@AKGupta wrote:

I think Ashok Leyland Ltd. (ALL) deserves a separate thread on this esteemed forum. In the below note, I have summarised whatever information I can obtain (and whatever variables are worth tracking from the perspective of an investor) from the sources in public domain (the numeracy of which is an advantage in case of a large cap company!).

Looking at the past 5 quarter performance of ALL, the following picture emerges:

ALL is a reliant on medium & heavy commercial vehicles, which make up for ~70% of quarterly volumes:

Q4 of 2018 was exceptional in terms of volumes because of (as per mgmt comments) strong GDP growth, pickup in investment, mining, road building and construction activity in Rajasthan and UP along with rated load legislation/overloading ban. (http://www.newindianexpress.com/business/2018/apr/19/gst-ban-on-overloading-to-lift-heavy-vehicle-sales-says-ashok-leyland-1803384.html)

Things I like about ALL:

1. Mgmt wants customer profitability first and wants to keep its margins intact by focusing on reducing operating cost/total cost of ownership of its CVs rather than initial purchase price. This is clearly visible from the financials as well (10%+ OPM in consecutive quarters). Refer below extract from Q4 concall:

In fact, ALL has increased its market share from 22% to 33% in the last 5 years. It’s dominant in the Southern parts and is gaining share in North, East, West & Central as well.

2. ALL has reduced debt significantly and has strong cash flows as well (Cash from operations was 5400 crs driven by higher trade payables (ALL doing business with cash from its suppliers!) by 1500 crs. ALL also has 800 crs advance from customers on the BS. (I have a bias for companies with this kind of working capital management).

If we look at the Balance Sheet as of FY2018, the following picture emerges:

And the interest cost has come down:

3. Management is of high quality and with a strong pedigree (Hinduja Group). High promoter holding at 51%.

4. Electric buses is an area where ALL is planning a lot of things. Refer the following comment from ALL MD in the concall:
   

Steps ALL is taking to reduce impact of cyclicality of CV business on its financials:

1. Getting deeper into defence procurement business – ALL won 25 tenders in the last 2 years and are going for more. Growth of 30% YoY in FY18 albeit making just 3% of Gross revenues. Though this business segment is a long gestation, it stays for 15-20 years once entered. (Read comments in screenshot) (https://economictimes.indiatimes.com/news/defence/ashok-leyland-looking-at-rs-5100-crore-revenue-from-defence-orders/articleshow/63815004.cms)
   

2. Expanding after-market solutions/services, spare parts offerings, network. 5% of Gross Revenues in FY18.

3. Expanding into more and more international markets. Growth of 36% YoY in FY18. (Recently they inaugurated Ivory Coast office to serve West Africa: https://www.thehindubusinessline.com/companies/ashok-leyland-makes-ivory-coast-a-hub-for-west-africa/article9990707.ece).

4. LCV business - grew by 37% YoY in FY18.

Key risks to the business:

1. Impact of cyclicality is still a concern. The business is based on primary economic activity, factors like GDP growth, mining, construction, roads & highways. Timing the entry and more importantly exit is important. Though India currently is a secular growth story (can’t see a sharp downturn on the horizon). Mgmt has also indicated the steps it is taking to reduce cyclicality impact (highlighted above).

2. Axle load norms recently announced allow higher loading by 20-25% thus allowing truckers to ship more on their existing trucks. (Whether this rule is applicable retrospectively or prospectively is still unclear: https://economictimes.indiatimes.com/industry/auto/lcv-hcv/axle-load-norms-may-create-short-term-impact-but-will-reset-in-august-gopal-mahadevan-ashok-leyland/articleshow/65039291.cms). Mgmt says overloading already happens and what this rule will do is bring unwarranted overloading to warranted overloading with strict implementation. And if this increases the extent of overloading further, it could impact safety of the vehicle.

3. High competitive intensity with players like Tata Motors, Eicher, Mahindra and Bharat Benz. Ultimately discounting price to win market share by competitors will force ALL to follow to some extent as well just to maintain market share. This will put a pressure volumes.

For comparison, look at the TMT numbers vis a vis ALL:

Note that in the above, Revenues and PAT for TML is PV+CV segments. If anybody can find out segmented financials for TML (CV, PV separately), please share!

4. Raw material costs (which make up for ~70% of direct costs) dependent on commodity primarily steel which is in an upcycle. Mgmt has indicated it regularly raises prices to offset that impact but in a highly competitive environment, pricing power might be limited thus impacting margins.

