31 st May, 2016 TABLE 1 MARKET DATA (STANDALONE) (As on 31 st May, 2016) NSE Code PRAENG NSE Market Price ( ) 6.65 NSE Market Cap. ( Cr.) 46.16 Sector Realty Face Value ( ) 10.00 Equity ( Cr.) 69.94 52 week High/Low ( ) 9.50/5.05 Net worth ( Cr.) 636.39 Business Group Indian Private TTM P/E N.A. Traded Volume (Shares) 2,512 Year of Incorporation 1994 TTM P/BV 0.01 Traded Volume (lacs) 0.17 Corporate Office: 8 2 293/82/A Plot No 1091, Road No 41 Jubilee Hills, Hyderabad, 500 033, Andhra Pradesh. Company Website: Source Capitaline COMPANY BACKGROUND Prajay Engineers Syndicate Limited, a real estate company, engages in the construction and development of residential, retail, commercial, and hospitality and leisure properties in India. The company operates through Construction and Development of Property, and Hospitality Hotels & Resorts segments. Its properties include high end apartments, commercial complexes, hospitality ventures, malls, IT parks, and high end integrated townships. The company also operates the Celebrity Boutique Hotel with 30 premium hotel rooms, as well as dining restaurant, gymnasium, and discotheque facilities; and the Celebrity Holiday Retreat and Club with 70 theme cottages and 4 star category rooms, and a premier club. Prajay Engineers Syndicate Limited was incorporated in 1986 and is based in Hyderabad, India. TABLE 2 PRICE PERFORMANCE 31 st May, 29 th May, 30 th May, % Change CAGR for 2016 2015 2014 2016 vs 2015 2015 vs 2014 2 years Price ( ) 6.65 6.30 9.60 5.56% 34.38% 16.77% Trading Volume (Shares) (yearly avg.) 44,266 41,291 26,384 7.20% 56.50% NSE Market Cap. (in Cr.) 46.51 44.06 67.14 5.56% 34.38% 16.77% Source Money Control TABLE 3 FINANCIALS ( Cr.) 2015 2014 2013 % Change CAGR for 2015 vs 2014 2014 vs 2013 2 years Net Worth 636.39 663.81 665.84 4.13% 0.30% 2.24% Current Assets 626.6 631.7 630.32 0.81% 0.22% 0.30% Non Current Assets 526.43 517.44 503.50 1.74% 2.77% 2.25% Total Assets 1,153.04 1,149.13 1,133.82 0.34% 1.35% 0.84% Investments 235.92 237.27 237.54 0.57% 0.11% 0.34% Finance Cost 5.80 0.87 1.94 566.67% 55.15% 72.91% Long Term Liabilities 94.61 121.06 134.09 21.85% 9.72% 16.00% Current Liabilities 422.04 364.27 333.9 15.86% 9.10% 12.43% Turnover 55.78 81.85 136.92 31.85% 40.22% 36.17% Profit After Tax (PAT, Cr.) 23.60 2.03 1.99 N.A. 202% N.A. EPS ( ) 3.37 0.30 0.29 N.A. 203% N.A. Source Money Control/Annual Report 1 P AGE
AUDIT QUALIFICATIONS Audit Qualifications in last 3 years: The Auditors a have not raised any qualifications, however they have empahsised on the following matters: Emphasis of matter 2015 Auditor draw attention to the following: a) Note 37(a) of the Standalone Financial Statements, in respect of trade receivables considered good include an amount of ` 23,519.03 lacs due from customers which are outstanding for more than six months. For the reasons stated therein, I am unable to comment on the realization of the aforesaid receivables. b) Note 37(b) of the Standalone Financial Statements, in respect of advances amounting to ` 5,999.05 lacs given to landlords /developers, and ` 727.58 lacs given to suppliers, etc outstanding from earlier years in respect of which no provision has been made for the reasons stated therein. c) Note 24 and 25, in respect of recognizing profit on construction project under an agreement to sell, stage of completion is determined as a proportion that contract costs incurred for the work performed bear to the estimated total costs. Similarly contract revenue is recognized under the percentage of completion method measured by survey of work performed. Further, expected loss on contracts is recognized when it is probable that the total contract costs will exceed the total contract revenue. This practice is being consistently followed by the Company. For this purpose, total project/contract costs incurred, and cost to completion of projects/contracts which is arrived at by the management based on current technical data, forecast and estimate of net expenditure to be incurred in future including for contingencies, etc, which being technical matters have been relied upon by me. My opinion is not modified in respect of these matters. Same Emphasis matters raised by the auditors since 2007 08 Frequency of Qualifications Have the auditors made any adverse remark in last 3 years? Are the material accounts audited by the Principal Auditors? Do the financial statements include material unaudited financial statements? Response No Yes No Comment Not Applicable TABLE 4: BOARD PROFILE (As on 31 st March, 2015) Regulatory Norms Company % of Independent Directors on the Board 