@phreakv6 wrote:

Surprised that there isn’t a thread for Info Edge so trying to put in whatever I know to get the conversation going. Info Edge is the company behind Naukri - India’s No.1 Job portal. They also own 99acres which is the No.1 in Real Estate classifieds, JeevanSathi (Behind Bharat Matrimony and Shaadi here) and quite a few others. They also own nearly 50% stake in Zomato and about 10% in Policy Bazaar/Paisa Bazaar and a few others like Shiksha, Merit Nation etc. Although the businesses come across to be quite diverse, the unifying theme if any, is that they are all mostly online classifieds. That’s what they consider themselves and there is indeed a method to their madness. They seem to have been around a long time (17 years). IPO was in 2006.

As a standalone entity, the revenues have grown from Rs.140 Cr in 2007 to Rs.820 Cr in 2017 (About 20% CAGR) and PAT has grown from 27 Cr. to 204 Cr. (About 22% CAGR).

This is not the whole story though, since unlike the software services companies like Infosys and TCS, the free cash has been deployed in several tech businesses. This is the sort of company that takes risks with its cash, tries to build products instead of hoarding them through the years. Their approach to me seems to be very Peter Thiel-ish, in that they have a portfolio of companies to invest in and they don’t seem to mind few of them going belly-up, as long as they end up with one or two big winners. They have also not been shy of accepting defeat in cutting out and writing-off some of their investee companies.

Standalone Companies
These are the businesses that are under the direct management of the company

Naukri.com
This is the bread and butter of the company and its current crown jewel. All the free cash flow comes from here. FY17 Revenues were 595 Crores out of the total 820 Cr. reported by the standalone company (75% of total revenues) and EBITDA was 321 Cr. (Outstanding 54% EBITDA margin). As for traffic share, they have about 75% of the overall market when the nearest competitor doesn’t even have 10%. That’s pretty much a strong monopoly driven by a strong brand and network effect. Continuous innovation in “product, engineering, channels and services” has kept the moat safe and sound.

90% of revenue comes from recruiters and 10% from job seekers.

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99acres.com
This is the company’s real-estate classifieds business which again has a leading position. Their traffic share is close to 60% while the nearest competitor has about 25%. This must be magicbricks.com. Housing.com and Commonfloor.com seem to have given up investments so this sector will survive going ahead as a duopoly with 99acres.com leading is my guess. FY17 revenues were at 112 Cr, EBITDA loss was at 59.7 Cr (Down from 91 Cr in FY16). The hit seems to have come from demonetisation which hurt the RE sector in FY17.

Current revenues seem to be driven mainly by paid listings and ads placed by developers. Whenever Real-estate sector picks up and ad spend moves from offline media to online, 99acres.com should capitalise, considering their market share.

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Jeevansathi.com
FY17 Revenue at 58 Cr. and EBITDA loss at 7.9 Cr. Seems to be doing well in terms of profile listings (11.8% growth) and has a 3rd position in the market behind bharatmatrimony and shaadi. Mobile penetration seems to be good and growing.

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shiksha.com
This caters to the online education classified market and is still new and growing. This could turn out to be a great business in the future as school and colleges move their ad spend from offline to online. The revenue stream (Currently) seems to come from branding and advertising for colleges and universities and also from lead generation (selling student profiles to colleges). They also seem to provide counselling services for their international university partners. FY17 revenues were at 36.5 Cr and EBITDA loss at 3.7 Cr which doesn’t seem to be too bad for a fledgling business with a very large and lucrative potential market.

Investee Companies

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Zomato.com (46% Stake)
Online restaurant discovery with presence in 23 countries, leading position in India and UAE. Revenues were at 332.3 Cr and EBITDA losses at 152 Cr. What’s interesting though is the trend – Revenues are galloping and cash burn is reducing. FY15 revenues were 96 Cr, FY16 at 184 Cr and FY17 at 332 Cr. EBITDA losses in FY15 were 136 Cr, in FY16 it was 441 Cr and in that light FY17 losses at 152 Cr shows that losses are reducing drastically. Average monthly cash burn is down from $4.2 million per month to around $1 million per month between FY16 and FY17. Food Ordering and Ad sales are both growing well too.

The key thing to watch out for is how its battle with Swiggy.com pans out. There were talks of a merger last year and Nomura had put the valuation for Zomato at $1.4 billion back in Nov last year. The only problem seems to be that they both can’t seem to agree on their valuations but its only been 4 months since the rumours came out. It is impossible for either of them to survive by competing with each other so a merger is inevitable and it is post this merger that Zomato could undergo serious re-rating because the food delivery business is massive.

Policybazaar.com (10% Stake)
India’s online financial supermarket – Has 90% of online policy comparisons and 40% of online insurance transactions – Clear market leader emerging here. This is another business I am extremely positive on because the business model is very strong and PB fills the price gap between online and offline policies. This reminds me so much of GEICO’s business model (although they do the underwriting themselves) as the whole business is based on arbitrage. Unfortunately, Info Edge which was an early stage investor here got diluted in subsequent rounds and currently owns only 10% here. This may not be something to scoff at though, as the opportunity size is huge and if they manage to build a large enough moat and also somehow get into underwriting, they might be huge someday.

Meritnation (59% Stake)

Supplementary online learning platform (like Byjus) with assessments, tests and live classes having content from KG to K-12. Revenues have grown from 28.7 Cr to 36.2 Cr (26%) and losses have reduced from 41 Cr to 23 Cr. They seem far, far behind Byju’s. Not sure if they can carve a niche for themselves.

Canvera
Main source of revenue comes from Wedding album printing, design of albums, portfolio microsites for photographers in this space, lead generation (Classifieds comes into play). Revenues down from 56 to 49. Losses down from 33 to 27.

Mydala
Seems to be a couponing site. Not sure what the business model is here. I thought coupon sites were dead and buried for good.

Happily Unmarried
This seems to be a very interesting business with a great online presence (Check out their facebook page for eg.), although its an offline business. It’s a range of boutique grooming products for women and men, with some modern, smart marketing strategies. (Think Paper Boat).

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Shareholding, Financials, Valuation etc.
Promoters held about 50% in 2007 and now hold about 42%. MFs hold about 15%. FPIs hold about 33%. Only about 2% is with small retail shareholders. There has been quite a few dilutions along the way – share capital was 21.84 Cr in 2006 and is now 121 Cr.

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The company has zero debt and has always had zero debt in the last 11 years which is an excellent thing. The cash flow from operations (standalone) has always been positive and growing. Oh and they have about 1250 Cr cash on the balance sheet.

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Negative working capital is another thing to note as well. The management seems ethical and open. Their approach to me seems very much like Peter Thiel in trying to build businesses that go from zero to one. In that respect, I really hope they merge Zomato with Swiggy.com sooner and stop the bloodshed there.

It is not going to be easy value anything here other than naukri.com since they have free cash flow and perhaps 99acres.com. This is the sort of space where growth can be exponential or bust, and valuations have in the past taken hilarious proportions. I don’t want to venture into doing anything silly like that.

Back of the envelope calculations make me value Naukri.com at about 7000 Cr.
Nomura thinks Zomato was worth $1.4 billion. That’s about 9000 Cr – Info Edge’s stake could be then worth about 4000 Cr.
Matrimony.com is valued at about 1800 Cr – Jeevan Sathi could perhaps be valued at 500 Cr.
Housing.com was valued at $75 million (500 Cr) and its traffic share is much lesser than 99acres.com. Let’s go with 1000 Cr here for 99acres.
The rest could amount to nothing as of now although they may raise funds at fancy valuations. The current market cap might be expensive by anywhere between 10-50% but that’s not abnormal in the tech industry.

Key Triggers/Opportunities
Near-term: Zomato – Swiggy merger, Zomato breakeven, 99acres.com performance post RERA/demonetisation, Policy Bazaar’s growth
Long-term: India doesn’t have an Amazon, Netflix, Google or Facebook. It has very few tech products and our services companies don’t seem intent in risk-taking and keep piling up cash until kingdom come. In that aspect, Info Edge seems to be a company which has the next-gen start-up mindset and may in fact end up with a few India-centric tech monopolies in the future. Think of Amazon in the 90s.

Risks

1. IT/ITES seems to contribute 50% of the naukri.com revenues. Any adverse impact to this sector could potentially hurt revenues
2. Tech valuations are at most times a joke. Most tech businesses have had a significant mark-down from 2015 heydays. There is no saying where they will be 5 years from now as rates rise.
3. With the financial deregulations, it’s easy for a SoftBank or Alibaba to pump cash and fight pretty much any tech business it fancies, even to complete destruction.

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@kanwalpreet18 wrote:

Bandhan Bank IPO is out. Issue details along with business summary and investment rationale is given blow. Most of this data is from the Red Herring Prospectus along with my notes in investment rationale and risk sections.

Issue details:
Public issue of 11.93 crores shares including
9.77 crores fresh issue; and
2.16 crores offers for sale by IFC and IFC FIG
Dates: March 15 – 19, 2018
Price band: 370 – 375
Total issue capital (higher end): 4473 crores
Objects of issue: Augment Tier – 1 capital
Post-issue market cap: 44700 crores
Promoter holding for BFSL: From 89.6% to 82.3%
Anchor Investors: Amansa Holdings, ICICI Prudential, Neuberger Berman, Nomura Fund, HDFC Standard Life, Birla Sun Life, Citigroup, Aberdeen, SBI Life and Kotak Mahindra.