Factors expected to drive demand in the coming years:

1. Hub & spoke model: Mgmt expects GST to encourage faster adoption of Hub and spoke model in the logistics sector which will drive demand. This demand will be for larger trucks resulting in higher avg sales realization. This is expected to improve demand for products like Dost (LCV) as well.

2. Cash for clunkers scheme: Govt is coming up with a scheme for old truck owners to exchange polluting trucks with new ones and avail a discount on the same to be funded by the govt. (https://timesofindia.indiatimes.com/business/india-business/cash-for-clunkers-set-to-hike-demand-for-trucks/articleshow/63372417.cms).

3. BS VI transition: Volume growth due to pre buy before BS6 kicks in expected in April 2020 as per mgmt. Also, ALL is readying a product portfolio expansion in the 2 tonne to 7 tonne LCVs for 2020 which will be ready with BS VI technology thus plugging gaps in product offerings.
   ALL has planned capex of 1000 crores in small plants (not brownfield plants) and new product development for FY19 expecting strong demand in the coming couple of years: (https://www.thehindubusinessline.com/news/ashok-leyland-plans-1000-cr-capex-for-fy19/article23589716.ece)

I am sure there is a lot more to be discussed about this company and I would invite fellow VP members to share their perspective.

Disclosure: Invested recently after a sharp correction & will add more on clarity about axle load norms. ALL might correct more though valuations look comfortable at 18 times trailing 12 months earnings

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@kaustubhkale wrote:

