From the lows of Rs. 3.80 on 1st April 2020 to Rs. 39+ today, Alok Industries is one of the few things that has brought smiles for the investors in the year 2020.

The stock began its rally well before the announcement of Reliance Industries Ltd and JM Financial taking over the business in the auction under the Insolvency & Bankruptcy code for the total consideration of Rs. 5050 Cr. The optimism around RIL has helped the stock big time, although there is no structural change. I see target of Rs. 400-500 being anticipated, some touting that it is next Ruchi Soya in the making. It will be very early to talk about that, we need to see what plans Mr. Ambani has for the company. 

Let's look into some interesting developments around the stock:

  1. RIL has redeployed Alok Industries' manufacturing facility in Silvasa for exclusive manufacturing of PPE kits during this COVID-19 pandemic. Further Alok has scaled up the production to 1 lakh units per day at cost of Rs. 650 per unit which is a third of the imported PPE.
  2. It is being known that production at Alok commenced from mid-April and has now constitute close to a fifth of India's daily PPE production capacity.
  3. At the end of March 2020, Reliance Industries held over 83.33 crore shares in the textile manufacturer. RIL has also infused Rs 500 crore in equity into the company since then. In the October-December quarter, Alok Industries posted a consolidated net loss of Rs 194.49 crore which was significantly less than the Rs 1,307 crore loss it posted in the same period a year earlier. Total income of the company also increased to Rs 877 crore from Rs 714 crore, on-year basis. Alok Industries owed lenders Rs 30,000 crore before heading into insolvency proceedings. 
  4. The Joint holding of JMFARC and RIL will move to 75% and the shareholding will look like this :

  5. When we compare Alok with the sector leader Page Industries, Alok can catch up the Market Cap of Page Industries at a Price of Rs.55. People giving targets of Rs. 400 - 500 simply means Alok is going to grow 9-10 times of Page Industries.

      Page Industries Alok Industries
    Market Cap Rs. In Crores 21500 16076
    EPS Rs.  347 25.77
This is not impossible especially with RIL backing the company but practically speaking, Alok has a long way to go and expecting it to achieve such feat in next 2-3 months is day dreaming.

Investors need to have their heads at place in these series of upper circuits. You cannot see what lies ahead after that until RIL comes up with the turnaround plan, how they are going to handle the ever increasing Interest cost ? How the company looks at generating operating profit ? There can be a list of such questions which has to be addressed and its too early to talk about targets.

Alok can be a turnaround story agreed, but one needs to take care of the position sizing and not gamble betting high on it. If our expectations are not realised the stock can come racing down with lower circuits leaving the retailers trapped. Investors are therefore advised to hold on and keep an eye on how the events unfold. 

Stay tuned for the latest updates!!

Happy Investing!

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Hi, You have not considered 172 crore of JMFARC. The disclosure of the same is pending and should come soon. Alok is already trading at MCAP of 16000+ crore.

Hi Jeetendra, the above market cap is based upon the information available in the market. Disclosures/ Information which has not been made to the public cannot be said reliable and hence is not considered. Thank you for reaching out!

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Hi Suraj,

The disclosure about resolution plan is already made in public which clearly states about 172 crore shares to be allotted to JMFARC and out of 10% promoters holding (6 % which is pledged will be given to JMFARC) and 3% disposed. RIL will hold 83.33 crore + 250 cr OCPS.
I would really appreciate if you update based on RESOLUTION plan. Thank you.

Hi Jeetendra let's talk in logical terms, this is a 5050 Cr deal, 4500 of which comes in form of loan backed by RIL. Further 500 Cr is infused by issue of 83.33 Cr at a price of Rs.3 (Rs. 1 Face value + Rs. 2 Premium)(83.33*3 = 250 Cr) for further Rs. 250 Cr, RIL has received OCPS. That's all about deal, please re-visit the resolution, you might be looking at the consortium terms between RIL and JMFARC. Also look at the Company Secretary attestation submitted to the exchange, Really appreciate retailers making an effort to understand the events. Thank you.

I am really surprised Sir. Do check last year 3rd qtr results or annual report for the details i am mentioning.
Also, just think will JMFARC come in for only 6%?
Will they leave 50%+ holdings with retailers?
Also the actual money infusion is 6250 crore. Do check one more time sirji.

Hi Jeetendra, My bad, my team missed the equity for debt swap aspect... You will see the update shortly … Thank you so much!

Thank you for the update. Now it makes the picture pretty clear. What is your take where it will consolidate?

This is the kind of stock which does not have any fundamentals , any technicals, pending orders of 3 Cr. shares daily in both the exchanges combined. This makes difficult to predict, I am expecting it to settle around double of CMP i.e. 80/90 , any further upmove would require some positive business developments to take place.

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