Business Summary:

History:
• 2001 – Bandhan Konnager formed as NGO providing microfinance services
• 2006 – BFSL started
• 2009 – NGO transferred microfinance business to BFSL
• 2015 – BFSL was largest microfinance company by number of customers and size of loan portfolio when it transferred assets to Bandhan Bank

Management:
 CEO/MD – Chandra Sekhar Ghosh (only person with equity holdings)
 CFO – Sunil Samdani
 CS – Indranil Banerjee

Shareholding (prior to issue):

Overview:
• Commercial bank focused on serving under-banked and under-penetrated markets in India
• Incorporated in Dec 2014 and began operations in Aug 2015 when BFSL transferred entire microfinance business
• Network growth –
o 2022 doorstep service centres (DSCs), 501 branches and 6.77 mn customers In 2015 to
2633 DSCs, 877 branches and 9.86 mn customers by Dec 2017
o 2.13 mn general banking customers added since 2015
o Despite extension, 56.37% of branches in East and Northeast India
• Assets/Liabilities
o Deposits and advances stood at 25293.96 crores and 24364.39 crores
o Advances to deposits ratio at 91.46%
o Retail to total deposits at 85.07%
o NIM of 10.34% in 2017
o Assets
 96.49% gross advances are priority sector lending (PSL) compliant
 Interest earned is 90.48% of total income.
 6.78 % income from Priority Sector Lending Certificates (PSLCs) as of nine months Dec 2017
o Liabilities
 Current accounts, savings accounts (CASA) make up 33.22% of total liabilities and can be withdrawn any time.
 70.62% of term deposits of tenure less than 12 months
• Profitability and return ratios
o RoE of 25.55% in Dec 2017
o RoA of 4.07% in Dec 2017
o Revenue of 4320 crores and PAT of 1111.95 crores in FY 2017 => PAT margin of 25.7%
• Credit ratings
o NCDs: AA –
o Term loans: AA-
o Certificates of deposits: A1+

Strengths:

1. Operating model focused on serving underbanked and underpenetrated markets
    17 years history in microfinance - was largest MFI by asset size when it became bank.
    Enjoys brand recognition, network and low cost of funding due to banking deposits
    Loans given to women (considered more risk averse than mean) who form self help groups of 30+ members
    Incremental higher loans given to individuals with good repayment history
    Reach customers through cost effective DSCs which are low overhead banking outlets
    29% branches in unbanked areas against RBI requirement of 25%
    96.49% of gross advances are microloans, considered PSL against RBI requirement of 40%

2. Consistent track record
    Since March 2016, gross advances grew from 15578.44 crores to 24364.39 crores and number of customers grew from 6.77 mn to 11.99 mn
    Deposits grew from zero in Aug 2015 to 25293.96 crores by Dec 2017
    Weathered trouble in 2010 to microfinance industry and rose from 4th largest to largest position in microfinance industry.
    Despite demonetization, GNPAs in March 2017 stood at 0.51%. In Dec 2017, GNPAs at 1.67%

3. Extensive low cost distribution network
    Hub and spoke model whereby 3-4 DSCs are connected to single bank branch.
    Ability to increase penetration to unbanked regions using DSCs
    DSCs have lower overheads as employees use handheld devices connected to Internet to process loan applications instead of fully fledged systems at bank branches
    Cost to income ratio at 35.38% as of Dec 2017, among lowest in industry

4. Customer-centric approach
    Offer range on microloans including educational and health. Deposits such as daily and recurring.
    All micro loan customers are insured so if they pass away family does not have to take burden.
    Pass on benefits of low cost of funds. Reduced interest rates on micro loans from 22% in August 2015 to 18.5% in Dec 2017

5. Consistent performance and robust capital base
    NIM at 9.86 %, RoA at 4.07%, RoE at 25.55% as of Dec 2017
    Increase in non-interest income due to treasury and PSLC contributions
    Share of retail deposits increased from 37.95% in March 2016 to 85.07% in Dec 2017.
    CASA ratio and large percentage of retail deposits provide low cost funding
    SLR, CRR and CAR at 24.9%, 4.12% and 24.85% as against requirements of 19.5%, 4% and 13% respectively.

6. Experienced and professional team
    MD/CEO Chandra Shekhar Ghosh has 37 years of experience in microfinance
    Members of senior management have 23.9 years of experience in financial services industry
    Hire employees from villages to better relate with customer base
    Eight training centres in India

Strategy:

1. Maintain focus on micro lending while expanding to retail and SME lending
    Develop pan India network in both microfinance and retail lending
    Reduce dependence on East and Northeast India
    Open branches in affluent areas and urban areas to improve deposit base while increasing opportunities to cross sell products

2. Continue to strengthen liability franchise
    Focus on source of low cost funding by seeking retail deposits as opposed to wholesale deposits as bank believes retail customers are more loyal.
    Selectively open branches in urban areas where potential of deposit collection is higher

3. Boost share of non-interest income
    Leverage strong PSL compliant portfolio by selling PSL certificates to non-PSL compliant banks
    Distribute third party insurance and mutual fund products
    Inward and outward remittances services

4. Enhance digital platform to improve customer acquisition and retention and reduce costs

5. Enhance retail banking systems and procedures by training staff initially developed for microfinance to carry out duties in retail banking

Financial statements:
Balance sheet:

Profit and Loss

Valuation with industry comparison:

image.png554x686 59.4 KB

*Figures in red are values estimated/calculated by me

Industry comparison:

image.png512x672 43 KB

Investment rationale:

1. Access to low cost of funding from retail deposits likely to ensure superior NIM against peers in private banking. Also poised in industry better than NBFCs that do not have access to deposits.
2. Majority of client base is currently in Eastern and Northeastern India where access to retail credit is poor compared to other parts of the country such as Western and Southern India so long runway ahead.
3. Management has a proven track record in microfinance and should be able to leverage its hub and spoke model, especially in Central and Northern India where access to microloans is low.
4. Capital adequacy ratio already very good. Net proceeds will improve this further. Any hit from increasing NPAs to ballooning loan book in the last two years should be contained without threat to operations overall.
5. Ability to gain non-interest income from selling PSLCs and third party distribution of mutual funds and insurance products is added positive.

Risk factors:

1. Since its operations as fully fledged bank began in Aug 2015, it has limited experience in general banking
2. Substantial portion of operations in East and Northeast India - any regional problem will destabilise operations

• 65% branches in East and North-east India
• Region contributes to 81% of total advances

3. Competition from players in both traditional banking and microfinance
4. Asset liability mismatch

• May rely on funding options with short term maturity for extending long term loans which may lead to negative asset liability gap

5. Majority of net advances (87.56%) are unsecured microloans extended to customers with little credit history and greater propensity to default.
6. Inability to preserve asset quality as geographical presence increases and customer profile changes.
7. Exact usage of net proceeds has not been outlined – may be used for organic/inorganic growth and/or improving capital adequacy
8. Seasonality in loan disbursements in third and fourth quarter of year due to agricultural conditions
9. Cases of embezzlement, fraud and theft in microfinance network
10. Key man risk of CEO/MD who has almost single-handedly grown the business
11. Too many changes in key management personnel in the last 2 years

Disc: Investing in IPO to maximum extent in retail section

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@SSRN wrote:

Surprised to find that CDSL doesn’t have a dedicated discussion thread. Would like to know the views of investors considering the recent correction despite good results and stable cash flows and not so unreasonable valuation.

The following news may also be playing its part

Any idea how this will pan out.

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@KC1986 wrote:

Poona Dal and Oil Industries Ltd. is an India-based company. The Company is engaged in the oil and food grains industry. The Company operates in two divisions: oil division and agro division. Oil division includes oil, by products and others. Agro division includes pulses, processed pulses, processed pulses flour and others. The Company had a licensed and installed capacity of 135,000 metric tons of Refinery, 90,000 metric tons of solvent, 30,000 metric tons of vanaspati and 45,625 metric tons of pulses.

SEGMENT

The operations of the Company falls into two segments viz. oil division & agro division. The oil division consists of extraction & refinery process & the agro division consists of manufacturing of dal & processing of flour.

PRODUCTS

The group is selling all its products under its own brand name viz HIRA, TIGER, SURAJ & MOTI. The brand name is very popular in the state of Maharashtra and other neighboring states. The group is enjoying excellent relations and is commanding a prestigious reputation with the banks with whom the group companies are banking. The group is also enjoying excellent reputation in the market of Maharashtra and neighboring states.

LOCATION OF PLANTS AND ITS MANUFACTURING CAPACITY

The factories of the Company are located at E 2, Kurkumbh MIDC, Kurkumbh, Tal. Daund, Dist. Pune - 413801

With the state of art refinery having capacity of 300 MT per day and with efforts of sound technical staff Employees and Workers who are able to create their own brand image of products in the market vis.
• HIRA Refined Sunflower SOYA OIL
• TIGER and SURAJ in Refined Soyabean OIL
• MOTI in RBD Palm OIL
• 111 super Palm Oil and,These products are mainly available in two main segments one Bulk Pack having pack size of 15kg, 15ltr in Tins and Jars
• Consumer Packs available in 500 ml Poly pack, 500 ml Bottle 1000 ml Poly pack and Bottles and 5 litres jar and in this segment our products are distributed through strong network of distributors in a state of Maharashtra and Neighboring state
• TIGER is our most popular and trusted brand in soyabean oil in various pack sizes 1 ltr and 500 ml poly pack and jar 2 ltr jars
• RBD palm Oil Is available in Brand name MOTI available 1,15 kg and 15 ltr
• 111- is a super refined palm oil which is specially manufactured in our refinery in short span of time it has gained brand image because of it quality this is sold in loose form along with refined soyabean oil in tankers
• The products which are well reputed in the market for their consistent good quality and competitive pricing. The brand name enjoys a premium in the markets and well known among the masses.