Vasa Retail ( Vasa ), is a small company that is listed on the NSE SME platform. Mcap of 22cr. CMP INR37. Company recently came up with an IPO in February 2018 raising funds aggregating to INR4.80cr. IPO price INR30 (4000 lot size). It is a company into stationery distribution, offers everything that a person might need in terms of stationery.
* Screener link: https://www.screener.in/company/VASA/
* Company website: https://vasagroup.in/
* Background: Vasa began business from the Gulf in 1967 by Late Bhupendra Vasa, the original promoter. Middle East as a business has thrived since 1970s after the oil surge. Hardik Bhupendra Vasa, the current CMD, joined business in 1997-1998. Hardik Vasa is 42, an engineer who has done the IIM-A accelerated management program. Company was incorporated in October 2017 as a conversion from partnership firm to public limited company. Business was done under partnership firm mode since 1994. Branded stationery products (not paper) as a segment has been started recently in last 7-8 years.
* Branded products: Co has the most prestigious and recognized brand in global education…‘University of Oxford’.
* Oxford association: Vasa has exclusive license agreements to make, market, sell, distribute and promote various stationery products under the brand ‘University of Oxford’ in 26 countries including India, SAARC nations, Middle East and North Africa. Agreement is for 10 years, with auto renewal for 5 years and extendable 2044, based on milestone achievements. First agreement was entered on 1 October 2014 only for India and subsequently second one on 10 June 2016 for Middle East and North Africa. Due to commitment to quality and timely delivery, Oxford Limited extended rights to the existing range of stationary products by way of a comfort letter dated 10 March 2016 wherein Oxford has provided comfort to Vasa for renewal of the agreement dated 1 October 2014 for a period of twenty (20) years until December 31, 2044 subject to company achieving milestones as required under the license agreement. This extension of rights till 2044 enables Vasa to further strengthen relationship with Oxford and the brand. This should probably act as a testimony to Oxford’s confidence in Vasa.
* 26 countries: India, Bangladesh, Sri Lanka, Mauritius, Maldives, Nepal, Seychelles, Reunion (South Asia) Saudi Arabia, Kuwait, Qatar, Bahrain, UAE, Oman (Middle East) Egypt, Lebanon, Jordan, Yemen, Iraq, Libya, Tunisia, Algeria, Morocco, Kenya, Nigeria and Tanzania (North Africa). Basically SAARC nations including India, Middle East and North Africa.
* Why Vasa: Unique differentiator is their experience in stationery since 1970s to forecast demand accurately, understand pulse of consumers. Oxford choosing Vasa is a testimony of their experience and skill. Company spends a lot of time on market research, identifying new trends. Last two years, focus of the company has been in developing innovative product range under the brand of Oxford, entering into arrangements with distributors, tie-up with suppliers and recruiting a sales team. The promoter considers stationery business as FMCG without an expiry date.
* Vasta + Oxford: In addition to marketing and selling products under the ‘University of Oxford’ brand, company also intends to promote and market products under its in house brand ‘VASTA’. Company intends to utilize the existing channels for sourcing products and distribution networks for the ‘VASTA’ brand products so as to create a market for products under the in house brand as well. Growth of ‘VASTA’ brand products market shall provide an alternative range of products to the existing range of products sold under the ‘University of Oxford’ brand to the customer. Company intends to leverage the existing distribution platform and implement effective marketing strategies to deepen our reach in domestic markets for both brands, also ensuring that the same can be interchangeably used. Company also does trading in copier paper and uses this as an entry point to build relationships with distributors.
* Reason for IPOs: working capital related requirements - earlier company used to fulfill orders on made to order basis, but given the experience and expertise in stationery, they decided to now work on demand forecasting - working capital, inventory ready business model. Sellers attach a lot of importance to speedy delivery of products.
* Asset light: Company is only into processing and assembling of stationery. No manufacturing, completely asset light. Functions like a master distributor. Vasa has been sourcing stationary products for sales in domestic and overseas markets since the year 1994. It outsources manufacturing of stationery products to various suppliers based out of India, China, Indonesia and Malaysia which enable Company to adhere to the required specifications and stipulated quality standards for stationary products both under ‘University of Oxford’ as well as for ‘VASTA’.
* Strategy: Vasa Retail has a very focused business model. In India - Oxford and Vasta (own brand). Overseas (mainly Middle East) - Oxford, Vasta and existing business of functioning like aggregators (consolidation of various stationery products), private labels.
* Aggregators: Consolidation, acting like a one stop shop for all brands (Cello, Kangaroo, etc.) and all products based on demand. The trend in Middle East is that sellers like having private labels, so they get it manufactured and use their own branding to sell.
* Indian industry: Operating in India was extremely difficult prior to GST. Unorganised sector had an unfair advantage since there was large scale evasion of taxes. Duties were close to ~40%, which after GST net off all input credits is now ~10%. This has led to a large shift from unorganised to organised, with many unorganised players being unable to cope up. Significant part of the industry is still unorganised. Stationery industry in India is expected to grow at 5.9% CAGR 2017-2026 from USD1.5b in 2017 to USD2.5b in 2026, with a large shift happening from unorganised to organised. Pens form about 31% of the market, expected to grow from USD460m to USD750m over the same period, adding USD58.6m annually (5.6% CAGR). Mid-range stationery segment is expected to grow from USD718.1m to USD1249.8m over the same period (6.4% CAGR).
* Products: Stationery products (Further classify into (i) school and education products; (ii) fine art and hobby products; and (iii) office products) + paper pulp + bag fabric.
* Stationery products: Artistic materials, hobby colors, scholastic colors, scholastic stationery, office products, drawing instrument, writing instruments, office stationery, adhesives, notebooks, office supplies and writing instruments, books, pens, pencils, erasers, files, copier paper, bags and bottles.
* Paper pulp: Procuring paper pulp and selling the same to paper mills.
* Bag fabric: Procuring bag fabric and supplying it to the other bag manufacturers and also using the same for manufacturing our products (school and office bags). These stationery products are essentially used by school going children and offices as a part of their stationery requirements. On the other hand, paper pulp is the key raw material for the manufacturing of wide variety of paper. Bag fabric is not only supplied to other bag manufacturers but is also used by company for manufacturing its bag products.
* Product portfolio: Products portfolio comprises of a wide range of products which are sold under the brand “University of Oxford” as well as under “VASTA”. Products portfolio includes water colour cakes, water tubes, poster colours, wax crayons, oil pastels, plastic crayons, sketch pens, textured papers, silk laid papers, handmade papers, cards and envelopes, pearl finish papers, scales, sharpeners, colour pencils, erasers, engineering boxes, other technical instruments, note books, adhesive mechanical pencils, hi-polymer leads, fountain pen and its ink, water bottles, pencil cases, primary school bags college bag packs, secondary school bags, geometry boxes, canvas rolls, canvas boards, artist water colours, oil sketching pappers, drawing inks, brushes, painting mediums, glass colours fabric colours, powder colours, fabric glue, artist poster colous, white board markers, permanent markers, peal and seal envelop, diaries and computer labels, organizing divider, highlighters, ball pen, gel pens, stamp pads, refills, paint markers, CD markers, carbon papers, glue sticks, gum, copier paper, paper pulp, bag fabric etc.
* SKUs: Offers around 240 products of Oxford currently, to go to 1500 products in future.
* Huge runway for growth: Currently reached 750 outlets in Mumbai (7 distributors), there are close to 18,000 potential outlets. So as such have just scratched the surface. As of now, no where in modern retail. Modern retail presents a big big opportunity. There are 50,000+ modern retail outlets across India.
* What makes a brand successful: Success of a product depends on three factors equally - 1. Strong brand 2. Acceptability 3. Maintain price/affordability - Oxford would check all the boxes.
* Pricing strategy: Company plans to keep pricing at low or no premium for Oxford, for basic (economy) standard stationery. If a pen is for 10 rupees in the market of other brand, Oxford would sell the same at 10 or 12, since market perceives the value in such a way. Company plans to keep margins higher for unique/niche products, where the market doesn’t attach a specific value (or price cannot be perceived). Designer pouches, special oil pastels colours, highlighters etc.
* Revenue breakup: roughly 60% is stationery, 40% is paper pulp (copier paper). Bag fabric is very very marginal. The revenue mix would change towards higher margin stationery products.
* To sum up: strategy in India - sell Oxford and Vasta, more of Oxford actually. Strategy overseas - continue to be aggregators and sellers, sell Vasta and Oxford - convert gradually everything into Oxford. The Middle East private label business, has a potential to turning to Oxford for higher acceptability, margins, given affordability is not a concern. Vasta largely offers an economy level product. India as well, distribution built for Vasta and Oxford can be interchangeably used. Company also plans to gradually convert all Vasta products to Oxford.
* Numbers: 1HFY18 (YTD October 2017) revenues 18cr, PBT 1.35cr and PAT 1cr. FY17 23.55cr, 1.23cr and 0.92cr. Debt - No term loans, all debt is largely working capital LCs, CCs, etc. No long term debts. Company would largely only require working capital loans.
* FY18 results analysis - Revenues of INR35cr and Profit after Tax (PAT) of INR1.42cr for FY18. Corresponding figures for FY17 - INR23.85cr and INR0.92cr. 46.57% YoY growth in Revenues and 54.34% YoY growth in PAT. EBITDA margins FY18 5.8% and FY17 5.5%. Hardly any long term debt (INR0.33cr) . everything is short term (INR9.36cr) which is rolling, used for working capital. Cash equivalents of INR1.18cr. While analysing, do note that company has recently shifted its business model to inventory based, demand forecasting from made to order. So a lot of IPO money (received only in February 2018, less than 90 days towards year ended March 2018) has gone into keeping stocks ready and ordering, etc. Hence the trade payables (INR9.75cr) and trade receivables (INR11.40cr) are high. Market cap INR22cr.
* My view: I would not want to comment on the valuations, but this definitely looks like a very high risk, unique, asset light, high return ratios play on the branded stationery business. Imo opinion, given the low base, company can easily achieve 30%+ growth YoY, for multiple years ahead.

