Aditya Birla Real Estate

The company came out with a set of disappointing numbers for Q4FY14 but the market forgot all about it once the ‘fund raising’ news came in. First the numbers – for Q4FY14, the company posted a net loss at Rs.5 crore compared to net profit of Rs.18 crore in Q4FY13. This loss was mainly on account of higher operating costs, huge interest and tax outgo. Net sales came in at Rs.1767 crore, up 13% (YoY). Operating costs rose 14% and this ate away 99% of the net sales earned. Costs were led by 24% hike in stores and spare parts consumed, 11% rise in power and fuel cost and 26% jump in freight/forwarding expenses.  Interest cost came in at Rs.94 crore v/s Rs.73 core in Q4FY13 and for the fiscal FY14, it was at a gargantuan Rs.363 crore v/s Rs.320 core in previous year. The company ended FY14 with a miniscule net profit at Rs.3 crore but better than the loss last fiscal of Rs.35 crore. 

Cement was the key driver, running at 104% capacity while work on the Mainkgarh expansion of cement capacity  and 60 MW captive power plant  was affected due to rains/flooding and shortage of natural sand. This cement unit is expected to go on stream in later half of current fiscal.

Now the fund raising plans.  The company stated that it plans to issue 1.86 crore preferential warrants of 16.6% equity to the promoters. The market was enthused by this news as this allotment was being issued to “Promoters/Promoter group / Persons Acting in Concert”. This is the most important part as it could mean that warrants might also get issued to Kumar Mangalam Birla as according to the shareholding pattern, 40.23% is held by the promoters, of which 36.78% is held by Pilani Investments, which is the holding company of the Birla group shares.  This means that if warrants to issued to KM Birla, then it could mean that entire cement business might eventually go to KM Birla fold. Brokerage houses are stating that if this does happen, then the stock will go for a complete re-rating.