CONSUMPTION AND IMPORT STATS of EDIBLE OIL

Between 2008/09 to 2015/16 the domestic production decreased by 8% whereas consumption increased by 48% and to cater that import increase by 78%. So the domestic edible oil producer are in sweet spot with the rising effort from the govt in the food processing and agro sector. It has been estimated that a mere 4% increase in the per capita consumption adds around 0.8 million tonnes of demand each year.
FINANCIAL
A Debt Free Company with 35 Cr Market Cap having 70 Cr Cash in account is a big plus in this sector where lot of other it’s peers are struggling with high debt. ROE and ROCE stands at 31% and 46% respectively . Receivable days at 14-15 at average is very good with Free Cash Flow stand at 52 Cr. Although high Working Capital Cycle (27-30 days) is a cause of concern for this industry but from the industry segment perspective it is very normal with Inventory Turn Over days at 10.
RISK

1. For the oil year 2017-18, there is scarcity in sowing and crop damage due to flooding has increased in the major growing regions. These factors have contributed towards a reduction in Soybean crop size. As compared to the last year, when the Soyabean oil output was 12 million tonnes, this year it is forecast at below 9 million tonnes. So we can see input cost will be on the higher side which will impact the margin. Also any unfavourable weather condition will impact this industry adversely.
2. If the Govt will raise the MSP then it will be a cause of concern which is very much on the card.
3. With the raising input cost and due to heavy domestic consumption it will be tough for the Govt to impose a high import duty on edible oil hence no protection can be given to the domestic industry. Although in the last quarter the Center has hiked the import duty on imported oil to protect the farmer so if this will be the trend then we can expect some good future for this segment.
4. Another concern is the management push/aggression behind the growth of this company. Since I found no major capex done after FY15 hence it will be hard to determine their growth strategy behind the business. Pradip Poonamchand Parakh the MD of the company not much is known apart from is very conservative attitude towards the business. [Urging any senior VP member to shed some light on this ]
5. Also the Promoter Group is into Real Estate business [Pdbm-poona Developers Private Limited] which is a diversified one and can be most closely compared with it’s peer like BCL. So not very sure about their intention .
   Attaching the Financial ration analysis data sheet[source screener data.]Poona Dal & Oil.xlsx (131.9 KB)

[Discloser :- Invested with a tracking position so views might be biased.]

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@vipinsays wrote:

Very impressive last 3 yrs for company
Both in terms of growth n improving margins
High promo stake of 72%
Negligible debt
But valuations high

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@Ravindra83 wrote:

My thought on Fortis Healthcare. I believe stock has priced in all the negatives and is set for re-rating in next 12months

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@Harsh04 wrote:

				VARDHAMAN TEXTILES

DATE – 02 FEB 2018

Industry :
Over the last decade, the global textile and apparel trade has been growing at a CAGR (compound annual growth rate) of 5.6 %. In 2014, it stood at US$ 820 billion. Apparel categories had a larger share of 56% while textiles had the remaining share of 44% in the overall trade. The global textile and apparel trade is expected to reach US$ 1,600 billion by 2025. It is projected to grow at a CAGR of 6.3% over the next decade. The Indian textiles industry, currently estimated at around US$ 120 billion, is expected to reach US$ 230 billion by 2020
Textile plays a major role in the Indian economy. It contributes 14% to industrial production and 4% to GDP. With over 45 million people involved, it is one of the largest source of employment generation in the country. The textile industry accounts for nearly 15% of India’s total exports.

Company :
Products – Fibre, Yarn, Sewing threads, fabric, garments.
They have presence in markets like the European Economic Community, Canada, China, Japan, South Korea, Mexico, Brazil, Mauritius and the Middle East. Also emerged as a preferred supplier to global garment makers like Tommy Hilfiger, Esprit, Gap (including brands such as Old Navy), Zara, H&M, Mango, Benetton and Arrow, among others.
Future - Currently, they operate at near 100% utilisation levels in the yarn business, catering to diverse customer requirements. They are also consolidating the fabric business and are focusing on expanding capacity in this space. Going forward, they have a planned capital expenditure of ` 2,500 crore over three-four years towards the ongoing schemes at Baddi, Himachal Pradesh, as well as proposed expansion in Satlapur and Budhni in Madhya Pradesh and modernisation in other units.

Subsidiaries, Joint Ventures and Associate Companies:

1. VMT Spinning Company Limited (VMT): This subsidiary of the Company is a Joint Venture with Marubeni Corporation and Marubeni Hong Kong and South China Limited of Japan. The Revenue from operations of the company has increased to 19,112.99 lakhs from 15,663.72 lakhs in the last year. The Net Profit of the Company after comprehensive income worked out to 826.11 lakhs as against 738.97 lakhs in the previous year registering an increase of 11.79%

2. VTL Investments Limited (VTL): This 100% subsidiary of your Company is engaged in the business of investment. The earnings of the company mainly comes from dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of 975.12 lakhs as compared to 357.01 lakhs in the previous year.

3. Vardhman Acrylics Limited (VAL): This subsidiary of the Company is engaged in the business of manufacturing of Acrylic Fibre. Presently, the Company holds 70.74% shares in this subsidiary. During the Financial Year 2016-17, VAL recorded Revenue from operations of 36,842.96 lakhs against 44,759.18 lakhs in the previous year. The net profit of the company after comprehensive income worked out to 4,099.14 lakhs as compared to 4,080.18 lakhs in the previous year

4. Vardhman Nisshinbo Garments Company Limited (VNGL): This subsidiary of the Company is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing men’s shirts. During the year, the Revenue from Operations of the company was 5,828.84 lakhs as compared to 5,799.22 lakhs in the previous year. The company incurred a Net Loss of 53.88 lakhs as against a net profit of 153.36 lakhs in the previous year.

5. Vardhman Yarns and Threads Limited (VYTL): Vardhman Yarns and Threads Limited, Joint Venture with American & Efird Global, LLC (A&E), is an Associate Company of the Company. It is engaged in the business of Threads Manufacturing and Distribution. During the year, the Company has sold its 40% stake in VYTL to A&E and is now holding 11% stake in VYTL. A&E is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were 77,857.87 lakhs as against 72,863.26 lakhs in the previous year registering an increase of 6.85%. The Net Profit for the year after comprehensive income worked out to 9,909.48 lakhs as compared to 8,991.66 lakhs during last year registering an increase of 10.21%.

6. Vardhman Special Steels Limited: Vardhman Special Steels Limited (VSSL) is an Associate Company of the Company. The Company holds 31.39% shares of VSSL. During the year, the Revenue from Operations of the Company was 75,312.90 lakhs as compared to 72,551.41 lakhs in the previous year. The Net Profit for the year after comprehensive income worked out to 1,891.01 lakhs as compared to 405.12 lakhs in the previous year. 43 DIRECTORS’ REPORT ANNUAL REPORT 2016-17

7. Vardhman Spinning & General Mills Limited: Vardhman Spinning & General Mills Limited (VSGM) is an Associate Company of the Company. The Company holds 50% shares of VSGM. It is a trading Company dealing in the business of Cotton and Fibre. During the year, the Company has not traded any goods. So, the Revenue from Operations is Nil for the Financial Year 2016-17. The Company incurred a Net Loss of 6,851 as against a net loss of 27, 292 in the previous Year.

image.png944x476 36.4 KB

Valuations :

CMP = 1300
M.Cap = 7480 Cr
Enterprise Value = 9610 Cr
Debt to Equity ratio = 0.52
PEG Ratio = 0.29
PB x PE = 19.15
CROIC = 20 %
RoE = 18%

EPS growth last 5 yrs at CAGR of 24%
Sales growth last 5 yrs at CAGR of 4%

I have used Ben Graham’s formula to arrive at the intrinsic value.
The original formula from Security Analysis is :
V = EPS x (8.5 + 2g)
where V is the intrinsic value, EPS is the trailing 12 month EPS, 8.5 is the PE ratio of a stock with 0% growth and g being the growth rate for the next 7-10 years.

V = 109.1 x (8.5 + 2x5)
V = 2018

Management Quality :
Mr. S.P Oswal is the MD. I have googled with the names of Directors and company for any frauds or SEBI notices. No such cases are reflected.

Risk Analysis :

1. 35% of the total sales of the company is exports. Hence company is exposed to currency risks.
2. Raw material cost is about 50% of the sales. Hence any increase in cotton prices will put pressure on the margins. This margin risk is also evident from that last 4 quater results which show OPM reduced to 12% in Sep 2017 from 21 % in Dec 2016.
   The cotton prices are said to go up in this year.
   http://www.thehindubusinessline.com/economy/agri-business/cotton-prices-seen-holding-firm-in-2018-on-slow-arrivals/article10001997.ece
   https://www.icac.org/Press-Release/2018-(1)/PR-1-2018-Global-Consumption-Increasing
3. Textile industries are capital intensive by nature and hence bottomline may squeezed due to fixed capital costs and rising cotton prices.

Disclosure : Not Invested. Tracking. Intend to invest soon.

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@kapilgokharu wrote:

ORIENT GREEN POWER COMPANY LTD
Market cap as on 05.02.2018 on BSE is 803 Crore

The company was incurring the huge losses in the past three four years. The Company came with IPO around 55 somewhere around 2010. The company has created 425 MW capacity in wind energy in 96 MW in the biomass power. Company was incurring huge losses in fast 3-4 years the stock price went down from the ipo price of 55 to Rs. 10.86 on 05.02.2018.

