Mercantile Ports & Logis... Share Discussion Threads

[placing] 04/9/2020 14:01

is coming soon

[dplewis1] 04/9/2020 13:45

What's the sudden flurry all about?

[aldoeldo] 04/9/2020 12:31

surprised they went mute on land by August blah blah blah, but here is why



dear oh dear

[oldbanker] 03/9/2020 13:55

Hate to say it, but sometimes one comes across an attitude (in some emerging markets) that it is perfectly acceptable to ‘pull a fast one’ on foreign institutions. It’s viewed as a kind of victimless crime, whereas the art of haggling is seen as a noble and ancient custom. Think Robin Hood on steroids. At the extreme, the thinking is: foreign institutions are rich, greedy, lazy and born with privilege; hence, it is ok for me to apply all my human capital (cunning, effort, connections,reputation, etc) to extract as much monetary capital from them as I can. By that measure, this management team wins the gold medal!

[igoe104] 02/9/2020 08:23

The management team must be very good sales men, to get away with this for years. Did anyway ever go to a agm and question how they manage to spend 25k on expenses ever month? How the hell did they get away with it for 9 years without being smack by a share holder ?

[phowdo] 02/9/2020 08:22

Indeed, why else would they appoint a bucketshop as joint broker?

[waterloo01] 31/8/2020 17:45

MT can give you chapter and verse on how they have managed the scam for years, over invoicing, related parties ......and yes they have huge debts with the Indian banks, debts well in excess of any value.

[oldbanker] 31/8/2020 17:39

Interesting post, as ever Mount Teide!

A question arises: What is the former MD's stake?

If you'll forgive a long back-story... Before the 07-08 crisis, lots of managers were looking to list permanent capital vehicles (PCVs) of one sort or another. Fund of Hedge Funds, Structured Credit (especially CDO-squared and CDO-equity), Private Equity, Real Estate, M&A SPVs, Blind Pools, Business Development Companies (BDCs), C-Corps, etc, etc. Hardly mattered what the assets were. AIM was the preferred destination due to the low regulatory bar. As the market got "wise" to the avalanche of toxic waste, IPO investors realised they were the only ones that could effectively decide what should be IPOed vs what should be still-born. Banks/lawyers/auditors etc were all just chasing fees. So investors started applying some pretty simple principles. Managers needed name recognition (think KKR), track record (5+ years of returns with high Sharpe ratios), skin in the game (5-10% of IPO raise, and managers to pay all placement fees, rather than it being taken out of opening NAV), the ability to be fired (termination provisions for externally managed funds) and the inability to charge fees on cash before it was invested and making a return. On top of that, assets had to be already warehoused, legally committed (signed contracts) or uniquely originated. And the portfolio had to be well diversified, BBB minimum, and appropriately levered with AAA repo/bank counterparties.

Based on those rules, how did SKIL ever get IPOed?

Name recognition? Gandhi.
Track record? 0 years. 0 returns
Manager skin? ? None. Nil-paid warrants or vested stock doesn't count
IPO fees? Taken out of IPO proceeds, hence opening NAV was ~95?
Termination provision? None AFAIK
Fees on cash? Apparently infinite in the form of T&Es for management.
Warehoused assets? Honestly, does MPL even own the asset? (and if so, why is asset value so much in excess of market cap?)
Leverage? I hope its zero, but does anyone know? I bet implied rating is way off BBB.
Repo/Bank counterparts? Is there a JPMorgan or BOA anywhere to be found?

For anyone who wants to DYOR, take a look at the US IPO market and the boom in SPAC issuance in the last 5 years. Ask yourself what the rules of the game are in the US? Look at which (if any) SPACS have made money for investors. Then take a look at AIM.