Risks/Concerns
* Company still small in terms of revenues.
* Close to 40-50% of revenues at the moment of low margin trading paper copier business.
* Oxford and Vasta plans may or may not work out - business risk. A lot of success would depend on Oxford stationery sales and acceptability.
* Typical risks associated with SME companies - liquidity is low, lot size is high and others. Company stock price has had a wild swing from level of 30s to 70s and back to 30s, just to elucidate the kind of price risks SME carry.

All the above details have been taken from public material, largely their prospectus, website and investor presentation during IPO.

Disclaimer: This note is not a research report but assimilation of information available on public domain and it should not be treated as a research report, investment advice or Buy/Hold/Sell recommendation. I am not registered with SEBI under the (Research Analyst) Regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”. It is safe to assume that I might have the company in my portfolio and hence my point of view can be biased. Investors are advised to do their due diligence and consult a qualified financial advisor prior to taking any actual investment or trading decisions.

Disclosure: Invested

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@varinderb wrote:

I could not find any thread on this co – so starting fresh - please free to add more for everyone to learn more on this co

Apollo Sindhoori Hotel
M-cap 170 cr (Listed only on NSE)
FY18 Consolidated PAT at 15.2 cr
FY18 Cash flow from operation was 17.8 cr
Stock trading at less than 10x FY19e EPS
Zero debt
ROE: 35%
WC days: 60
Cash flow from operations has always been positive and increasing for the co
Promoter holding: 65.77 %

The co belongs to Apollo Group with Ms. Suneeta Reddy on the board as the director

About The Business
The co is majorly into Management Services like Manpower, Utensils, Equipment, Cleaning, Training etc focused on food industry. Management services is a v low capex business and huge cash generation happens

Other vertical is Food & Beverages which includes catering to hospitals,Café (Sketch). This vertical can grow without much capex with Apollo setting small cafes at their own hospital and F&B business growing into non-Apollo business

3rd vertical which is the cash cow is the Bio-medical JV with Faber (Malaysian co backed by the government): 51% with Faber and 49% with Apollo Sindhoori Hotel. This is a cash cow business for the company and has been growing vvv strong

http://www.apollosindoori.com/overview.php

Segmental Results
As per accounting norms, Faber JV sales are not shown in the topline but profits are added in the bottom line as share of profits of jointly controlled entity. So standalone results will not have Faber JV.

