Thursday, March 11, 2010

Shirpur Gold Refinery Ltd. - Investor's eagerly eyeing the company


Shirpur Gold Refinery ltd is definitely a subject of interest amongst investors. We all know that how everyone is found talking about Deccan Gold mines, and similarly Shirpur too has been able to garner investor's invest. The common link as obvious from the name is the presence in Gold related business, be it gold mining in the case of Deccan or Gold refining in the case of Shirpur Gold Refinery. We have already discussed Deccan in the past, the link for which can be found here.

Shirpur gold was promoted by the Patels of Autoriders group and it is believed to be the first and largest gold refinery in India. The Refinery came on ground in 2001 and was inaugurated by Chief Minister Vilasrao Deshmukh. Its capacity is 217 tonnes of GOLD per annum but later due to death of Mr.Mukesh Patel the group went in doldrums and the refinery could not go beyond the initial trial runs.

The company was recently taken over by Jayneer Capital Pvt. ltd. Jayneer Capital Pvt Ltd is one of the Indian promoters of ZNL and holds 40 per cent equity stake in ZNL (Zee News limited), thus an entity belonging to Mr. Subhash Chandra. Actually, the Zee group has been associated with the company since long. Zee group has been part of the company from 2000, when the proposed gold bars manufactured were intended to be marketed under Zee brand by paying them 20% royalty.

However, it has now taken over the total control of the company, and that is what is making the company quote at a market cap of 200 cr and more, even when it has not been able to start the operations. As far as Shirpur is concerned, there does not seem to be any ground breaking done since the time the management took over the control of the company. The management is merging its company which will lead to equity dilution and also there's a loan of Rs 227 crore from the management which may subsequently be converted to equity. There's lack of transparency as to when the activities will start.

I feel, the news of acquirement of the company has already been discounted in the current price, and would rather suggest investors to avoid this counter, as its been more than 10 months, and the new management has not been able to commence the operations.


Note:
The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

- Ekansh Mittal, Lead Associate - HBJ Capital Services Pvt. Ltd
Email: Ekansh@hbjcapital.com

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