50% 50% % of Promoter Directors on the Board 12.50% Number of Women Directors on the Board Atleast 1 1 Classification of Chairman of the Board Promoter Executive Director Is the post of Chairman and MD/CEO held by the same person? Yes Average attendance of Directors in the Board meetings (%) 76.56% 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 a Promoter Director. The Company as on 31 st March, 2015 has 50 % of Independent Directors and hence, it meets the regulatory requirements. Board Diversity: The Company has 8 directors out of which 7 are male and 1 female. Holding of position of MD & Chairman by same person: The Company has appointed Mr. Vijay Sen Reddy 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. 2 P AGE
TABLE 5 FINANCIAL RATIOS Ratios 2015 2014 2013 Turnover Ratios Return Ratios Liquidity Ratios Solvency Ratios Trading Ratios % Change 2015 vs 2014 2014 vs 2013 Inventory Turnover 0.16 0.24 0.41 33.77% 42.70% Debtors Turnover 0.24 0.33 0.49 27.61% 33.06% Fixed asset Turnover 0.11 0.16 0.27 33.01% 41.83% Current Asset Turnover 0.09 0.13 0.22 31.30% 40.35% Operating Profit Margin 39.51% 9.19% 3.72% N.A. 347.14% Net Profit Margin 42.31% 2.48% 1.45% N.A. 270.64% Return on Assets (ROA) 2.05% 0.18% 0.18% N.A. 200.65% Return on Equity (ROE) 3.71% 0.31% 0.30% N.A. 202.32% Return on Capital Employed (ROCE) N.A. N.A. 3.27% N.A. N.A. Current Ratio 1.48 1.73 1.89 14.39% 8.14% Quick Ratio 0.64 0.79 0.90 18.23% 12.29% Cash Ratio 0.08 0.10 0.06 14.66% 73.16% Working Capital Turnover ratio 0.27 0.31 0.46 10.91% 33.74% Debt to equity ratio 0.18 0.20 0.22 7.53% 10.07% Interest Coverage Ratio N.A. N.A. 3.62 N.A. N.A. Market Cap / Sales 0.83 0.57 0.34 46.74% 67.28% Market Cap/ Net Worth 0.07 0.07 0.07 4.31% 0.31% Market Cap/PAT N.A. N.A. 23.27 N.A. N.A. Market Cap/EBITDA N.A. N.A. 7.50 N.A. N.A. Trading Volume (shares) (avg. of 1 year) 42,407 46,416 22,119 8.64% 109.85% Trading Volume (shares) (high in 1 year) 9,97,626 7,25,704 2,43,670 37.47% 197.82% Trading Volume (shares) (low in 1 year) 1,622 1,981 305 18.12% 549.51% Ratio High/low trading volume 615.06 366.33 798.92 67.90% 54.15% Ratio High/average trading volume 23.52 15.63 11.02 50.46% 41.92% Source Money Control 3 P AGE
TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS Shareholding Promoter shareholding Public Institutional shareholding Public Others shareholding 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 Report Dec' 2015 Dec' 2014 Dec' 2013 Comments 32.87% 32.87% 27.92% 0.18% 1.58% 5.92% 66.94% 65.55% 66.16% No new equity shares were issued during the period from Dec 2013 to Dec 2015. The promoter shareholding increased from 27.92% as on Dec 2013 to 32.87% as on Dec 2015 due to market activity. The promoters have pledged 16.78% of their shareholding. The Promoters of the Company buy shares from the secondary market. No preferential issue of shares was made to the promoters in last three years No preferential issue of shares was made to other shareholders during last three years The Company did not issue any GDRs during last three years The Company did not issue any shares to the employees under its ESOP Scheme in last three years 4 P AGE
Equity: The equity shares capital of the Company Glossary 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 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 / 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 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 Accounts recievables Fixed Asset Turnover: The fixed asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Assets Current Asset Turnover: The current asset turnover ratio is a financial ratio of net sales to fixed assets Current Assets 5 P AGE
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 Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net profit Return on Assets: ROA tells you what earnings were generated from invested capital (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. 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. 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 Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. 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. 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. 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. 6 P AGE
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/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. / Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. / Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to 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 7 P AGE
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