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Nivedita Mercantile And Financing


The company is a Non Banking Finance Company (NBFC).  It was taken over by Eskay Infrastructure Development Pvt Ltd in during FY ’10.  Nevertheless, the public still holds about 35% ownership in the company (as at 31st March, 2011).  Post takeover, the company intends to engage in margin funding, funding business activities, and investments in shares/mutual funds as per its public filings.

The company seems to have ramped up its business operations as a result of substantial loan financing in the current year generating about 2 crores of revenues and profits of approximately 13 lacs.  This compares to negligible business generated before the takeover. 

The debt position, however, looks comically high with unsecured loans amounting to 106 crores against equity and reserves of less than 20 crores (as at 31st March, 2011).  This is, however, balanced out by loans and advances of 120 crores. 

Assuming the company is now engaged in financing infrastructure development (no specifics provided in public filings), the advances appear to be to contractors for construction, which are financed by unsecured loans.

Business risks are substantial since the business is unfamiliar with this scale of operations and the company doesn’t appear to hold any known edge in financing real estate construction.  Further, the business is subject to all risks relevant to real estate including dependence on the interest rate cycle (for loan financing), project delays, subjectivity in revenue recognition, heavy cash flow investment etc.  Therefore, cash flow projections for this financier appear to be highly speculative.

Management have engaged in preferential allotments of shares and warrants to promoters, which is generally abhorrent but probably necessary in this instance to kick-start the new operations.  Needless to say, management hasn’t declared any dividends over the last year.
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