There were three reasons for the losses

1. The losses from the biomass business
2. Unavailability of grid in the Tamilnadu for evacuation of wind power. (Availability around 75%)
3. High interest loans

Now the situation is currently as follows

1. Company has sold all the loss making biomass power plants
2. Grid availability in Tamilnadu has improved more the 95% in last six quarters.
3. Higher interest loans taken for biomass business has been transferred and remaining loans have been restructured. There is still scope for improvement in the interest cost. For remaining details please see the investor presentation

The company has reported the financials for the Q3 2018 on 25.01.2018. In 9 months the company has generated the cash profit from wind business of Rs. 132 crores (94 crores depreciation + 38 crores of profit before tax) (Refer page 18 of Investor presentation)

Now the almost all the biomass assets are sold company will be only left with the wind business.
Company will report the following estimated cash flow from the wind business in FY 18
Rs 152 cr (Rs 132 crores for 9 months and 20 crores assumed for quarter 4)

Company can report the following cash flow from wind business in 2019
Rs 152 cr + 20 crore assumed in interest saving which looks easily feasible 2% on 1000 crore + 25 crores assumed from the newly commissioned wind energy capacity which will go live in April 2018
So total comes to around 197 core

So 197 crore cash flow on market cap of 803 cr, which looks cheaper to me.

There are some other positives which can be found in the investor presentation and con call scripts.

Risks
Grid Unavailability in Tamilnadu

Disclosure Invested around 2% of My net-worth in the stock around 10.50
Con call details
Investor Presentation

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@kanwalpreet18 wrote:

Business Summary:

• Established in 1993, SDBL is a Bhopal based company engaged in manufacture of beer and IMFL.
• As of March 2017, it had total capacity of 59200 KL (kilo litres) of beer and 5400 KL of IMFL.
• Its product portfolio includes beer, whiskey, rum, brandy and vodka.
• 89% of topline is derived from beer. Company has three brands that sell more than 1 mn cases (~9000 KL) per annum – Hunter, Black Fort and Power Cool.

• Sales as of Dec 2017: Hunter – 21.2 lakh cases, Black Fort – 15.6 lakh cases, Power – 17.1 lakh cases

• Hunter and Woodpecker brans are supplied as draught beet to major hotels in Madhya Pradesh and Chhatisgarh.
• A number of key expansion measures are currently underway (look at section below)

History:

• 1994 – Incorporated and listed on BSE. Black Fort and Legend brands with depots in Delhi and Chandigarh
• 1996 – Commercial production started with 10000 KL of beer and 5400 KL of IMFL, expanded beer capacity to 18900 KL
• 2003 – Expanded capacity of beer from 18900 KL to 23800 KL
• 2007 – Expanded beer capacity to 29200 KL
• 2010 – Expanded beer capacity to 59200 KL
• 2012 – Launched Power Cool beer
• 2013 – Launched Whiskey Milestone 100 and Vodka White Fox
• 2016 – SOM allowed to supply rum and beet to Canteen Store Depot (CSD) pan India
• 2017 – Set-up brewery in Karnataka through subsidiary Woodpecker Distilleries and Breweries Pvt. Ltd.

Management:

 MD – JK Arora
 CEO – Deepak Arora
 DMD – AK Arora
 Nilojit Guha – President, Sales and Marketing

Shareholding:

• Promoter shareholding – 23.17
o JK Arora – 6.61%
o Som Distilleries Pvt. Ltd. – 11.01% (JK Arora has 69.32% stake)
o Aalok Deep Finance Pvt. Ltd – 2% (JK Arora has 89.56% stake)
• Institutional holding - Nil

Industry Overview:

• Per capita consumption of alcohol in India is one of the lowest in the world – due to social stigma, high government interference and high taxes
• Beer industry is mainly concentrated in Southern states of India with market share of these states at 50%, mostly due to hot climate throughout the year. Some seasonality in sales of beer.
• Industry is strongly skewed towards IMFL. Among beers, strong beers are preferred -

• Alcohol is taxed by total volume, and not by volume of alcohol. Thus in comparison, on basis of alcohol volume, beer is taxed higher than IMFL.
• Thus IMFL has greater share (67%) in alcohols in India vs beers (26%). This is skewed compared to other countries. Beer market valued at Rs. 448 billion in 2016. Expected to grow at 8.6% for next 5 years. IMFL market valued at 2040 billion and expected to grow at 8.2% in next five years.
• Strong beers are seen as more value for money by consumers. This is in contrast to other countries where light/premium beers are preferred.

• Ban on direct advertisements and promotion imply that for a brand to become successful it has to invest in surrogate advertising such as glasses, mineral water, music items etc.

Key Developments:

• Woodpecker beer (in Mar 2017) and other four IMFL brands (in Nov 2016) allowed supply to CSD in March 2017. Entered into bottling agreements with Jagajit Industries and Oakland Bottlers in Apr 2016 to cater to CSD and Northern market.
• Launched new flavours in RTD vodka White Fox.
• Invested 40 crores equity in subsidiary in Karnataka. Capacity expected to go online from end of March 2018.

• Total outlay of 115 crores out of which 100 crores already incurred.
• Already started supply of Black Fort and Hunter beers in June 2017 width of distribution (WOD) of 30% across the outlet universe.

• Signed MoU with White Owl Distilleries in August 2017 to brew and bottle their craft beers -
• Entered Maharashtra market in Nagpur in Feb 2018.
• Approved decision to raise capital of 150 crores in March 2018.

• Also approved Employee stock option place to grant 5 lakh options convertible to one share each.

• Recruiting top management to strengthen sales

• Shirish Pilankar appointed as head of sales West. His last assignment was with Bacardi as Cluster Head Western region.
• Appointed Nilojit Guha as President Sales and Marketing. He was earlier Director Sales with SAB Miller. To focus on sales in Southern and Eastern markets.

• As of annual report 2017, in the process of implementing ERP across manufacturing sites and depots.
• Beer brands have been approved by USFDA for supplying beer to USA and trial orders sent.

Strategy:

• Focus on CSD and increase CSD sales share from 5-6% to 15-20%. Increase from 16 to 36 outlets.
• Diversify geographically into growth markets such as Karnataka, Kerala, Andhra Pradesh and increase sales in legacy markets such as Delhi and MP-Chhatisgrah
• Decrease seasonality in revenue from beer by increasing sales of IMFL and RTD drinks.

Financial statements:

Balance sheet

Profit & Loss Statement

Investment rationale:

1. Overall consumption theme of beer in India remains good. Per capita consumption of beer in India is low. While this is not expected to increase dramatically in the short term, the growth of premium brands in cities is a good growth opportunity.
2. Only listed player having both beer and IMFL products. These may complement each other and reduce seasonality going forward.
3. Diversifying into key markets in South India (TN, AP, Kerala) where beer is widely consumed. Karnataka has 10% market share of beer in India.
4. Ventured into craft beer with White Owl. I see this as a potential market with opportunity to give competition to Bira. I have personally had these beers in Goa and found them to be very good, will post pics in next post.
5. Ability to sell to CSD is a positive. Company expects 15-20% of topline from this. I believe that is already reflecting with improved sales in last three quarters. Out of 36 CSD outlets, Som is catering to 16. Margins projected to be better.
6. Few home grown brands that have successfully scaled up to become national players in beer. This is due to regulatory setup. Ability to manufacture and cross-sell in different states is a major advantage.
7. Good financials - maintained EBITDA margins of 15% (except drop to 9% immediately after highway ban) and maintained a healthy balance sheet with gross debt to equity at end of Dec 2017 at 0.48. Dividend paying company with dividend payout ratio > 25%. RoCE at 14-16% for last 3 years.

Risk factors:

1. Industry wide risks
   • Highly taxed consumption item makes in unaffordable for a number of consumers.
   • High regulatory interference including bans that may disrupt operations suddenly. For example, in 2017 there was scare that alcohol would be prohibited in MP, but company came out with statement what Finance Minister of MP has clarified that Excise policy of 2017-18 does not have any fix plan for prohibition.
   • Unfavourable judgements such as the ban on alcohol near highways. Also the Constitution of India has Directive Principle (article 47) that states “…the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health".
   • State wise differences in regulations make it difficult to market and sell across states.
   • Difficulty in building a brand that catches the attention of the youth. Significant advertising and marketing costs might mar margins in the future.
2. Low promoter holding. Some sources say that some public shareholding is with distributors and other related parties, but this needs to be confirmed.
3. Promoter was super bullish in 2013 when they said they will double sales. Has only now started improving topline. I believe projections given by promoter have to be taken with a pinch of salt. Delay could have also been to legal matters as noted in point 7.
4. Working capital cycle has fluctuated in the past couple of years and was as high as 125 days in 2016. Also led to negative cash flows in previous years. In 2017 however, drop in receivables led to increased CFO.
5. Disputed statutory dues with respect to income tax stands at 6.38 crores.
6. While auditor noted that company had adequate finance control system, it suggested some steps to codify the system, document operations and segregate duties in AR 2017.
7. Company has struggled with legal issues in the past. Need to check whether any cases are pending. Legal guidance in this regard will be helpful. Some legal issues found online -
   • Copyright, design infringement filed by Carlsbeg and SAB Miller - https://indiankanoon.org/doc/87429194/, https://indiankanoon.org/doc/54757965/
   • Dispute over dues with MP State Industrial Development Corporation – https://indiankanoon.org/doc/87429194/. It came to a point where court asked for Som to be liquidated and then Som settled outside court. As I understand after settling issue, Som further appealed the decision as unjust – and most recent order is here - https://indiankanoon.org/doc/59356510/

Other inconsistencies:

1. Annual report 2017 says that interest due but not paid was to tune of 1.21 crores. Don’t understand why.

2. As per annual report, CEO/MD salary is Nil. However senior management takes salary up to total 2.56 crores. This must be out of total 7.14 crores listed as employee cost. Total employees on rolls is 106.

image.jpg561x522 166 KB

Disc: Not holding presently.

