Analysis of Compact Disc India Ltd

The uncertainty in the delisting of Compact Disc Ensues. Last month, HSBC Bank, bankers to the firm brought a stay order to the proposed voluntary delisting. This may mean several things, the first of which comes to my mind (i am speculating here) is the fact that the bankers may have lost faith in ability of the company to pay back and they feel that the money is being unnecessarily used to buy-back shares instead of doing something productive.

It is always tough for a company, if their banker, a reputed name in the industry shows such signs. This may hinder further raising of finances for the company. On a long run this may harm the growth of the company.

Moreover the resignation of key personnel from the board sends the wrong message. As mentioned in my previous post, the target of 60 (based upon the past 26 week avg) had been passed. Now if the delisting does not come about, any appreciation of price may not come up.

Despite of the good figures in the book of the company i shall recommend not to go in for the shares of the company.

News on Compact Disc India Ltd

Board Meeting on Jan 28, 2011 | 20/01/11 18:02

Compact Disc India Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on January 28, 2011, inter alia, to consider the following matters:

1. To consider and approve unaudited financial results of the Company for the quarter ended December 31, 2010.

2. To consider and approve the delisting of the securities of the Company from Bombay Stock Exchange and other stock exchanges where the securities of the company are listed.

3. To consider and convene the Extra Ordinary General Meeting of the members of the Company.
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My Analysis:
If the "Delisting of the shares is approved by the board on 28th, as per SEBI rules, they will have to give a Buy Back offer as an Exit opportunity for the shareholders.

The price of the buy back offer is decided by the book building process, where the floor price is the past 26 week average. Now, for Compact Discs India Ltd, the 26 week average is around Rs 60. So hold on to shares till they reach 60.

Happy Investing!!

Analysis of Compact Discs India Ltd.

About the company:

Compact Discs India Ltd is a leading player in the South Asian Animation Industry. Their major source of revenue comes from animation outsourcing projects. These animation projects (related to movies) are contractual and hence are not risky, but lack of any Intellectual Property Rights over it also reduces the scope for prolonged revenues.

In order to tackle that, they are coming up with two animation feature films "Eternal Love" and "Futebol with Pele". In the latter movie, Pele has been roped in as an executive producer. In March this year. Compact Discs has also inked a deal with BBC to co-produce a film "Blame It On The Bhangra". They have also reported having struck a deal worth $82 mn with a british production house to make an animation movie on Adolf Hitler.

The company also plans to come up with five animation degree awarding institutes, thereby foraying into the Education business.

Financials:

Q2 FY11: Sales at Rs 78.4 Cr, up from Rs 61.67 Cr in Q2 FY10
PAT Rs 16.87 Cr vs Rs 12.84 Cr in Q2 FY10

EPS for Q2 FY11 stands at Rs 17.62 vs Rs 13.42 for Q2 FY10

For the first half (H1) of FY10, sales were Rs 129.17 Cr vs Rs 105.88 Cr for H1 FY10
and PAT was Rs 26.96 Cr vs Rs 22.01 Cr in the same half last year.