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Live: Indo Asian Fusegear – 2x More Cash Than Market Cap?


Update 11 Jul 2011: “Market” Buyback at Rs. 130 per share

In a board meeting, Indo Asian Fusegear has decided to buy back shares at a price upto Rs. 130 from the market, for a total amount of Rs. 23.19 crore.

This is a terribly disappointing strategy for multiple reasons. (Read the full post)

Update 20 Jun 2011: Transaction Withdrawn

Alert Reader Karmic_Investor notes that the promoters have withdrawn the “scheme of arrangement” that would have allowed them to siphon off a big chunk of the company. This is great news indeed – but given that that promoters have shown true colours, it may not be very nice to continue with a large position.

So why did they do it? Did Ashish Dhawan use some convincing? Did investors threaten them en-masse?  I wish I knew!

Also, they have changed their name to Eon Electric. I’ll wait for the NSE code change to happen before I refer to them by the new name.

Update 12 May 2011: HUGE Change, potential siphoning off situation.

Promoters have decided to merge Indo Asian Fusegear with a promoter owned firm, Indo Asian Marketing Pvt. Ltd. Remember, the marketing co. got 35 cr. as a fee (VC Circle).


1. Indo Asian Marketing Pvt. Ltd. will merge with Indo Asian Fusegear Limited.

2. Post merger the Metering, Institutional Business and the proposed Power Businesses will be hived off by way of demerger to Advance Metering Technology Limited, an SPV created for this purpose.

3. The BoD has also approved the valuation and swap ratio report for the merger and the capital structuring report of the two companies post demerger. As per the valuers report Indo Asian Fusegear Limited has been valued at Rs. 128.2 per share and Indo Asian Marketing Private Limited has been valued at Rs. 86.30 per share, and the swap ratio is 7 equity shares of Indo Asian Fusegear Limited of Rs. 10/ each for 10 shares of Indo Asian Marketing Private Limited.

4. The paid up equity capital will be equally split between the two companies….

Okay, this sucks. This is one way to attempt to siphon off money as I’d mentioned earlier.

First, how the heck is the company valued at Rs. 128 per share? This seems like just a blatant lie in some way or the other – the company has, in their disclosed statements below, 280 crores worth of investments, very little loans, and just 1.6 cr. shares. That itself is worth Rs. 175 per share. Then you have a factory and all the other stuff which obviously has at least SOME value. How on earth can the valuer say 128 bucks a share? Obviously, this is a sham.

And then, how come the promoter company gets 86.3 rupees a share? I need to see further documentation – I might tap the RoC for more.

If I get this right, the private promoter company has as many shares around, as it takes to split the equity capital equally after the 7 for 10 merger ratio? (Promoter co will have more shares). Meaning, the promoter will go on to own 72% of the resulting company! I hope I’m wrong here.

We don’t know what the promoter co’s earnings will be or any such. But I would like to hear the management on this.

On the face of things, this company is ripping off investors, by diluting them to half their ownership and increasing promoter share instead. There’s a big guy in the current shareholding pattern – Ashish Dhawan of ChrysCapital – and I’m thinking he’s not going to be very happy. Should I dump what I own or protest? Let’s see.

Original Post:

A company that announced results today was zany – an EPS of 157 on a stock price of just Rs. 87!

Indo-Asian FuseGear (INDOASIFU on the NSE) is trading at Rs. 87, and this is the result it announced:

Indo Asian Fusegear Mar 2011 results

And the balance sheet shows some of that cash.

Indo Asian Fusegear Balance Sheet

Note: I’m never sure when to believe the fundamentals – while it all looks good, you need to remember that this news was known a LONG time back, and the stock hasn’t gone anywhere. All I know is that this is an interesting situation.

I’m going to do a bullet point analysis – and I’ll keep updating it as I get more data. This is a “live” post of sorts.