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@shreys wrote:

Veljan Denison, is a relatively unknown company in the capital goods industry. It manufactures hydraulic pumps, valves, motors and power packs.
It derives almost 85 percent of its sales from hydraulic pumps. The promoter group holds roughly 75 percent of the shares. The company is led by Mr. V C Janardan Rao. The leadership team is well remunerated which gives me comfort. A high promoter holding could mean that their fortune is hinged on the performance of the company.
Financials:
March 2017:
Sales:88.6 crores
Net Profit:14.53 crores
March 2016
Sales: 85.27 crores
Net profit: 12.54 crores
March 2015
Sales: 82.7 crores
Net profit: 13.04 crores
March 2014
Sales: 72.17
Net Profit: 8.44 crores
March 2013
Sales: 73.02 crores
Net Profit: 9.95 crores
Comments: As is evident from the numbers postedo their growth over the past 5 years has been anemic. Unimpressive.
However, most companies in the capital goods sector have been experiencing poor growth. But, when times get better companies like Veljan Denison will be beneficiaries.
Financial ratios:
Return on Equity:
13.52 % ( March 2017)
Return on Capital Employed:
15.41 % ( March 2017)
SWOT Analysis:
STRENGTHS:
1)53 years of experience in the fluid power industry.
2) Led by a technocrat.
A person who has a nuanced understanding of this industry.
3) Good product quality
WEAKNESS:

1. In my opinion the biggest weakness is it a relatively small size.
   The threat of bigger companies snatching their market share looms.
   But, their small size could also be a blessing in disguise. It’ll be easier for them to rudder the company in the right direction and be sensitive to the economy’s demands.
   OPPORTUNITIES:
   Instead of quoting numbers I’ll share anecdotes. Fluid power is everywhere- Highway maintenance vehicles, military aircrafts, landing gear, cranes, spacecrafts etc.
   Humongous opportunity. As the economy grows the requirement for these goods and auxiliary services will increase substantially.
   THREATS:
2. Cheap imports flooding Indian markets
3. Price war with larger companies
4. Emergence of Chinese and Italian companies
   Comments:
   At current valuations and a cursory look at their past shows that the company has been a decent performer.
   In a market where there’s a dearth of sanity in valuations Veljan Denison seems like an oasis.
   Decently priced and it could be a play on India’s growing economy.
   Now, to be frank, what drew me towards this company was their marine division.
   I’ve been a ships fan boy. And, knowing that they prepared systems for controlling ships they swept me off my feet.
   Their marine division may not be a major contributor to their business but I respect the work that goes into developing such complex technologies.
   marine_brochure.pdf (1.4 MB)

Disclosure: Not invested yet.
Evaluating the company.

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@RajeevJ wrote:

Shreyas Shipping, a transworld group Co. is not a conventional shipping Co. Being mainly into Indian coastal shipping, it is largely unaffected by the movement of the world Contex time charter shipping Index.

Transporting goods by sea is at least twice as cheap when compared to other modes like road & rail. It is also hugely environment friendly by reducing both the traffic as well as pollution on the roads. What has been lacking is adequate infrastructure, something that is set to change with the Govt.’s ambitious Sagar Mala project which will give a huge fillip in developing new ports as well as other infrastructure around it. Shreyas is set to be a major beneficiary as coastal shipping gains momentum.

The potential for coastal shipping is tremendous. In addition to its regular business, the Co. recently tied up with RINL for the transportation of its steel products from its factory to its warehouses in different parts of the country. Attaching a note which also throws more light on the Co’s fleet & types of ships.

The Co. has been doing well in the current year, having added three more ships taking its current tally to 13. The full impact of this will be seen in Q4. Its operating margins are around 20% & the mgt. is quite optimistic of maintaining them. Q3 was marginally impacted with the new ships gradually being deployed. It could do Sales & PAT of about 635 Crs & 85 Crs respectively for 2018-19 on a stand alone basis.

The Co. had a fully owned subsidiary Shreyas Relay Systems Ltd., which was the logistic arm looking at end to end connectivity for its customers. Last year, Relay acquired the business of Balaji Shipping, another company of the same promoters, based out of UAE in exchange of 70% stake in Shreyas Relay Systems, thereby making Shreyas Relay an associate. This could potentially be a win-win for both as Balaji, which owns containers, runs a very successful asset light model business (does not own ships). Shreyas’ gains from its 30% stake in Relay could be twice its last year’s gains of 6 crs when it was fully owned. The consolidated PAT for the Co. for 18-19 could be in the vicinity of 100 crs. The Co. trades at a current market cap at about 1100 crs.

The Promoters merging Balaji Shipping with Shreyas through Relay is perhaps being done with an eye on the market cap as from now on profits from Balaji will also be indirectly reflected in the Co. The promoters hold a high 73.25% stake in the Co. This was perhaps why Balaji could not be merged with the Co. directly as the promoter stake would have gone beyond the stipulated 75%. Perhaps at higher valuations, the promoters may merge both the Co’s, & dilute equity at higher levels.

The main concern to the story is the pace at which the infrastructure for rapid growth of coastal shipping can be developed. Another concern is that coastal shipping as a concept is only gradually gaining traction. These concerns however are not coming in the way of the Company’s performance in the current year as also in the foreseeable future as is evident from the results of the last few qtrs.

(in Cr.)	17-Dec	17-Sep	17-Jun	17-Mar	16-Dec	FY 16-17
Income Statement
Revenue	140.73	123.51	117.86	95.97	96.68	370.16
Other Income	2.6	0.93	1.43	2.27	0.26	5.12
Total Income	143.32	124.44	119.29	98.24	96.94	375.28
Expenditure	-118.3	-99.34	-95.03	-106.89	-79.21	-352.3
Interest	-3.79	-2.67	-2.75	-2.44	-2.6	-9.96
PBDT	25.03	25.11	24.26	-8.65	15.13	22.98
Depreciation	-6.03	-5.26	-4.63	-2.49	-5.87	-17.56
PBT	19	19.85	19.63	-11.14	9.26	5.42
Tax	-0.14	-0.15	-0.46	-0.51	-0.17	-1.35
Net Profit	18.86	19.7	19.17	-11.65	9.09	4.08
Equity	21.96	21.96	21.96	21.96	21.96	21.96
EPS	8.59	8.97	8.73	-5.3	4.14	1.86
CEPS	11.33	11.37	10.84	-4.17	6.81	9.85
OPM %	17.78	20.33	20.59	-9.01	18.34	6.21
NPM %	13.4	15.95	16.26	-12.13	9.4	1.1

Attaching the AR of the Co. for better insights into the Co.’s working.

Disc: Invested & looking to add.

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@harshb232 wrote:

Hi, I am new to this forum. So please pardon mistakes if any. I have been following this stock for quite a some time.
About the company (Copied form its website)
Mangalam Organics Limited (Formerly Dujodwala Products Limited) is a BSE listed company (stock code 514418) and are Prime Manufacturers of Camphor, Resin and Sodium Acetate. The company has a strong foothold in the pine chemicals Industry through its management who has been in the field for over 50 years. Mangalam Organics Limited is a government recognized export house with customers in Europe, USA, Africa and the Middle East

Manufacturing plant was established in 1996 at Kumbhivali, Mumbai. Over the years the company has successfully increased its production, augmented its sales reach and maintained its superior quality for which it is renowned. Going forward Mangalam Organics Limited will continue to strive and innovate to meet the growing requirements of its valued customers.

Mangalam Organics Limited employs highly qualified and trained personnel to monitor, maintain and grow its manufacturing and sales activities of our various products(Camphor, Resin, Sodium Acetate, etc.).
Story
Around 75% of the revenue is derived from the sale of camphor. Intially camphor was sold by the company as a commodity but recently company has ventured in to marketing and distribution of camphor as room freshner and Puja-ingredient. Response to this product is good from the consumers as can be seen from Amazon. Company has also recently announced buyback @Rs 230/share in whih promoters are not participating.
Disclosure: I have a tracking position in this stock

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@dcoolsam wrote:

Hi,
I am planning to create a low maintenance - High dividend yield portfolio for wife. Growth investing for wife is being taken care mostly using smallcap and midcap funds.

The purpose of this portfolio is to receive Regular Dividends and will never sell these stocks (thanks to LTCG - now no more switching , unless company story changes). My assumption is: as the companies grow, dividends would also grow. As per my study, if you had to invest in Indiabulls HF (good dividend paying stock) in 2011, by now in 2018, dividend yield would have been 20% (Price of 2011 / current dividend). This could be a good bills paying strategy for retirement.

I have decided to stick to only private companies. Government companies, many of them are paying excellent dividends (Coal India, REC, PFC, HindZinc, etc) However Govt may stop paying dividends anytime, or if the government changes, new govt may pay lesser dividends.

Filters:

1. Private Companies
2. Dividend Yield > 2%
3. Net profit > 100 Cr
4. Non-Cyclical
5. Consistent Dividend Paying
6. Rising Profit
7. Debt/Equity < 1
8. Average to Low Valuations
9. FCF > 0
10. Diversified Portfolio

Stock and Approx Dividend Yield (Equal weighted Portfolio):
OFSS 4.54%
CASTROLIND 5.61%
HCLTECH 2.48%
INDIGO 2.64%
INFY 2.27%
HEROMOTOCO 2.40%
IBULHSGFIN 2.18%
CARERATING 2.31%
ITC 1.86%
BAJAJ-AUTO 2.00%

Sector wise distribution:
Software: OFSS, HCLTECH, INFY
Housing Finance: IBULHSGFIN
Airline: INDIGO
Auto: HEROMOTOCO
Rating Agency: CARERATING
FMCG: ITC
Oil: CASTROLIND

In advice or suggestions, would be useful. Thanks

Disc:

1. Invested in IBULHSGFIN in my growth portfolio.
2. I am not a SEBI registered advisor and this is not an investment advice.

