As you may know that we suggested Shrenuj as good but risky investment in our blog.There is an update for those who had taken our suggestion.We had already said that the company had a good chance from recovering from its debt crisis.
According to latest developments, the company is in talks with unknown institutional investors to get a long-term loan of $100 million.As is evident from shrenuj’s shareholding pattern there are many institutional investors who own its stock.So it shouldn’t be surprising if it is getting a loan from one of them or getting from a group of them.
The company promoters have said that they will spend $35 million to clear the outstanding bank lines.The left out will be used for operational normalcy.Many customers of Shrenuj has failed to give back the money to Shrenuj which are due.
Previously the inventory of diamonds owned by shrenuj was seized by a consortium of banks.This was after it failed to repay the debt.
After giving the $35 million to the banks, shrenuj will get back It’s diamond inventory back.And normal operation of the company will start.The promoter also clarified that they are not giving back the total principal to the bank, but they will take the route of growth.
The company has a total loan to the tune of $450 million to the banks.If everything goes in the right direction then the company is expected to make an official announcement by the mid of December about the fresh money to be taken as loan.
If the company’s growth takes off as expected by the promoter, there is good money to be made by the owners of its stock which is currently trading at Rs.3 a share!The total debt after taking the long-term loan will be $550 million, which is heavy!
If the company fails to keep up its sales and profit margins up in this sliding economy,it will go in a further crisis.
De Beers the rough diamond supplier to Shrenuj has suspended the agreement.Also, the company has also stopped it’s Botswana operations.These measures were taken by the company to scale down its operations which could lead to further losses in this moment of crisis.
But Doshi said that the company is in talks with De Beers to resume the rough diamond supply deal with De Beers.Then they could start the operations in Botswana again.It will take a tremendous amount of courage and luck to turn around this company by Doshis’.It is a big company with a history of 110 years of existence.The management of the company is good.
The company suffered a genuine problem.So there is a good chance that the company will recover from its debt crisis.So if it does recover then there is a lot of money to be made by the shareholders.The risk is only Rs.3 a share whereas the reward can be anything!
Disclaimer:The above article only gives the author’s view on shrenuj.It should not be taken as buy /sell recommendation.