Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Forensic Accounting

Uniply Industries Ltd / Forensic Accounting

<p>For quick background, Uniply Industries ("Uniply") is a plywood business that was taken over in mid-2015 by new management under the leadership and ownership of Keshav Kantamneni, a private equity investor. At the time, it continued to be a pure-play plywood business with plans of the new management to grow the branded plywood business multi-fold. Later on in 2016, the company diversified into the interior fittings business through acquisition of a company named Vector Projects ("Vector"). In FY18, the company also initiated some project work in the affordable housing construction space, which has since become a core business for the company.</p>
<p>A close look at Uniply Industries raises more questions than answers. Its sale of plywood business to an associate company at a potentially discounted valuation raises suspicion. The cash flow movements at Uniply Industries reveal that since the new management took over in 2015, only a part of the investor capital raised has gone into real assets owned by Uniply Industries. Rest of it seems to have been diverted to either promoter’s other business entities, suggesting potential conflicts of interest, or have been consumed for high working capital requirements, suggesting potential weak quality of sales. Recent announcement (as on Jul 3, 2019) around significant stake sale by the current promoter (Keshav Kantamneni) to a Gulf based investment firm raises further suspicion. Why would Keshav sell down his stake from current ~27% to ~7%, when as per management, the firm is on a high growth trajectory, has strong order book and sufficient capital to realize its full potential? Since the stake sale announcement in early July, there has been no progress towards it. The buyer (Gulf based investment firm) was supposed to deposit advance money in an escrow account but it hasn't happened yet. All the while, the merchant banker administering the deal has also resigned.</p>

For quick background, Uniply Industries ("Uniply") is a plywood business that was taken over in mid-2015 by new management under the leadership and ownership of Keshav Kantamneni, a private equity investor. At the time, it continued to be a pure-play plywood business with plans of the new management to grow the branded plywood business multi-fold. Later on in 2016, the company diversified into the interior fittings business through acquisition of a company named Vector Projects ("Vector"). In FY18, the company also initiated some project work in the affordable housing construction space, which has since become a core business for the company.
A close look at Uniply Industries raises more questions than answers. Its sale of plywood business to an associate company at a potentially discounted valuation raises suspicion. The cash flow movements at Uniply Industries reveal that since the new management took over in 2015, only a part of the investor capital raised has gone into real assets owned by Uniply Industries. Rest of it seems to have been diverted to either promoter’s other business entities, suggesting potential conflicts of interest, or have been consumed for high working capital requirements, suggesting potential weak quality of sales. Recent announcement (as on Jul 3, 2019) around significant stake sale by the current promoter (Keshav Kantamneni) to a Gulf based investment firm raises further suspicion. Why would Keshav sell down his stake from current ~27% to ~7%, when as per management, the firm is on a high growth trajectory, has strong order book and sufficient capital to realize its full potential? Since the stake sale announcement in early July, there has been no progress towards it. The buyer (Gulf based investment firm) was supposed to deposit advance money in an escrow account but it hasn't happened yet. All the while, the merchant banker administering the deal has also resigned.

Uniply Industries: More Questions Than Answers?

India

Uniply Industries Ltd. manufactures plywood. The Company produces construction grade, MR grade, decorative grade, waterproof grade and industrial grade plywood. Uniply has a marketing network across the country.  The Company also generates electricity from the wind.

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Uniply Industries Ltd (UNIP IN)

Uniply Industries: More Questions Than Answers?

For quick background, Uniply Industries ("Uniply") is a plywood business that was taken over in mid-2015 by new management under the leadership and...

Ankit Agrawal, CFA

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