Provogue (India) Ltd - Follow-up

I had written about Provogue demerger a few days ago. Its surely an interesting case with lots of apparent value, but with a very very questionable management. Although my position in it is not very large, I have never ever been so uncomfortable in any stock in my life!
An interesting thing has happened recently. The following announcement has been made on Provogue on NSE:


Members of the Exchange are hereby informed that the trading in equity shares of Provogue (India) Limited shall be suspended w.e.f. March 07, 2012 (i.e. closing hours of trading on March 06, 2012) on account of Scheme of Arrangement & Amalgamation.


This does not happen normally in demergers. Its happening here due to capital reduction in Provogue, which is part of the scheme. Now the interesting thing about this is made up of two parts; one, that the announcement hasn't been made yet on BSE, and so I bloody missed reading it immediately. It won't happen that it will remain listed on BSE while its delisted on NSE. I think it wont be listed on either for some period of time. Secondly, this is something that I was afraid of, (since there is capital reduction happening in Provogue as part of the scheme), hence, I had checked it with the CS of the company when I had begun research on the stock. He had informed me at that time that Provogue will not be delisted.


Now, it seems that it will be!! So what does this mean for us? We will not be able to sell Provogue shares on ex-date (7th March 2012) since it wont be trading on that day. So there are two options:

1. Sell out pre-demerger; i.e. before 7th. One will not get shares of Prozone in that case.
2. Hold on and wait for Provogue to get listed again. Then sell off the original (Provogue) position. One will receive shares of Prozone in that case.

So what is the risk? 

• Time risk: How long will it take to get Provogue relisted? Usually, it does not take long, its only capital reduction. It could take maximum 8-10 days at best. However, if one invests on the basis of best-case scenarios, one should not be in the market at all!! What if due to some god-forsaken reason, it takes a long long time for Provogue to relist again? The money remains trapped in an already uncomfy position. Not an ideal scenario, at least for me.
• Market risk: What if the market collapses during the time Provogue is not listed? If it gets relisted during bad times, the price could be severely depressed, resulting in losses on the original position.
• Provogue risk: This is a special category of risk, applicable only in this case. Under this risk, anything can go wrong! Hehe. (Just kidding)

What am I doing?

I intend to sell of my entire position asap, pre-demerger itself. In a position which is already stretching my risk threshold and making me uncomfy, this event increases the risk phenomenally for me. I am very happy and content with my 30-35% profit and am willing to pass on the baton to make more money to others who are willing to take the risk and are ok with it. :-) In special situations, one has to be nimble, think straight and clear, and be ready to take decisions fast, with changing facts.


On a different note, who says luck does not play a role in making money? Earning money in Provogue is enough proof of luck, imho! :-)


Cheers and happy investing!!



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