Skip to main content

Olympic Oil


Olympic Oil was a dormant company until the last quarter when it showed a spike in operating activity.  The company is currently promoted by a Mr Sunil Varma and a Mr Uday Desai from Kanpur holding a combined 31% equity stake (after an open offer in 2010).  The public still holds 69% equity in this company.

A perusal of its public filings reveals changes in its memorandum of association to include trading activity for all kinds of commodities (agri-commodities, extracts, oils etc.).  Further, there appears to be substantial additional financing in the past few months to enable this business.

Latest balance sheet is unavailable – therefore, the amount of external debt to equity capital is not readily ascertainable.  The company appears to have generated 48 lacs of profits on substantial revenues of 38 crores in the last 12 months compared to nothing in the last year.  The profit margins are marginal, as expected in a trading business, but the interest cover stands at just over 3 times indicating reasonable safety.  Nevertheless, the high cost base could result in substantial losses if revenues were to decline even marginally.

The business is subject to the risks associated with a trading organisation – primarily that it lacks ownership of assets within the value-chain.  Of course this provides it with flexibility should the economics worsen but even in this business of trading commodities, the barriers to entry are very low resulting in severe competition that can easily render this venture unviable.  Further, the company doesn’t have any recent experience in this business and this is compounded by the scale with which the management propose to pursue it.

Management has allotted substantial equity and warrants to promoters to finance the new venture – which approximates to a maximum value of over 1 crore.  Only time will tell whether this is only a legitimate allotment to finance a new venture or whether this is indicative of further expansion at the expense of the minority shareholders.
Labels:

Comments

Post a Comment

Popular posts from this blog

On The Radar: India's Small-Cap Equities (Concluded)

We have been running a series of articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in December 2011 - and followed up twice - with the last article in December 2013. We would like to conclude this series after updating the small-cap index level and returns, comparing it to our expectations ex-ante, and analysing the current scenario.  Following this, we have also outlined where we may take this blog in the future. The small-cap index closed at 11,087.07 on December 31 st , 2014.  This compares to a level of 6,150.65 in our last article – resulting in an advance of over 80% to date. This is a handsome absolute return by any standard, particularly compared to Indian government bonds, which yielded around 8-9% for the period.  This justifies the conclusion at the end of our previous article that “small-caps in India offer among the most attractive bargains during any time since 2006 and certainly in the entire Indian stock market today”. Of cour
1 comment
Read more

Under the Radar: India’s Mid-Cap and Small-Cap Equities

Indian stock markets have been one of the worst performers in 2011 – worse than their BRIC peers, worse than the rest of Asia and far worse than the US with the leading indices declining about 25% during the year.  Foreign investors in India have also suffered substantial declines of nearly 20% in INR currency value. There appear to be several reasons for the market’s dislike for Indian equities in 2011, which include persistent inflation (including food inflation, which constitutes the major proportion of the typical Indian household), political paralysis (e.g. rollback of foreign investment in retail etc.) and global concerns about the solvency of several Eurozone countries. As a result, estimated GDP growth for the next financial year has been revised downwards from about 8% earlier in the year to about 6% now - with many market commentators wondering whether this rate of growth is India’s ‘new normal’.  This is still, however, substantially higher than global average.
2 comments
Read more

Under The Radar: India’s Small-Cap Equities (Part Three)

In February of this year, we summarised the valuation parameters of the BSE Small-cap Index in India (now the S&P BSE Small Cap Index) - following on from an earlier report we wrote in December, 2011 - and drew certain conclusions. We would like to update the valuation scenario with the data today, review those conclusions, and form new ones based on the available information. The small-cap index closed today (17 th December, 2013) at 6,150.65 with an indicated price to book value of 1.04. The closing value as on February, 2013 was 7,006.73 representing a decline of over 12% as of today. The current index value masks a greater fall of over 27% to a low of 5,085.56 in August, 2013. This represents an unsatisfactory overall performance for those who invested in small caps at the beginning of the year. In our earlier report, we made two assumptions towards the end of our report to form a conclusion as to prices then:              1)   “The market has a
Post a Comment
Read more