  • The company sold off one unit of the company – the profit making one, switchgears – to LeGrand of France for a consideration of Rs. 530 cr. That took off, with it, much of the debt.
  • The company has some 280-290 cr. of the money after that, lying around.
  • They still own a CFL business and a wires business. But those are loss making. CFL losses may be temporary, though (explained in videos below)
  • The market cap of the company is around Rs. 140 crores right now.
  • What is keeping the stock price that low?
  • Note: CNBC and NDTV seem to dislike management going by the aggressive tone in the media interviews on tape – which is a good sign, because the anchors seem to be extremely bad judges of character.

Can we trust promoters?

  • This is the big question. Since the company has received the cash, it’s only useful if it somehow creates value for shareholders.
  • You can’t always blame management for not giving the cash to shareholders. I mean come on. He still has a business to run, and he could use that cash to make it a profitable business. You can’t really complain yet, though it’s known to happen that promoters siphon off money.
  • Cash is good in a rising interest rate scenario – that way they can use their cash to build what they need, and then add debt when rates are benign.
  • If they were really going to siphon off money, there were ways to do so; one common way is to buy out a company owned by promoters.
  • Promoters got Rs. 35 cr. as a non compete fee separately from LeGrand and another 35 cr. for Indo Asian Marketing. (link) That’s worth about 50 cr. after tax. They didn’t stiff the co (company got a non-compete of 35 cr. as well, and 495 cr. for the business)
  • Promoters haven’t pledged shares, and own 42% of the company. A good sign.
  • Promoters have steadily been increasing their stake from 30% in 2006 to 42% now.
  • But they somehow managed to sell about 47K shares in the December 2010 quarter (but the March 2011 quarter notes aren’t there yet). That’s strange – for someone who’s just earned 70 crores, why would you sell shares worth 50 lakhs? Could be fractured shareholding among promoter families. Don’t know.
  • The annual report seems to show lots of related party transactions


  • Ashish Dhawan from Chrys Capital owns 8%.
  • Citi, Merrill and some other FIIs own about 15% of the company.
  • The floating stock is about 35% of the company if you consider that FIIs and Promoters aren’t going to be willing sellers. That’s about 50 crores of floating stock.


20 April 2011: Indo Asian Fuse Gear, P K Ranade Interview, CNBC

  • Relocated manufacturing business after switchgear sale
  • CFL inventory hosed due to government changes in CFL norms
    • Government changed CFL specifications
    • Had to compensate distributors for their inventory
    • No numbers mentioned
  • Out of 530 cr. sale proceeds
    • Retired 150 cr. debt
    • Taxes 80 cr.
    • Dividend 20 cr.
    • Also redeemed pref shares (probably tiny)
  • 280 cr. invested in securities
  • 5-6 months might be profitable, new projects which are in steam
  • Lighting – new manufacturing line of spirals (onstream last month)
  • Power Generation (Renewable Energy) onstream in the course of the year

6 April 2011: Video interview with V P Mahendru


  • Sold switchgear business in September
  • Focus now in two verticals – Lighting and Renewable Energy
  • Joint venture in the lighting space quite likely
  • Lighting and Meters is a huge JV possibility – LEDs for one.

5 April 2011: Interview with P. K. Ranade, Jt. Md, with CNBC

  • Total assets of 400 cr.
  • Hyder, Solar/Thermal renewable power focus


Indo Asian Fusegear Chart

Needs to break the 200 DMA at 100, and then head on towards 135. Needs to break 160 for real strength. Volumes terrible (today was less than 30K shares, that’s less than 50 lakhs for the whole day).


Siddharth Shukla’s post on the deal on August 7, 2010 (stock was at 140 then, the deal was just announced)


Long some stock. Currently just picking up tiny bits of stock to keep myself interested till I get a handle on things.

VERY long term investment if things are okay, and because this is fundamental driven I need a massive stop loss of some 40% or something. This means I’ll allocate less to this position than I normally would, adding more only when the stock goes much higher.

Note: There’s tons of disclaimers but please don’t take this as advice. At best, it’s about learning.


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