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@ankitgupta wrote:

Shivalik Bimetal Controls Ltd (Market cap - Rs.408 crore)
Shivalik Bimetal Controls Ltd (Shivalik) is engaged in manufacturing of Bimetals and Shunt Resistors. The company’s plant is located at Solan, Himachal Pradesh. The company is led by Ghumman and Sandhu families. Mr. NS Ghumman, the MD of the company, is considered to be one of the pioneers in bimetal industry. The company was earlier into manufacturing of cathode ray tube (CRT) but the demand for the product declined significantly post introduction of LED and LCD television.
The break up of sales over the past three years:

image.png703x122 2.94 KB

Shunt Resistors - I am more excited by the shunt resistor segment and will talk about it more. Over the past two years, whatever growth has happened in the company seems to be mainly on account of shunt resistors. Electronic beam welded (EBM) shunt resistors are primarily used to detect current. The company has developed shunt resistors which are used in battery management system (BMS) of electric vehicles. For BMS, shunt resistor play a key role because if the detection of current is not accurate, the current can damage the battery. Although, there are thousands of shunt resistor manufacturing companies in the world, from whatever research some of us have done, it seems that the ones which make shunt resistors for detecting low ohmic current (in micro amperes) and that have low temperature coefficients (able to withstand high temperature and not loose their current detection capabilities) are hardly few. From whatever research some of us have done, it seems that currently there is limited competition for the shunt resistor used in BMS with hardly few players manufacturing it. Furthermore, the key technology for shunt resistor manufactured by the company is the welding through EBM machines. Although, the contribution of shunt resistors in overall BMS is pretty small, but its is a very important part of it.
The company has an established relationship with one of the large semiconductor companies based out of US and it has been one of Shivalik’s biggest customers. The customer is a diversified electronics company and manufactures range of electronic components like diodes, resistors etc. The customer supplies shunt resistors to BMS manufacturing companies who in turn supply to electric vehicle manufacturers (Shivalik being a tier III OEM supplier to EVs). It seems that the company has been working on shunt resistors for a long time. As per some scuttlebutt, it seems that company has also been trying to supply directly to EV manufacturers. It takes years to get approval from large vendors due to their stringent qualification criteria. The company also has some of the important certification required for supplying such products for Automobile applications like TS 16949. It also follows standards outlined by the Automotive Electronics Council (AEC). Apart from usage in BMS of EVs, the shunt resistors are also used in smart meters used by electricity distribution companies. With increasing automation of cars, the usage of shunt resistor is expected to increase.

Bimetals: Bimetal refers to an object that is composed of two separate metals joined together. Instead of being a mixture of two or more metals, like alloys, bimetallic objects consist of layers of different metals. Bimetals have application where current or temperature detection is required. Bimetals are mainly used in circuit breakers, trippers, electronic alarms, fire alarm etc. The company is amongst the largest players in bimetals in the world. The company has established clients like Honeywell, Siemens, L&T, Havells etc. The company is one of the few (in some case the only one) local supplier of bimetals to many MNC companies. The sales of bimetals has largely remained flat over the past few years primarily as it is a proxy play on real estate which is facing headwinds over the past few year. Furthermore, the size of the market is also limited. The company is trying to make a headway into export markets but getting vendor approval takes time. The company is also working with defence for supply of some material (hardly any sales now) and disc grade bimetals (used in high end geyser).
The key thing in both shunt resistors and bimetals is to get an entry into an established customer which also acts as an entry barrier. The company’s major raw material is copper alloy which is being imported currently and is in short supply. The company seems to be able to pass on volatility in raw material prices and forex to its customer. On account of increasing demand of shunt resistor, the company has started working on a capex plan to triple its capacity in both bimetal and shunt resistor space.

What attracted me to the company?
• Proxy play of EVs: The company has been able to break into the EV space and the demand for the product can be exponential. Furthermore, there seems to be limited competition for the product.
• Technocrat promoters and focus on R&D: The company is mainly run by the family members of Ghumman and Sandhu family. Most of the family members have engineering background. Mr NS Ghumman himself is considered to be a pioneer in bimetal space. The company seems to have an established R&D and has continuously come up with new products (in the past the company was supplying CRT tubes and suddenly the demand fell of the cliff due to introduction of LED and LCD TVs, company however bounced back from the setback successfully). The company also has a lab to test its product
• Established customer base: The company has an established customer base in both shunt and bimetal segment. Such customer base does act as an entry barrier for other entrants.

Key Risks

• Valuations: This year, the company might do EPS of around Rs.3.5 and is thus trading at PE valuation of 30 times which is not cheap by any means. Furthermore, there seems to be a onetime write off of Rs.6 crore this year (just an assumption) of long term trade receivables (of CRT customers) from P&L out of which around Rs.2 crore seems to have been written off during H1FY18. Despite adjusting that, the stock is richly valued.
• Technology obsolescence risk and increase in competition: The company faces technology obsolescence risk for shunt resistors. Although, currently there are not many options available for detection of current in BMS, it seems that some other technology like Hall Effect Sensors can replace shunt resistors. Furthermore, the competition for the product might increase with increasing market size especially from Chinese and Korean companies who are leaders in semiconductor space.
• Key Man Risk: Mr. NS Ghumann is the key man driving the R&D of the company. Although, his two sons are involved in day to day operations and one of his sons is the plant in charge, the company does face the key man risk.

Key Financials

Profit & Loss account

image.png703x597 15.1 KB

Quarterly Results

image.png703x534 14.6 KB

Balance Sheet

image.png703x927 21.5 KB

(Disclosure: Invested. This is not a recommendation or an advice to purchase the stock)

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@annapurna wrote:

ALl,
Posting notes from various links for HSIL demerger for evaluations.

MUMBAI: Shares of HSIL could rally 20% in the next two-three months as the company decides to unlock value by demerging its consumer products, distribution and marketing business into a new entity Somany Home Innovation (SHIL). Typically, consumer products businesses are traded at a higher PE than manufacturing businesses, according to analysts…

HSIL will retain the manufacturing of all the building and consumer products in addition to manufacturing and sales of packaging products. The …

Read more at:
//economictimes.indiatimes.com/articleshow/61776391.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

HSIL is the market leader in the sanitaryware segment with 32% market share and is the second largest container glass player in India after HNG.

HSIL always traded at a discount to its peers despite its strong brand franchise, but now the situation will change, said analysts.

“The company’s RoE is lower than that of its peers, however HSIL is likely to see higher RoE expansion than peers, given its entry into a few high-margin segments and reduction in losses in consumer produc …

Read more at:
//economictimes.indiatimes.com/articleshow/61776391.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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@amitverma21 wrote:

CL educate among the largest organized listed player in education market which trading at deep discount. Though of initiating thread to jointly collaborate on this thread.
There is no moat in this business and hence it will rely on execution capability of management.
To me this opportunity looks very simple and it is available cheap to avoid deep analysis as the downside risks are very limited over 3 years period and upside is unlimited or at least 3 times . So i will present very basic framework and hypothesis. Here goes my simple checklist.

About the company: http://www.cleducate.com/about-us.html and analyst call transcripts to get hang of what they are trying to do.
I am more interested in their consumer business and hopefully it is biggest contributor in years to come and hence no point wasting time on analyzing their enterprise business which eventually they will realize and hive off.

CHECKLIST:

1. Honest Management with Considerable experience: YES
   IIM educated management who have built business in education due to passion. There is no sign of fraud or short-changing minority shareholders. They have built and scaled MBA CAT business in last 20 years.
   Integrity: Good till now
   Experience in scaling: 20 + years built CL to top 3 in MBA.
   Power of incentive: less - Share in company 15 % by Sathya and 15 % Gautam - less than usual
   Drive: Wants to build HDFC in Education. Focus on ROCE of 18 % or more
   Capital allocation capabilities: Average

2. CONSUMER MOAT BUSINESS WITH LONG RUN WAY- YES : Consumer business which can pass inflation to customers. The market is 37,000 crores growing more than 14 % annually.
   Porter:
   • Threat of substitute: Very less probability although technology disruption is another market segment where big Unicorns are already born like BYJU
   • Threat of new entrant: No entry barriers
   • Buyer Power: Consumers power low in dictating prices
   • Supplier Power: Although suppliers (teachers ) have reputation power but this can be overcome by making them partners in business (Franchisee ) model. CL is doing this
   • Competition rivalry: Competition is high but cost structures remain same for large players and everyone will have raise prices with inflation. Only very large players can distribute and spend on advertisements and expanding franchise centers. It takes lot of years to build reputation and hence acquisitions become very important to scale

    MOAT:
   

• Pricing power: Present
• High Switching cost: Once Customer signs up usually fees are taken upfront and batch start dates are time bound and hence switching cost are high with customers as well as Franchisees.
• Network Effect: Opening more centers across cities with more products has effect of availability bias and develops a kind of network effect both students and franchisees reducing cost of advertisements and customer acquisition cost
• Low cost producer: Not yet known
• Negative working capital: Yes and requires almost no capital to expand

3. DOES Company stay in it Circle of competence (Specialist): YES
   Yes, kind of although they did branch out in Schools business and Corporate side which are low ROCE business but it was done during recessions in CAT business.

