Pressure is mounting on the Tirupati Graphite (LON: TGR) board as former non-executive directors support the requisitioners of the general meeting scheduled for June 11. The plan aims to remove the three current directors and appoint four new ones.
The latest supporter is Hemant Poddar, brother of Tirupati Graphite CEO Shishir Poddar and company co-founder, who resigned as a non-executive director at the end of January. Hemant backs the four proposed directors, stating that his attempts to reform the organization were ignored by the executives. He also criticizes the investor communications over the past year.
Hemant highlights conflicts of interest, including the supply of processing plant equipment to Tirupati Graphite by companies related to management, and various services, such as accounting, provided by related companies. He describes the value of these transactions as “humongous.”
He also highlights the company’s failure to become an integrated producer of natural flake graphite and value-added products. Tirupati Graphite had ambitious plans when it floated on December 14, 2020, but progress has been disappointingly slow since then.
Free Tirupati Q&A – Jun 3, 2024 12:00 PM in London
The overall strategy was to become a fully integrated graphite and graphene producer. Instead, a related company called Pranagraf, where Hemant Poddar holds a 35% stake, has been used to process graphite and has grown independently as a result. Hemant was eager for Tirupati Graphite to acquire Pranagraf, which was the plan in 2020.
One of the early announcements involved the development of flame-retardant polyurethane foam by Tirupati Speciality Graphite, which later changed its name to Pranagraf.
Unleashing the Full Potential of Tirupati Graphite plc
The relationship between Tirupati Graphite and its related entities has always been confusing. When Tirupati Graphite floated, the press release stated: “In India, the Company processes and produces speciality graphite for use in hi-tech applications like lithium-ion batteries, fire retardants, and composites. Its speciality graphite processing operations include the 1,200 tonnes p/a Patalganga Project, which was successfully commissioned in July 2019…” It was clear from the press release that “the Company” referred to Tirupati Graphite. However, it planned to acquire these operations, which were not strictly part of the group. This confusion has undermined both the company and confidence in its management.
Mining Operations
Tirupati Graphite has been mining graphite in Madagascar, with projects at Vatomina and Sahamamy, the latter already in production by December 2020.
On December 17, 2020, the company announced plans to increase graphite production to 81,000 tonnes per annum by 2024. In the most recent year, production was only 7,096 tonnes. The annual target has since been reduced to 30,000 tonnes per annum.
Progress has been hindered by a cash shortage, yet management still acquired additional projects in Mozambique. Although the purchase was mainly in shares with a small amount of cash, there isn’t enough cash to properly invest in the current projects, let alone new ones.
Tirupati Graphite has the feel of a family-run business that has gone public without updating its governance. There has been a lot of talk and very little delivery, with plenty of excuses in recent Investor Meet presentations.
A concerning sign is the turnover of non-executive directors in less than five years. Two of these directors, Murat Erden and Isabel de Salis, are being put forward for election. The other two proposed directors, Leo Koot and Mark Rollins, have local expertise in Africa and resources experience.
Optiva Securities has resigned as a joint broker, with CMC remaining as a broker, following its boss Christian Dennis’s resignation as a non-executive director of Tirupati Graphite. He is likely to vote against the board, and other non-executives may follow suit.
Currently, there are three executives. In the Investor Meet broadcast, the company outlined plans to recruit non-executives and a chairman to replace Shishir Poddar, allowing him to focus on his role as CEO. A finance director is also needed, but progress has been slow.
When Tirupati Graphite floated, it raised £6m at 45p/share, valuing it at £33.6m. The share price has since fallen to 7.25p, just above the all-time low. Executive directors have been buying shares in recent weeks.
It is unclear whether the company has reached a point where a turnaround is possible by either party. The tangled web of companies related to management could confuse and delay improvement plans.
More cash will certainly need to be raised. The current board will find it difficult to raise funds through a share issue due to its track record, while the requisitioners will need to present a strong case to gain investor backing. It appears they may have a better chance of success than the existing management.
