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Wednesday, October 1, 2008

Khoday India Limited: No Money In Sin

Scripscan:Khoday India Limited

Story:A few months ago a Research House of Bombay had put out a BUY call on Khoday with a one year price target of Rs 480. There were two factors which were supposed to bring this about-increase in volume sales of liquor, merger and then sale of Khoday's land in Bangalore to Institutional Investors. The end result of this would have been a strong upmove in top line and bottom line. While the Real Estate market is all but Dead as far as the capital markets are concerned, it is the inability of Khoday in showing any plausible financial performance which has been the cause of an even bigger distress.

For the last 5 quarters, Khoday reported profits only in the December 2007 quarter, for all other four quarters the company either reported losses or minor and ignorable profits. Now it seems, Khoday will not carry on the merger of its land banking group company and so both the pillars on which this stock was supposed to become a multi-bagger have fallen flat. With high cost of molasses impacting margins massively and Khoday's inability to pass on the cost to consumers, the stock could lose even more from here.

Worse, the management seems to be running around some kind of shady manouevres informing the BSE of its inability to hold its AGM by September 30, 2008 and infact postponing the same by another 3 months. This latest move is a virtual no-confidence motion for Giridhar Khoday, the promoter of the company. The move is neither a confidence creator nor is it a harbinger of anything positive from the company. At Tuesday's closing price of Rs 49, the corporate still fetches a market cap of nearly Rs 181 crore.

This is a huge market cap for a loss making company, and it will not be surprising that the stock loses another 50 per cent from here unless the management shows an ability to produce financials acceptable to the market. It is difficult to believe that even producing and selling liquor makes no money these days.

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