Moser Baer: Need Not Bear - BSE Code - 517140

14/02/2017 18:35:38
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G Prabhakar, Nellore

Q:What is happening in Moser Bear India Ltd (BSE Code:517140; Price: Rs 7.50) ... please analyse in detail?

A: There are three issues in this case to analyse. First, let us look at the financial performance to know what is going on with the company. It had booked a net loss of Rs 40.89 crore in the Dec 2015 quarter. The loss narrowed down in the later quarters. It incurred Rs 22.61 crore in Sep 16 quarter, Rs 20.06 crore in Dec 16 Quarter.

Its Operating Loss (loss occurred from business activities) in the first nine months of 2016-17 was at Rs 61.15 crore. The company, in fact, has not been getting losses from business activities. The real villain is interest payment on previous debt which is spoiling the sport. To get the real thing, it needs a thorough study of the financial statements. There has been a consistent outgo of Rs 53 crore in every quarter as interest payments. This amount was Rs 160 crore for the first nine months or 3 quarters of 2016-17. After taking it into account, the net loss would be Rs 221 crore. It is the actual loss.

The second point that we must consider is the amount that the company had pumped into the subsidiary firms. Now the board decided to write-off the entire sum. The reason is simple. These funds given in the past had become non-performing. The company has shown them in the books as extraordinary losses. On this basis, it has written off Rs 580 crore, at one stroke in the recent third quarter financial statement. With this only one entry in the books, the final net loss has swelled out like a balloon at Rs 655 crore.

The third one is the company’s massive debt and interest burden.  Though it had tried to settle the debt issues with financial institutions and banks through CDR (corporate debt restructuring) process, the efforts proved to be futile. In November 2016, it opted the SDR (Sustainable Debt Restructure model) route, the newly designed scheme by RBI.

If the debt issue remains unsettled, the share price continues to drag. Whether the issue gets resolved or not? If solved how long it will take??  These are highly uncertain things. If settled as expected, the share price will move up unchequered. Otherwise, it will become a dead share.

Market is for Brave-hearted only

Sometimes the corporates and markets behave in their own way that is not in toe with the estimates of analysts. In that case, whether to hold or not a stock is purely an investors’ mindset. Out of ten, some scrips go up as expected while some shares go down. A few people forget the gains they made and always tries to look at the losses they suffered through a magnifying glass. The market, in which the element of risk is inbuilt and can’t be separated, is surely not for those people who always get worried about the losses incurred or going to incur while forgetting the huge gains already made or going to make. It is important whether you are in profits or not is the only thing you have to consider. 

Markets, no doubt, shower the investor big gains, but with the condition that says one should prepare to wait for a long period with utmost patience and reasonably balanced mind if one must grab them. This long term might be more than one year or two years. When worrying about an investment, the investor should sell away that share and book the losses. After that, he must take a decision about covering the loss in another share. If the person is doubtful about the second share also, it is better to decide to keep away from the markets instead of losing money repeatedly.  Market are not for the week-hearted and unbalanced.

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