The SKIL/MPL MD joined Bear in 2001 straight from uni. While at Bear, he never ran a fund or a trading book, never made a return, no track record of principal investing, no experience in corporate finance or M&A, no project or leveraged finance, no DCF or other business modelling, etc. Left for Askar at the onset of the financial crisis. Set up their Indian office (i.e. himself on a cell phone from a London hotel). A year later, he's convinced Cenkos he's CEO material for an Indian infrastructure project. Fast forward a decade, he's run out of road with the FBI and SEC, but AIM and SFO (and Crux apparently) are still backing him.

Honestly, if this IPO business plan and management team was on Dragon's Den, my 14 year old daughter would shout "I'm Out" at the TV in Duncan Bannatyne's accent...

God speed to all!

[mount teide] 31/8/2020 15:57

Major Shareholders - Insiders and II's hold 83% of the stock.

21.8% - 414,349,000 - Karanpal Singh
18.2% - 346,934,500 - M&G Investment Management Ltd.
13.2% - 251,522,790 - Schroder Investment Management Ltd.
8.96% - 170,723,310 - Miton Asset Management Ltd.
7.57% - 144,423,953 - Canaccord Genuity Wealth Ltd
5.16% - 98,351, 262 - Nikhil Prataprai Gandhi
4.99% - 95,060,603 - Legal & General Investment Management Ltd
1.73% - 33,000,000 - Allianz Global Investors GmbH (UK)
0.74% - 14,173,913 - CRUX Asset Management Ltd.
0.66% - 12,500,000 - Henderson Global Investors Ltd

PI's mostly (wisely) have given it the bargepole treatment since 2014 shortly after the market was told 'construction' of its only asset had commenced - as a result of finding out - from hiring a light aircraft to fly over the 'port' under 'development' - there was no port under development whatsoever at the site, since all access to the site was blocked by a 50 metre wide fast flowing tidal creek that was not bridged until December 2015, to enable construction machinery access.

However, further investigation at the time revealed that although access to the foreshore to start the land reclamation did not commence until December 2015, it did not stop management burning through circa £45m of shareholders funds and loan drawdown during the previous 21 months - according to company accounts. On lord knows what, considering this was 80% of the winning tender offer to build the entire 200 acre port development, and all the management had to show for the money was a small bridge with a £2-3 million build cost, on a dirt track access approach road to the area of foreshore selected for land reclamation!

One Fund Manager who continued to back the management after being given extremely strong evidence suggesting this could be foolhardy in the extreme, went on to lose a fortune investing in it for L&G. Incredibly, it's since come to light he STILL can't resist grabbing the Mercantile falling knife with his new company's funds, even after losing most of his fingers while at L&G, as a result of finding the MPL management had welded the falling knife to a two tonne anvil!



Richard Penny's 2 Penny Stock _ Royal Bank Of Scotland

'This India-focused company lost Richard Penny lots of money while he was at L&G, but he's backing it in his new fund at Crux.

Richard Penny’s new venture at Crux is a punchy offering, illustrated perfectly by his backing of a company that he “lost a lot of money on” while at Legal & General.

The £10 million Crux UK Special Situations fund, launched on 1 October, will be run in a similar way to his L&G fund – high conviction, long term and with a decent exposure to small caps.

Some of his former investments make appearance in his new venture, notably a tiny AIM-listed company called Mercantile Ports & Logistics (MPL).

At £8.5 million market capitalisation, it’s a pretty punch call from Penny. “It’s not for widows and orphans,” he says, “but this is a Special Situations fund and it is in a portfolio that is diversified.”

Mercantile is an India-focused logistics company, which boasts on its website of having “delivered several ground-breaking, mega infrastructure projects”. These include India’s first ever private sector port and logistics facility, the first private sector railway line and the first private expressway.

Today, its operations are focused around the Karanja Port near Mumbai, which it says is a key gateway to trade for eight land-locked states in India. Going forward, it looks to identify other suitable locations to bolster its portfolio of ports and logistics facilities.