4. Target Market size must be huge with respect to company size- YES

37,000 Cr growing at 14 % per annum.

Fy18	 	 	 	 
CL Student	Total Student appearing for test 	CL Market Share  	Addressable Market (50%)	CL Market Share  

GATE 25000 800000 3% 400000 6%
CAT 30000 300000 10% 150000 20%
civils 50000 1000000 5% 500000 10%
MBA 25000 200000 13% 100000 25%
CA 30000 300000 10% 150000 20%
Tutions & Engg 50000 2000000 3% 1000000 5%

5. FINANCIALS and RATIOS representing good business with reinvestment opportunities -YES

LOW leverage: YES: Almost zero debt in fact cash positive
HIGH ROCE: Test Prep is 21 % while publishing and Enterprise
WORKING CAPITAL: Negative and float to expand. Virtually needs no money to expand

Consumer Business
2018 2017 2016 2015
Centres 200 162 161 146
Owned 91 60 54 49
Franchise 109 102 107 97

Students 86636 88462 77953
Digital 26857 24769 10134
Centres 59778.84 63692.64 67819.11
Students per centre 369 396 465
Rev per centre 0.93 0.83 0.84
Test Prep in cr 150 133 122
13% 9%
Publishing in cr 20 16 17
Rate 17,314 15,035 15,650
15%
ENTERPRISE in cr 97 71 60
University in CR 9 6 4
106 77 64
38% 20%
University 82 68 96
Per university 0.1097561 0.0882353 0.0416667

Total 276 226 203

Adjusted EBIDTA 53 52 39

EBIDTA % 19% 23% 19%

ROCE 14% 14% 11%

 Guidance on ROCE - 17 to 18 %   

6. CHEAP PRICE –- YES -FINALLY VALUATION MATTERS - can I get 15 % post tax returns over 10 years
   Taking Seth Kalman method to find various scenarios of return expectations
   Current Market CAP - 256 CRS - Price – Rs 180 Market cap < Sales

7. Hitting of hammer on head valuation method - PE of 4 for business with ROCE 17 to 18 % and good potential growth without any requirement of capital

   Cash on book s- 50 crs , Receivables and sale of school business is close to 100 Crs = 150 cr
   EV = Market cap – 150 CR = 100 CR
   Business avaible for less than 100 Cr and if we assume it does historical business with profit of 20 CR (Adjusted normalized profit ) so business is avaible at PE of 4 taking cash into consideration or even without cash PE is 12 So if business does ROCE of 18 % - we can easily expect return of 18 % for very long term

8. VALUTAION BY MANAGEMENT GUIDANCE for 2020 - 60 Crs * 18 PE (Assuming 18 % ROCE ) = 1080 Crs - Basically 4 X from current price in 3 years

9. DCF Valuation without considering of cash and receivables - 20 % Return with growth of 10 % in Profits

   	25 cr
   

Initial FCF /OE 20 Assumed 5 cr for Maintnence capex

Years 1-5 6-10
FCF Growth Rate 10% 10%
Discount Rate 20%
Terminal Growth Rate 2%

Shares Outstanding (Crore) 1.42
Net Debt Level 52 crore of Cash

Year OE Growth Present Value
1 22 10% 18
2 24 10% 17
3 27 10% 15
4 29 10% 14
5 32 10% 13
6 35 10% 12
7 39 10% 11
8 43 10% 10
9 47 10% 9
10 52 10% 8
10 934 151

10 Year Valuation Multiple 18
Present Vaue of FCF Cr 128
Present Value of valuation Cr 151
Total present value minus debt Cr 279
Number of Shares 1
Present Value per Share 197

Finally, I think there is high probability that we will end up 15 % return over long term which is 5 times our money in 10 years and 25 times in 20 years unless management is totally fraud or they commit great mistakes.

Please let me know your views.

Disclosure : Invested 6 % of Portfolio and plan to make it 10 % .

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@saggy98 wrote:

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@shrpatil wrote:

Hi All thanks for the fantastic forum with expertise in cathing the value stocks at an early stage!

Can I request all of you to give a thought about this stock? Big Block Construction.
Sorry I’m not from this background to post numbers and growth stories about a stock. However I feel this stock needs an attention as it is in the consumption theme in infra.

Disc- I have invested in this stock from 90 Rs added more later

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@sammy11 wrote:

Current price 72, Mcap 169cr (as on 09.02.18)
Listed on BSE

Background

Inditrade Capital Ltd. (Inditrade) was set up in 1992 in Kochi as JRG Securities Ltd., and was engaged in broking and distribution of financial products.

Barings Pvt. Equity Partners India were the promoters of the company since 2009, and as of December 2015, held 49.4% of the shares through its affiliates/funds [Duckworth Ltd (subsidiary of Baring India Private Equity Fund II Ltd; 45.6% share) and Baring India Pvt. Equity Fund III Listed Investments Ltd. (3.8%)]. In February 2016, a group of investors that included Sudip Bandyopadhyay (SB) and 2 corporate entities Juno Moneta Technologies and AT Invofin India purchased the stake from Barings and made an open offer to the public to acquire additional 26% of shares. The price paid by the new investors was Rs. 42.5 per share as compared to book value per share of Rs 39.6 as at March 2016.

As at December 2016 (after completing the formalities for takeover of shares and open offer) the new promoters owned 71.77% of the company. SB directly owns only 0.21% of the company, and it is likely that he has indirect stake through the 2 corporate entities, as well as future stake through ESOPs. These entities also have a certain Alok Tandon as a key person.

Current Business

Inditrade in its current avatar is engaged in equity/commodity/insurance broking (constituting 40% of total revenue), client financing (21%) and distribution of financial products (23%). It has 29 branches and 350 franchisees with over 1.5 lakh registered customers across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana and Maharashtra.

Future Businesses – focus areas

Agri Commodity Funding

The company has also been involved in agri-commodity trading and financing, and this received further impetus by acquisition of the agri-commodity business of Edelweiss group in November 2016.

This is a highly unorganized market (about 75-80%) and presents a focused player like Inditrade ample opportunity to grow. Warehouse receipt management and certification is increasingly becoming more regulated, standardized and professionally managed, minimizing frauds that used to plague the sector in earlier times.

Inditrade offers funding against exchange traded non-essential commodities stored in exchange recognized warehouse, for short duration of 1-3 months, to commodity traders and processors. Commodity price risk (and to a large extent, default risk) is mitigated by simultaneously selling futures contracts of the commodity of similar duration on the exchange through their broking division. This enables them to offer high loan amounts of as much as 95% of the value of the commodity in a relatively quicker time at fairly attractive rates of 14-15% (much of the competition is from banks which charge lesser rate of 12-14% but take time and offer only 70-80% of the value).

Microfinance

Inditrade secured its microfinance lending license in March 2017 and commenced microfinance business in April 2017 by initially targeting the semi-urban industrial belt of South Maharashtra and Tamil Nadu. It has 9 branches in both states and plans to have 15 more branches by end of FY2018 with a loan book of Rs 100cr (half each in Maharashtra and TN).

They claim to be the first in the industry to have a completely digitized prospecting-approval-disbursement-collection process which involves eKYC and GPS tracking, online credit checks (through rating agencies Equifax and High Mark Ratings), and money transfer to bank accounts. Use of digital systems are likely to enable better risk management. The maximum credit provided to a single borrower is Rs 30,000 over a period of one year, with weekly collections. The microfinance business has currently 50 employees who have been incentivized by making them part owners, infusing 1/3rd of the equity capital.

As per recent press report of November 2017, Inditrade’s microfinance business had 17 branches and a loan book of Rs 40cr. It is in the process of acquiring 80% stake in another microfinance entity Varam Capital (25 branches spread over TN and Chhattisgarh, with loan outstanding Rs 100cr) at a cost of Rs 40cr. Whether this is paid in cash or shares is not known as of now.

Quick comment on Financial performance

The financials are audited by Haribhakti (including 4 out of 6 subsidiaries, the remaining 2 having insignificant contribution as on 31.03.17) which provides some comfort.

FY17 was the first full year of operations under the new management. Till recently the company has generated revenues only from its traditional business of broking, private funding and distribution. This is expected to continue to grow at a healthy pace in future given the sector tailwinds. The new businesses of agri-commodity funding and MFI are likely to start having an impact from early FY19.

The company has grown its revenues year on year by 39% in Q1-18 and 33% in Q2-18. However expenses, particularly employee, finance and administration costs, have grown at a faster pace over these periods as the company is focusing on growing its commodity financing and microfinance businesses. The company started borrowing funds in Q4-17 and would have deployed them during FY18. These expenses are in the nature of upfront investments, and should start generating returns in future periods.

Q3 income is up from 10.8cr to 17.8cr, up by 65% (but we have to remember we are comparing with a demon quarter). PAT is up from 0.13cr to 1.5cr. Momentum of Q2 also appears to be sustaining (revenues of 16.4cr and PAT of 1.6cr). Finance cost has doubled in Q3 over Q2 indicating that company has resorted for borrowings to fund its lending businesses (there is a big difference between the interest cost figures in P&L and Segment reporting, which needs clarification). Debt/equity ratio as of Sep 17 was less than 0.4.

Broking is a volatile business and is highly correlated to the vagaries of market activity. It can be seen from table below that broking is around 40% over last 3 quarters. And client financing is 21%. Financial distribution is decreasing is and others is increasing (what does others constitute is not known at present).

Summary

• Although in a crowded space (NBFC), the company appears to have a differentiated business model – particularly (1) agri commodity funding with commodity price/credit risk hedging and (2) sector-focused semi-urban MFI lending to banked and/or tax paying customers (as against the uneducated poor that MFIs are known to target) and leveraging digital information and platforms for more efficient delivery and risk management.

