 45.83 46.38-0.09% -1.19% -0.64% Finance Cost 0.03 3.74 6.16-99.20% -39.29% -93.02% Long Term Liabilities -2.29-1.75 1.40 N.A. -225.00% N.A. Current Liabilities 67.99 68.24 124.39-0.37% -45.14% -26.07% Profit After Tax (PAT) ( Cr.) -0.77-5.19 4.19 N.A. -224.00% N.A. EPS ( ) -1.22-8.24 2.33 N.A. -454.00% N.A. Source - Money Control/Annual Report 2 P A G E
AUDIT QUALIFICATIONS The Auditors have qualified their report Audit Qualification(s): The Auditor s report on the Financial Statements of the Company for the financial year 2014-15 contain qualifications, reservations or adverse remark. 1. Inability to comment on Inter Corporate Deposits and Other Loans and Advances taken from various parties as at March 2015, in the absence of third party confirmation, reconciliation, if any and other sufficient appropriate audit evidence. 2. No Provision is made for Interest Payable on Inter Corporate Deposits and Other Loans and Advances taken by the Company and no provision made of Interest Receivable on Inter Corporate Deposits and Other Loans and Advances provided by the Company, consequently the profit / loss of the quarter are not ascertainable. 3. Inability to comment on Trade Payables and dues to Related Parties as at March 2015, in the absence of the third party confirmation, reconciliation, if any and other sufficient appropriate audit evidence. 4. No Provision made for Interest payable on Loans taken from Banks and NBFC Companies which are already been declared as NPA, consequently the loss of the quarter is not ascertainable. 5. Inability to comment on Balance Recoverability, if any of Trade Receivables and Other Short Term Loans and Advances as at March 2015, in the absence of sufficient appropriate audit evidence. 6. Inability to comment on Balance Recoverability, if any of Sundry Deposits and Other Current Assets as at March 2015, in the absence of sufficient appropriate audit evidence. 7. With reference to Fixed Deposits Accepted by the Company, the Company has defaulted in repayment of dues as at March 2015. Further, the Company has not made provisions for penal interest as per the Companies (Acceptance of Deposits) Rule 2014. The Company has not intimated to the tribunal on monthly basis about the default in repayment as per section 73(4) of the Companies Act 2013 corresponding to section 58AA of the Companies Act 1956. 8. Inability to comment on impairment provisions, if any as per the Accounting Standard 28 Impairment of Assets on Plant and Machinery along with other fixed assets amounting to INR 1281.46 Lacs situated at various sites of the Company which have been generally operating at lower capacity, in the absence of future cash flows projection and information about the value of use 9. A notice has been issued by the State Bank of India under section 13 (12) read with rule 3 of the Security Interest (Enforcement) Rules, 2002 for non-repayment of instalments and interest thereon after the due date by the Company and therefore all the loan accounts became Non Performing Assets with effective from respective dates mentioned in such notice. We are informed that the Company has filed response against such notices and requested to restructure the loan accounts. These factors along with other matter as set forth in said notice, raise substantial doubt about the company s ability to continue as going concern in the foreseeable future however the company s financial statements have been prepared on going concern basis on the basis of management assurance. 10. Inability to comment on Impairment provisions, if any on loan of INR 32,12,000/- given to VKS Edserve Private Limited ( the related party ), in the absence of last audited financial statements, detailed information of projected cash flows as at March 2015 or other sufficient appropriate audit evidence. Further Inability to comment on Impairment provisions, if any on loan of INR 36,17,000/- given to 46 VKS Healthcare Private Limited ( the other related party ), in the absence of last audited financial statements, detailed information of projected cash flows as at March 2015 or other sufficient appropriate audit evidence. 11. Tangible Assets are stated at cost net of recoverable taxes, trade discounts, and rebates, less accumulated depreciation. 12. Depreciation on Fixed Assets is provided to the extent of depreciable amount on Written Down Value (W.D.V.) Method. Depreciation is provided based on useful life of asset described in Schedule II to the Companies Act, 2013. 13. The Sales Tax Department initiated proceedings for various financial years starting from 2006-07 to 2012-13 on the 3 P A G E
