Cranes Software at 52 week low of Rs 28…was Rs 100 just over a year ago…Waste or Worth ?

End October 2008,when the Sensex had crashed below 8000 from a high of 21000 in January 2008,Cranes Software (FV Rs 2) was at Rs 90 and yet rated a ‘Buy’ by a leading Broking House with a target of Rs 106….Had you invested,you’d have gone ‘Broke’ and probably be with the ‘Angels’…get the whiff!? 

Cranes is now at Rs 28/29…a 52 Week Low…there is a lot of interested buying that has led me to have a brief look at this scrip

While the Whole market surged in 2009,Cranes reversed from Rs 80 to Rs 28

This appeared strange at first,given the fact that for FY 2009,the Networth shot up from Rs 481 crs at March 31,2008 to Rs 632 crs at March 31,2009,helped by a bottomline of Rs 115 crs….Book Value moved up sharply from Rs 41.95 to Rs 53.70 and is likely to cross Rs 60 this year….P/BV is very low at @ 0.50….. Equity is Rs 23.55 crs giving an EPS of Rs 9.8…..Q1 FY 10 indicates this EPS will be maintained this year…Thus the PE is under 3

So does Cranes Look great at Rs 28/29 ?….Look again

EBITDA in FY 2009 was Rs 227 crs,up from Rs 191 crs and PAT was Rs 115 crs,up from Rs 95 crs….Yet the company crashed Dividend to just 10% from 60%….Rs 2.36 crs was the absolute amount…that’s barely 2% of the PAT !

Look again…The Company is obviously in deep cash trouble…Borrowings have increased from Rs 573 crs in 2008 to Rs 743 crs in 2009…These incremental funds of Rs 170 crs along with Cash Profits of Rs 187 crs (after Depreciation adjustment) give additional funds of Rs 357 crs….Where have they been applied ?…Look at the Assets…Gross Fixed Assets have increased by Rs 103 crs and Debtors by a whopping Rs 272 crs from Rs119 crs to Rs 391 crs…that’s 74 % of consolidated (+15 subsidiaries) revenues of Rs 529 crs……that’s way too much….raises question marks on credibility of the Sales and Profitability figures and therefore Liquidity situation at the Company

Shareholding Structure reveals near 37% is held by Promoters and nearly as much by FIIs…Normally this should spell ‘confidence’…but seems more like just ‘con’

This Bengaluru proprietary software products based company will celebrate 25 years next year after it was co founded by Mukarram Jan and Asif Khader….Hope it does not go the way of Aftek Infosys (Rs 17) and Silverline (Rs 6)

There is heightened activity at the counter with traded volumes running into several lakhs of shares, both, at BSE and NSE

Even though the Auditors Report is Clean,there is a question mark on the Integrity of the Financials and on Corporate Governance issues

I’m not convinced on Cranes….but I sense it is a prime candidate for Insider Trading and Manipulation of Share Prices…probably already is experiencing it !

So even though PE is under 3 and PBV is just 0.5,I would be wary of Investing in Cranes at this 52 week low of Rs 28/29 unless some Clarity emerges on Financials,especially how is the Debt going to be tackled

Don’t get seduced by the regular announcements of new Product launches and increasing revenues and profits or market rumours that someone is warehousing to pass on to his institution at an inflated price later on !

Cranes has shrunk to Rs 28/29 for justifiable reasons…any recovery from here has to be supported by improved company liquidity, better financial management and debt restructuring….and if you do know something on this front,do let me know and I shall re-assess Cranes