• Existing businesses like broking, client funding and distribution of financial products will continue as bread and butter business with sector tailwinds emanating from digitization and a structural shift towards financialisation of savings.

• The company is contemplating a digital enabled foray into affordable housing finance, which would be a new area for growth.

• The Jockey has relevant experience, financial backing and probably, skin in the game in terms of ESOPs (2 sets of ESOPS have been announced by the company for its employees with exercise price of Rs 37.75 earlier and Rs 83 more recently)

• Current price is around 1.7x of what the new promoters paid to takeover the company

Risks/Concerns

• This is an evolving story and needs close tracking on how the new businesses pan out. The last 3 quarter results have been directionally right. However, it is now 2 years post management takeover in November 2015, and the company needs to start delivering at the bottomline level soon. Broking is a volatile business and it can drag performance in bear markets.

• There is key-man risk as a lot is riding on SB. While he has a slightly chequered past, he seems to have the necessary experience having been involved/started financial service businesses. One wonders why he is still actively appearing on TV (as a financial analyst) recommending other company stocks and why he is mainly based in Mumbai instead of the headquarters in Kochi. Of course, as they say- once an analyst, always an analyst; and maybe SB will continue to be one. Also the MFI business is based in Mumbai.

• As is typical with small/start-up companies, there is the generic risk of over promising and under delivering. In their FY2017 Annual Report the company made a tall claim to achieve a loan book of Rs 5000cr in 3 years (which was later scaled down to 3000cr in a subsequent interview). Even then, this is extremely aggressive/ambitious and while the company may certainly have these as internal targets, it should refrain from public announcements of this nature, so as to manage investor expectations. Such steep targets may also force the company to take undue risks while chasing growth (for instance the price they intend to pay for their proposed acquisition of Varam Capital could be questionable).

• Lending is easy, but key is credit risk management and recovery. The company is still to be tested on this. Their delinquencies/NPAs should be closely tracked, as ideally none (or very little) of it should appear within the 1st year atleast.

Some pointers on valuation

The share was available for below 42.5 for many months post announcement of takeover by the new promoters (till as late as May/June 2017), and would have been the ideal time to buy as we would be getting in at the same price as the new owners. The share witnessed a spurt sometime around Jul-Aug 17 when the target of Rs 5000cr in 3 years became public.

The book value per share as of Sep 2017 was 44 per share, and annualized 9-month EPS is 2.35. The current price of 72 translates into price-to-book of around 1.6x and price-to-earnings of 30x. While the price looks ok on PB basis, the PE looks optically high for an emerging company, and may correct, if the company delays on delivery. However, if the company is able to sustain 30-40% growth at PAT level, this would look attractive.

The company has several subsidiaries, which are not wholly owned, through which it carries on its activities. When applying valuation metrics, some element of holding company discount may come into play.

Disclosure

I hold shares in the company from earlier and also added recently after Q3 results. I am not a registered financial analyst and this is not a recommendation. Views welcome.

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@kunal_patel wrote:

Sintercom India Ltd

Market Cap @ 65/- ~156crs
Revenue 1H18: 36.3crs / FY17 – 66crs
Margins: ~24%

Why to read more about Sintercom

1. One of the three company in India making Sintered products (Auto component) alongside GKN (a MNC), Sundram Fastener.
2. An associate of global market leader ‘Miba’ in Sintered products
3. Strong board/management composition
4. Strong margin profile for a 66crs revenue company.
5. Growing and untapped market

Company Background:
Sintercom India Ltd. is one of the leading automotive sintered components manufacturer located in Pune, India. It specialises in manufacturing medium to high density sintered components for automotive engine, powertrain and exhaust systems as well as sensor components for global customers. Company was started by Mr. Jignesh Raval in 2007 as Maxtech India Pvt. Ltd. Mr. Raval is a technocrat with over 20years of experience in Automotive industry. Prior to starting Sintercom, he was working with Tenneco Inc as ED, Global Supply Chain Management division.

Timeline:
2007 – Started as Maxtech India Pvt. Ltd
2010 – Started manufacturing Stainless Steel Hego Boss (converted forged parts to Sintered products)
2011 – Entered into a JV with MIBA Sinter Austria (converted Forged Gears to Sintered Gears)
2012 – Changed company name to Sintercom India Pvt. Ltd (kept introducing new products)
2013 – Started supplying to Maruti Suzuki
2015 – Developed 6-speed transmissions Syncro Hubs
2016 – Developed a product for Bajaj Auto (Forged shift tower component to sintered)

Board of Directors
Mr. Hari Nair – Chairman, ex-COO, Tenneco, 20yrs experience
Mr. Jignesh Raval – MD, CEO
Mr. Markus Hofer – CFO, Miba AG
Mr. Harald Nuubert – CEO, Miba Sinter Group

Management Team
Mr. Jignesh Raval – MD, CEO
Mr. Pankaj Bhatawadekar – CFO
Mr. Nikhil Chavan – Head, Engineering and Marketing
Mr. Sachin Gunjal – Head, Manufacturing

What is Sintering Technology
Sintering is a process that uses metal powder to make components. Sintered products are highly tensile and density higher than normal casting and foundary products. Please go through the video here to understand more about the process. (Sintering process)

Sintering is a green technology as it uses metals scrap and uses less water and energy compared to Casting and foundaries.

Usage

Market Sizing
Currently market size of Sintered products in automotive segment is pegged at ~950crs. Share of sintered products in PV is ~4kg/Passenger vehicle, however in the US this comes to 17kgs and in EU and Japan, this is around 12kgs. If management is to be believed, this could go up to 7kgs over next 5 years.
Since sintered products are lighter than casting/forging products, hence they are more and more preferred by the OEMs to reduce the weight of the vehicle which helps in increasing efficiency of the vehicle.

If Auto analysts are to be believed then 2W market is expected to increase by 12% per annum to reach 23-24m while PV is expected to go up to 5m over next 2-3 years. Also as BS VI will roll out in 2020-21, usage of sintered products is expected to go up by another 1-1.5kg/PV.

With rough calculation, we can arrive at the market size of ~1500-2000crs over next few years. That roughly doubles the market in next few years.

Sintercom currently has market share of ~6.5% which it expects to increase it to ~10% by 2020-21

Key Customers
Sintercom has long standing relationship with major players in India like Mahindra’s, Bajaj, Maruti, Honda and others. It is also exporting a small portion to Suzuki for products in Japan. Pic below shows how many models of which OEM uses Sintercom products.

image.jpg1990x1201 545 KB

Financials & Other operating metrics

4-yr Revenue CAGR – 10.7%
4-yr Sintered Products revenue CAGR – 18.5%

4-yr EBITDA CAGR – 15.2%
4-yr PAT CAGR – 104% (On a low base)

EBITDA margin has improved from 17-18% to 24% in 1H18. This is largely because of discontinuation of sale of Hego Boss (non-sintered product) which was a low margin business. Management had consciously taken this decision to reduce sale of hego boss and as of 1H18 it has been discontinued. Sintered products have higher margins and every new product introduced will improve the margins further.

RoCE has increased from 11% in 2013 to 14% in 2017 & 18% in 1H18.

Cash Flows: Company is generating ~10-11crs of operating cash flow and uses it to reduce debt.

Asset turnover is ~ 1.5x and operates at 70-75% capacity. They use rest of the capacity for R&D purposes to bring new prototypes.

Object of the IPO:
Company would be raising ~INR 56.5crs (incl anchor/Preferential allotment).

Total amount Raised – 56.5
Exiting Shareholder – (23.0)
Capex - (16.56)
Debt Repayment - (11.5)
W/C requirement - (3.0)

Remaining for general corporate purposes

Sintercom would be spending ~16.5crs on capacity expansion which would increase its capacity from 1800 tons to ~3800tons (need to confirm this number). Also at the present facility they can increase the capacity to 8000tons by just installing machineries.

Current debt is 35crs out of which they would retire 5crs from operating cash flow and reduce it further by 11.5crs from IPO proceeds. Portion of debt that they are retiring is a high interest debt from Mahindra financials that charges ~14% interest. After the IPO, effective interest rate is expected to be ~11-12% which is likely to reduce further to 9-10%. Interaction with the management indicates they already have an offer from HDFC with effective interest rate of ~9.5%

Valuation
At IPO price, company will have a market cap of ~156crs. In 1H18, company has generated PAT of ~3crs and is likely to cross ~6crs for FY18. It would command a multiple of ~26x at IPO price which is not expensive but not cheap either. Other auto ancilliary companies with similar margin profile trades at higher multiples.

Other Details:
MIBA AG would hold ~20% after the IPO. Company pays 3% royalty to MIBA for the technology/Know-how that they use from MIBA.
Company has an order book of 50crs for New products that it has developed.

To sum up
Sintercom is an interesting company to study. Sintered products demand is increasing globally. It has a strong technology partner in MIBA which is a leading player in the industry. Company is run by a passionate CEO and has strong BoD in place. Further company is only focussing on Auto industry while sintered products finds place in other industries as well. However, management feels they have long road ahead in this industry and hence any diversification will come only when they penetrate this market well.

Key Risks

1. Slowdown in Auto markets
2. Change in technology
3. Increase in royalty to MIBA
4. Increase in raw material prices could affect margins

Investment in SME stocks has its own risk. It is always about growth while investing in SME/micro cap stocks. Please do your due diligence before investing.

Discl: Applied in IPO. This should not be construed as an invest advice. Please take your own decision before investing.

Source: Company presentation, Youtube and RHP

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