Company, in the absence of the detailed information and explanation in respect of Tax Liability, Interest and Penalties thereon, we are unable to comment upon the impact of the same on the statement of profit and loss account. 14. It is informed to us that the Company has not complied with the provisions of filing of Returns for TDS during the period under review however the company has not provided the effect of the same in the books of accounts. 15. As per explanation and information provided to us by the Company Management about the Future Business of the Company, Realization of Current Assets and Default in Repayment of loans to Banks and NBFC s, the Going Concern assumption of the Company in near future is considered inappropriate, as there is significant material impact on the Company s Going Concern after the due action taken by the Banks and NBFC s for default of repayment of dues however the company s financial statements have been prepared on going concern basis on the basis of management assurance. 16. The Company has not provided us the details of pending litigation against the company and its directors for various matters including the financial matters hence we are not able to comment upon the financial impact of the same on the financial statements. Management Response: The board is in the process to resolve the qualifications at the earliest. Response Comment Frequency of Qualifications - Auditors have qualified their report in FY2014-15 and 2012-13 Have the auditors made any adverse remark in last 3 years? Yes The Auditor s report on the Financial Statements of the Company for the financial year 2014-15 contain qualifications, reservations or adverse remark. TABLE 4: BOARD PROFILE Regulatory Norms Response % of Independent Directors on the Board 50% 50% % of Promoter Directors on the Board - 33% Number of Women Directors on the Board Atleast 1 1 Classification of Chairman of the Board - Executive Promoter Is the post of Chairman and MD/CEO held by the same person? - Yes Average attendance of Directors in the Board meetings (%) - 100% Source - Money Control/Annual Report Composition of Board: As per Regulation 17(i)(b) of the Listing Regulations, 2015, the Company should have at least 50% Independent Directors as the Chairman of the Board is an Executive Promoter Director. The Company as on 31 st March, 2015 has 50% of Independent Directors and hence, it meets the regulatory requirements meet the regulatory requirement. Board Diversity: The Company has 4 directors out of which 3 are male and 1 is female. Holding of position of MD/ CEO & Chairman by same person: The Company has appointed Mr. V.K. Sukumaran as the Chairman and Managing Director of the Company. Appointment of a single person as the Chairman and Managing Director of the Company is not a good governance practice as this may lead to concentration of power in a single person. Attendance at Board Meetings: All Directors of the Company attend the all board meetings. 4 P A G E
Trading Ratios Solvency Ratios Liquidity Ratios Return Ratios Turnover Ratios STAKEHOLDERS EMPOWERMENT SERVICES TABLE 5 - FINANCIAL RATIOS Ratios 2015 2014 2013 % Change 2015 vs 2014 2014 vs 2013 Inventory Turnover 35.38-69.78 - - Debtors Turnover 0.04 0.91 1.56-0.96-0.42 Fixed asset Turnover 0.22 4.94 12.20-0.96-0.59 Current Asset Turnover 0.02 0.56 1.12-0.96-0.50 Operating Profit Margin -46.29% -11.47% 3.19% N.A. -4.60 Net Profit Margin -27.21% -7.50% 2.04% N.A. -4.68 Return on Assets (ROA) -0.57% -3.79% 2.08% N.A. -2.82 Return on Equity (ROE) -1.10% -7.36% 5.54% N.A. -2.33 Return on Capital Employed (ROCE) N.A. N.A. 21.39% N.A. N.A. Current Ratio 1.80 1.80 1.48 0.00 0.21 Quick Ratio 1.80 1.80 1.46 0.00 0.23 Cash Ratio 0.68 0.68 0.40-0.01 0.72 Working Capital Turnover ratio 0.05 1.26 3.42-0.96-0.63 Debt to equity ratio 0.75 0.74 0.55 0.02 0.35 Interest Coverage Ratio N.A. N.A. 2.06 N.A. N.A. Market Cap / Sales 2.00 0.08 0.03 23.46 1.97 Market Cap/ Net Worth 0.08 0.08 0.07 0.01 0.07 Market Cap/PAT N.A. N.A. 1.35 N.A. N.A. Market Cap/EBITDA N.A. N.A. 6.84 N.A. N.A. Trading Volume (shares) (avg. of 1 year) Trading Volume (shares) (high in 1 year) Trading Volume (shares) (low in 1 year) 5,29,424 3,460,512 3,79,315-0.85 8.12 2,08,15,531 7,15,59,890 64,02,189-0.71 10.18 50 20,318 200-1.00 100.59 Ratio - High/low trading volume 416,310.62 3,521.99 32,010.95 117.20-0.89 Ratio - High/average trading volume Source - Money Control 39.32 20.68 16.88 0.90 0.23 5 P A G E
