Manipulation of the intrinsic value of its share price by HOEC
New Delhi, January 12, 2021: Hindustan Oil Exploration Company (HOEC), India's first private oil and gas companies, has continued to ride the wave of misinformation to their stock exchanges and their shareholders. According to sources, HOEC has continued to cleverly use market forces to manipulate the intrinsic value per share of the company which today should be at INR -1.09 but is continues to fluctuate around the INR 88-89 mark.
According to the reports filed with the stock exchanges on September 3, 2020, the total declared asset valuation was approximately INR 726 crore and the overall debt and liability was shown as over INR 870 crore. Simple math will show that the company is facing a significant deficit, yet it continues to enjoy a good run and enjoy the misplaced confidence of its shareholders.
According to sources close to the company, the company should be registering an overall deficit of approximately INR 145 crore. Despite this the shareholders due to the recent continuous surge, continue to believe that the company has the wherewithal to weather this storm.
However, the current level of confidence by the investors of the company may prove to be a mirage in the long term. This will ultimately stem from the quality of decisions and thought process of the leadership of the management namely the CEO and CFO of the company. Taking advantage of the adulation from shareholders who passionately believe that the current leadership have the potential to right the ship has resulted in an impressive individual financial windfall for both.
The question however that still begs to be answered is while the leadership team has rewarded itself substantially, the actions taken by the management above begs the question of operational efficiency across all assets given the incorrectly placed focus of the leadership. While attention needs to be given to its AAP - ON- 94/1 Flagship Project which is operating at an annual pre-tax operating deficit of approximately INR 15.3 crore or INR 4.2 lakh per day. Not far behind is its PY1 Flagship project which is operating at an annual pre-tax operating deficit of approximately INR 6 crore or INR 1.5 lakh per day.
Questionable decisions made in the recent past by the leadership mentioned above include the non-payment of over INR 150 cr worth of outstanding dues not being met. Also, the constant delay tactics being applied to bypass due process and the decision of the arbitration courts led to the freezing of its movable and immovable assets. Last but not least repeated but unsuccessful efforts challenging the various Courts Supreme Court with regards to the purchase of the assets of JEKPL at rock bottom prices, causing disruption for public sector banks in the Committee of Creditors also seems a foolhardy move. With commercial production from B-80 still proving to be elusive, it can be deduced that HOEC does not have the necessary funds needed to carry out design changes in infrastructure of its B-80 project where production is yet to commence.
Despite these glaring shortcomings the company continues to show that all is well and still enjoys the support of its shareholders which is reflected from its steady share price. However, digging a little deeper will bring out the truth and the numbers are there for all to see and then make a well-informed decision.