But it’s had a chequered past. It floated back in October 2010 at 250p, and Penny invested in it during its early history. But its share price chart since IPO is scary viewing.

Soon after beginning to build the port, the project saw hit regulatory issues, explains Penny. Those delayed the project substantially, and the share price fell dramatically.

Two years ago, Mercantile raised £36 million by issuing new shares priced at just 10p. It came back to the market for more cash earlier this month, placing shares at just 2p.

This round has been well backed by institutions, with the likes of Legal & General, M&G, Schroders and Miton, who combined own half of the business, continuing to back the firm.

Penny says that’s given him confidence, as has the strength of the management team and board of directors. “We take assurance from that, for all that this is a minority sport, Indian assets on AIM in the UK – and it’s as contrarian as you’d like,”


'There's none so blind as those who will not see' springs to mind!

AIOHO/DYOR

[oldbanker] 31/8/2020 13:46

I am new to this board (found it when looking into the CEO) but it makes for interesting if painful reading. I’m a retired I-banker. No skin in the game. I spent a year working with the MPL CEO (now consultant) while at Bear in 2006. He was a first-year associate and junior hand on the desk when we did the AIM IPO of HIRCO. Everything I read about SKIL/MPL was already present in HIRCO. I’m afraid to say he left Bear under a large T&E cloud in 2007. I’m disappointed the nomad apparently did zero background checks when writing his bio for the IPO prospectus.

[mount teide] 31/8/2020 11:53

Rdelano - you're far too generous to the management with your description of events that have unfolded here since 2014 under their 'Governance' !

[rdelano] 31/8/2020 11:05

What a mess!

[diku] 29/8/2020 08:42

Surely think there is more to it than just a simple name change from SKIL to MPL...

[diku] 28/8/2020 22:00

They want to cover themselves from the blame game?...





We might also ask, why NOW the auditor is being cautious.

[mount teide] 28/8/2020 21:58

Net finally closing in on Nikhil Gandhi?

The Indian Enforcement Directorate has attached Nikhil Gandhi's SKIL Infrastructure's assets, in connection with its money laundering probe into the collapse of IL&FS .


IL&FS: The crisis that has India in panic mode

'As the world marked the 10th anniversary of the collapse of Lehman Brothers which triggered the global financial crisis in September 2008, India's leading infrastructure finance company IL&FS defaulted on payments to lenders triggering panic in the markets. '

[mount teide] 28/8/2020 21:38

Latest RNS beggars belief - with a single 'asset' under 'construction' and Zero revenue and operating expenses for the accounting period(as per the previous 9 years, despite the entire 200 acre port having ` maximum 2 year construction timetable deadline under the Port Operating Concession!), the accounts could not be simpler to produce.

[escapetohome] 28/8/2020 21:34

We might also ask, why NOW the auditor is being cautious.

This was pretty obvious to the auditor, last year and years and years before that.

So why play up now?

[pj 1] 28/8/2020 20:40

e) All of the above?

🤣

[pj 1] 28/8/2020 20:38

'' the lockdown restrictions in India due to COVID-19 continue and the audit is not yet complete''

What this actually means is that the auditors have finished their initial works and raised questions that the Company CANNOT yet answer satisfactorily.

The audit itself isn't an issue, but the Company response, or lack of, is.

So, all guesswork IMO- what are the issues?
a) The Company cannot provide proof of cash balances?
b) The Company cannot reconcile supplier invoices to purchase invoice and works completed?
c) Carrying value of assets on Balance sheet?
d) Tangible proof of contracts to support 'going concern' status? (especially if they cannot find where the cash is)

[diku] 28/8/2020 18:13

If they were really respectable they would have taken MPL to task long time ago...





I wonder if the respectable city fund managers sense something amiss.

[diku] 28/8/2020 18:09

RNS 16.31...how close was I?...do i get a Brucie bonus...




diku28 Aug '20 - 09:30 - 1877 of 1888 Edit
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16.34?...