TABLE 6(A): OWNERSHIP & MANAGEMENT RISKS Shareholding Dec' 2015 Dec' 2014 Dec' 2013 Comments Promoter shareholding 14.84% 25.64% 34.70% Public - Institutional shareholding 9.78% 9.78% 27.85% Public - Others shareholding 75.39% 64.59% 37.45% Non Promoter Non Public Shareholding TABLE 6(B): OWNERSHIP & MANAGEMENT RISKS Market Activity of Promoters Preferential issue to promoters Preferential issue to others GDRs issued by the Company Issue of ESOPs/Issue of shares other than Preferential allotment Source - Annual Reports 0.00% 0.00% 0.00% No new equity shares were issued during the period from Dec 2013 to Dec 2015. The promoter shareholding decreased from 25.64% as on Dec'2014 to 14.84% as on Dec'2015 due to sale of shares by the promoters in the secondary market. The promoters have pledged 99.61% of their shareholding. The promoters have not pledged any shares The Promoters of the Company sold their shares in the secondary market in FY 2014-15. Total number of shares sold by promoter and promoter group during FY 2014-15 period is 78,07,500 No preferential issue of shares was made to the promoters in last three years No The Company did not issue and GDRs during last three years The Company does not have any ESOP Scheme. 6 P A G E
Glossary Equity: The equity shares capital of the Company Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders funds of the Company Turnover: The revenue earned from the operations of the Company EPS: Earning Per Share is net profit earned by the Company per share EPS = Profit After Tax Number of outstanding shares P/E ratio: It is the ratio of the Company s share price to earnings per share of the Company P/E ratio = Price of each share Earnings per share Current Assets: Cash and other assets that are expected to be converted to cash in one year Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment Total Assets: Current Assets + Fixed Assets Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges incurred during the year in relation to borrowed money. Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year. Current Liabilities: A company's debts or obligations that are due within one year. Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover ratio = Inventory Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period Debtors Turnover ratio = Accounts recievables Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Asset Turnover ratio = Fixed Assets Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets Current Asset Turnover ratio = Current Assets 7 P A G E
Operating Profit Margin: Operating margin is a measurement of what proportion of a Company s revenue is left over after paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company s operating income (also known as operating profit ) during a given period by its sales during the same period. Operating Profit Margin = Operating profit Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net Profit Margin = Net profit Return on Assets: ROA tells you what earnings were generated from invested capital (assets) Return on Assets = Net profit Total Assets Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on Equity = Net profit Net worth Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Return on Capital Employed = Net profit Total Debt + Equity share capital Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. Current ratio = Current Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Quick ratio = Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. Quick ratio = Current Assets Inventories Account Recievables Current Liabilities Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a Company's effectiveness in using its working capital. Working Capital Turnover ratio = Current Assets Current Liabilities Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Debt to Equity ratio = Short Term Debt + Long Term Debt Net Worth Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a Company can pay interest on outstanding debt. Interest Coverage Ratio = Earning Before Interest and Tax Finance Cost 8 P A G E
Market Cap/Sales ratio: Market Cap/sales ratio, Price sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue. Market Cap Market Cap/Sales ratio = Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. Market Cap Market Cap/Networth ratio = Networth Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. Market Cap Market Cap/PAT ratio = net profit Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to EBITDA. Market Cap/EBITDA ratio = Market Cap EBITDA Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year 9 P A G E
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