From Explosives to Power: Inside a 2,000 cr company with 4,000 cr cash.

Actually, almost the same amount as the current Market capitalisation has already been realised in cash by the company over the last 3 years with 90% of those monies coming in just the last 1 year.

That’s not all - yet another Rs 1900 crores are expected over the next two to three quarters.

It would’ve been cool if that cash was getting redistributed to shareholders but it's not.

Personally, we prefer that a company allocate cash to an asset that can earn at least higher than the cost of capital AND grow.

Perhaps that’s why this business is going for a back door listing of a 1050 MW Thermal power plant owned by the promoter.

This is reminiscent of another business that has been a decent investment for us - Sigma Advanced systems.

Not that we should draw parallel with the outcome at Sigma Advanced Systems - the point is that through a combination of financial engineering and perhaps the realisation that Indian markets are generous with valuations - many companies are taking this ‘back-door listing’ route to getting their privately held companies into the listed universe.

With that background, there are only a few questions we need to ask and answer well to evaluate this opportunity.

Q1. What happens/happened to the cash rolling in?

Q2. What valuation is the listed company & private company valued at?

Q3. What is the post merger/Pro-forma valuation?

Q4. Is there a meaningful discount to the post-merger valuation?

All of that and more coming up next. But first..