Regulation30 - Decoding Stock Filings

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[Regulation30 - Decoding Stock Filings @regulation30]

A small but relevant addition to R30 Newsletter - tracking upcoming ex-dates of important corporate events.

Many subscribers playing situations like buybacks, rights issues, demergers, etc. miss record dates and ex-dates as they wizz past.

Starting today, R30 Newsletter will feature a new table with ex dates (up to 7 days ahead) of important corporate events, along with the usual selection of corporate announcements.

Hopefully, no one will ever miss an important date again :)

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As spotted in the quoted short thread a few weeks ago - R Systems Ltd was raising debt for an acquisition, which it has disclosed today.

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R Systems took shareholder approval for 2000cr loans/advances/guarantees/securities at its AGM recently. Immediately after, it held a BM for fundraising and approved issuance of 275cr NCDs. And simultaneously it got a rating upgrade from A+ to AA-.

What gives?

(1/5)

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Just to be clear, the target here may not be meaningful in terms of adding to R Systems or changing its trajectory, this is not a recommendation or anything of that sort; just some thoughts on what could be happening given these filings.

(5/5)

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R Systems took shareholder approval for 2000cr loans/advances/guarantees/securities at its AGM recently. Immediately after, it held a BM for fundraising and approved issuance of 275cr NCDs. And simultaneously it got a rating upgrade from A+ to AA-.

What gives?

(1/5)

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If target is profitable, debt can be repaid from the earnings of the acquired business, or in due course by the parent itself. This strategy is not uncommon in PE owners, and even otherwise, PCBL did the exact same thing in 2024 with a large acquisition of Aquapharm.

(4/5)

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In every great smallcap run, you feel like a genius capturing momentum by just reading stock exchange filings for news that will create interest, and it works too when liquidity is good.

However, at some point, other market participants (i.e. not retail) will also start gaming the 'signals' that you're relying on (i.e. filings). Printing money (i.e. issuing shares) is a popular way to go about it - start investor relations, put out lots of info, have a few evangelists (misguided or otherwise), keep printing money (i.e. issuing shares) at every few quarters.

How the sequence goes:

Investor presentation (very few notice) -> conference call (some people notice)-> frequent order book updates (a few more people notice) -> capex plans get made (a few more people notice)-> fund-raise filings follow (even more people notice) -> known names in pref allotment list (almost everyone notices)-> narratives get built -> rinse and repeat.

It's important to recognize where your stand in the sequence above, if you want to play news-based momentum. The other participants know this game much better than you do, and know that each step brings attention from different people looking for different signals, and towards the end ALL signals are present, hence maximum retail interest too. This is not a scam - this is capitalism and behavioural psychology at work - the buyer should beware.

Some easy rules of thumb to avoid being trapped are:

(a) only be early in the sequence and plan an exit with a predefined multiple; or

(b) have a different time-frame than the rest of the market (measured in years, not usually months).

It's a lot easier to do (a) than (b), as the latter requires experience. So doing (a) boils down to self-awareness of the game you're playing - most social media stuff is some variation of momentum, be early and don't fall for narratives that sound best near peaks. Often, the true test of being early into a pattern is just whether anyone has noticed it in public.

Most investors can do almost everything right but still struggle with selling without emotion - this is usually the hardest part - the primary reason people feel reluctance to sell is because they do not believe they have a repeatable process - those who can find signals again and again have fewer issues with selling, they know they'll find more.

As smallcap-focused handles and services have proliferated significantly in the last 1-2 years, it is important to remember that the more curated information you demand, the more stale the information is and the more likely that these curated signals are being manipulated to catch your attention (with or without the knowledge of the curator).

Stay smart, stay alert :)

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@MC_Chandler01 Perhaps. They mentioned they accounted for INR 100 crore returns, sans that, growth would be 21% instead of 10%. Dhanuka-Orchid management has generally proven to be clean and transparent in actions and words in last decade or so.

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Found this mildly amusing.

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@nqtrader7 @tushaartalwar All credit is to the investor themselves who display the patience to let things play out after the initial pop :)

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QIPs accelerating; while FY23-24 ended with Rs 68,971 crore, just April'24 saw Rs 11,472 crore worth of paper issued via QIPs.

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QIPs have raised INR ~57,000 crore in FY24 (up to 31 Jan'24), total QIP raise in FY22-23 was INR ~8,200 crore. There's a new QIP announcement in stock exchange filings every few days.

This is essentially companies doing the central banking version of printing money, a.k.a. issuing shares. Printing money (i.e. shares) is a well-developed strategy in more developed equity markets. Willing buyers at the current fair market price, right?

While it sounds really fancy, a Qualified Institutional Placement, it is a large preferential allotment with slightly different rules.

The valuations of many of these QIPs is eye-watering given most have placed the cart before the horse i.e. projections before execution.

Some day, the market will also have to absorb these shares. History is replete with more bag-holders than winners when investing at these valuations.

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@kiran03071145 A few years later there will be a SEBI order barring promoters from accessing the capital markets for X years, but it's too late by then :)

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You can tell something is off, but can't put a finger on it?

If you see such a filing without the SEBI format for a significant order (see second screenshot), it is probably not a *mandatory* disclosure. And likely, not a real 'order' at all.

MoU is not a $1.29 billion 'order'.

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@Swingtrades09 Vaporware

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@mall_kamal With a significant order or contract, disclosure on exchanges requires mandatory info; see second image, extract of the regs. If this info is missing, either it is not a binding contract or they forgot. I'd go with the former, nothing in the press release indicates a firm order.

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@mall_kamal You are welcome to ask questions, I have written entire threads in replies before, but you need to ask the right questions.

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@kiran03071145 It's a made up number if it's not backed by a firm supply contract and delivery schedule.

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@munawaralamreal @ronakkumar39 I was thinking more on the lines of the complete man.

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Allegedly, Binny Ltd MD's son tried to obtain father's signature to resign as MD while he was sedated, and then 'hacked' the company's BSE logins to make the resignation filing. Now daddy fights back.

Hmm, where have we seen this before...

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FYI: It seems the signatures could not be obtained, because the resignation filing doesn't have the resignation letter scan attached (it is required to be and always is). If it's not attached, probably means it didn't exist.