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Stocks

Sintex Drops EPS 61% on FCCB Losses

Sintex announced results post market hours, at 3:45 pm today. While revenues are up 25% to 1154 cr., the net profit has dropped 61% to just 38 cr. from 101 cr. Much of this loss was due to Foreign Currency Convertible Bonds (FCCBs) based losses. Companies that borrow through FCCBs (in foreign currency) have to make an allowance for the exchange rate changes. A fall in the rupee means they have to pay more in rupees than earlier and this is considered a loss.

Sintex Revenues

At the current price of Rs. 115, the P/E comes to 8.1, which isn’t very expensive.

FCCBs: Sintex issued $225m of FCCBs in 2008, payable or convertable in 2013. The conversion price is Rs. 247, said their group president, Sunil Kanojia. The yield is 5.2% which means a total payment of $290M in 2013, which at today’s USD-INR price amounts to Rs. 1450 cr. Including this, their total debt is 2900 cr.

It might be noted that Sintex has 25% higher revenues and FCCB losses are “exceptional items”. In fact Sintex’s press release embodies that fact:

Sintex Cons PAT numbers

But since Sintex has revenues in Europe and the US their revenues would go up in rupees simply because of the exchange rate – so some of the higher revenue in rupees also comes from the higher exchange rate.

Fundamentally, this stock doesn’t show great signs, though I’ve heard of a few people looking to “buy on dips”. (I think that’s a dangerous term)

The stock has declined a lot, so it’s not a great technical buy either:

Sintex Chart

Perhaps there needs to be serious strength – beyond the 160 high – for a purchase to be worthwhile.