Urja Global  Ltd: A case of Unbridled Stock Manipulation or too much Euphoria.....?

Photo: BCG Attorney Search

The stock of Urja Global Ltd (Rs.9.72 on Re.1 Face Value and Rs.97.2 on Rs.10 face value) has been hitting the upper circuits since sometime. This Re.1 face value stock has been hitting the buyer freezes since some videos surfaced in the YouTube, claiming its growth story in the solar power sector, when majority of its established peers are not doing that well.

On reviewing its financials and other crucial parameters, what I find is:

#The net profit for Q2FY18 is only Rs.41 lakhs against a revenue of Rs.28.92 crore, giving an EPS of Re.0.01 or only 1 paise on its Re.1 face value share. 

#The depreciation shown is Re.1 lakh which does not make any sense, considering its product pipeline and its solar power business. 

#Interestingly its NPMs and OPMs are almost same. It has OPM at 1.45% while NPM at 1.43%, which looks quite bizarre. 

#If we look at its FY17 results, we find that it has a total income of Rs.118.15 crore, while its net profit is only Rs.1.03 core, which is less than even 1% of its turnover. This leaves many unanswered questions about its business model.

#In early November, 2017, the company announced the signing of Memorandum. Urja Batteries Limited, a subsidiary of Urja Global Limited, signed the Memorandum of Understanding (MOU) with Micromax Energy Limited. As per the MOU, the company will manufacture and supply batteries on OEM basis to Micromax. But singing of such documents does not mean much unless actual ground work begins. At that time scrip price was ruling around Rs.2.23, against the CMP of Rs.9.72 or more than 4 times. Or in other words the scrip price has become around 4 times in just 3-4  months.

#Urja Batteries, a part of Urja global, is a leading battery manufacturer in India that specializes in lead acid battery for Industrial, Solar, and Standby power solutions. However, there are huge number of me too lead acetate battery manufacturers in India, leaving it in the face of immense competition which is already seen in its very low margin business. 

#The Live Mint wrote today: India’s quest for low clean energy tariffs “possibly contributed” to the demands for renegotiation of the already signed power purchase agreements (PPAs), the Economic Survey said on Monday.

This in turn may result in legal battles and bring uncertainty for the sector, with the banks becoming wary to lend to such projects, the Survey cautioned.

This comes in the backdrop of India’s wind power tariffs plummeting to Rs.2.43 per kilowatt-hour (kWh) at an auction conducted by state-run Gujarat Urja Vikas Nigam Ltd last month, beating the record low solar tariff of Rs.2.44 per unit registered in May.

While solar power tariffs rose to Rs.2.65 per kWh at an auction conducted by the Gujarat government in September, last month’s auctions conducted by state-run Solar Energy Corp. of India threw up winning bids of Rs.2.47 and Rs.2.48 per unit.  

If this is the condition of renewable energy sector, then what is the growth story people are talking about in this space?

#It has a market cap of Rs.493 crore against its FY17 turnover of Rs.118.15, showing that the share price is already highly over valued, at the current set of financials. And, hence its future price as against its fundamentals and its highly touted growth story remains skeptical. 

#Its promoter holding is 33.52%, which means they do not have full control over management decisions. 

#Its book value according to Moneycontrol.com is Rs.3.23 against the CMP of Rs.9.72. Or  it is trading at around 3 x Book Value. However, the ET gives its book value at Rs.30.45.

Moreover, its P/E is at whooping 447.5 against the industry P/E of 38.98. Even if we discount, the extraneous factors, its PE of 447.5 does not give much justification of a buy at the CMP.

Besides, a renewable energy share with ordinary product portfolio is trading at Rs.97.20 (of Rs.10 book value) -- doesn't that look strange? However, the stock markets all over the world is guided more by sentimental play rather than fundamentals in the short term. Or according to my analysis, Mr.Market is never perfect in the short term and is guided by the cycles of too much euphoria and pessimism.....

The above factors, gives some signs of stock manipulation by the vested groups. I hope the regulators will swing into action and take pains to find out the unnamed entities behind making such videos in YouTube; before the horse actually bolts the door.  

The point is if money finds place in such highly overvalued scrips, then from where the money will flow in real turnaround stories like 3i Infotech Ltd (Rs.6.40) or Hindustan Zinc Ltd (Rs.310.75)?

Note: I am having severe teeth problems with excruciating pain in the Jaws. I am likely to be operated tomorrow -- if the situation turns more teething then by today night. Hence, the updates of the blog is likely to get affected in the near future. Please bear with me.