FY18 CONS sales 140.87 cr Vs 132.9 cr
• Management services sales at 60 cr Vs 54 cr; EBIT at 4.8 cr at 6.51 cr
• F&B sales at 79 cr (Sketch Café likely around 5 cr) Vs Rs 78.5 cr, EBIT at 5.7 cr Vs 4.06 cr
FY18 CONS PAT at 15.2 cr vs 12.1 cr
• Share of Faber JV at 8 cr vs 5.5 cr

There was 10 cr increase in employee expenses in FY18 Vs FY17 which impacted the management services business (Read note no 6 in March results)

Faber JV
FY18 sales was 167 cr vs 127 cr
Total FY18 PAT at 17 cr vs 11.2 cr

GOING AHEAD
The share of Apollo Group business is around 75%, and non-Apollo is 25%
The challenge going ahead is to increase share of Non-Apollo business
We believe that in FY19 – Non-Apollo should be 35%

As per scuttle butt with industry & company - FY19e CONS sales could be Rs 200 cr (170 cr from existing business and 30 cr from new Non-Apollo business)
On Management + F&B = expected PAT margin 5% = so co can do PAT of nearly 10 cr
Faber JV PAT expected 10 cr in FY19
So total FY19e Cons PAT at 20 cr

We take comfort in the valuations with low risk at current levels
If the management is able to execute with Management services + F&B business (with Apollo background) and some fresh big hires recently – this could be an interesting co for the long-term to track

Detailed financials can be accessed on Screener.in or the co’s web-site

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@Karanops wrote:

Magnum Ventures: it’s paper business is currently doing good. It’s 5 star property at sahibabad is also in good shape now. Promoters had borrowed heavily from banks and used some and diverted some (I may be wrong). Now the management understands that growing the company benefits them more than diverting the funds.

Their assets stand at almost 600 cr plus (promoters say it’s 900 cr). And current debt at around Rs 150 cr. Stock available at market cap of almost 25 cr.

Lyka Labs : they are negotiating with bankers to repay all debts, but bankers want them to continue paying interest rather than foreclosing the debt. They deposited the amount in escrow account (entire debt amount of approx 80 cr). It is due to this reason their last quarter interest payment shows negative number. They are trying hard to grow their business and may succeed as efforts look genuine. Their revenues may reduce to Rs 175 cr against 195 of last year. This is on account of shift in business model where they have changed from p2p to loan license so they get only jobwork charges against full value of product. But they will save on working capital as all raw and packing material is supplied by customer. They expect profit of rs 12 cr approx.

Again these are my observations and I may be wrong by a mile.

Disclosure : I hold small quantity JUST for tracking bought @ 7 and 35. Not much.

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@BalusuAditya wrote:

And then there is this:
https://businesswireindia.com/news/fulldetails/weizmann-forex-bags-airport-counters-across-five-cities-india/59094

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@Rounak_Maheshwari wrote:

Sharda Motor is in the business of manufacturing of Exhaust System, Catalytic Converter, Independent Suspension, Seat Frames, Seat Covers (Two Wheelers & Four Wheelers), Soft Top Canopies, and Pressed part- White goods products.

It is leading supplier to leading auto manufacturers and clients include Maruti, Tata, Hundai, Mahindra, Tafe, Nissan, Force etc.

Financial snapshot of the company’s performance -

Sales and OP.JPG827x242 51.9 KB

Company’s sales growth was peaked in FY 11, post that company’s growth was almost flat till FY 16, from FY 17 company started to grow its revenue in early double digit of 10% to 12%. However in the period between FY 10 to FY 17 company has invested almost 340 cr. in capex.

Cash Flow.JPG821x194 48.7 KB

Although I am unable to identify the manufacturing capacity and utilization level, Company’s balance sheet shows that company has invested in its capacity improvement and expansion in last 5 years and now revenue growth should come.

Since last three years company’s net profit is increasing at CAGR of 60% primarily because of improvement in operating margins.

What is most important is that along with improvement in margin company is also able to reduce its working capital requirement.

key ratio.JPG735x118 29.5 KB

These all improvements makes the company a free cash flow machine in small cap space - in last three years company has generated free cash flow of more than 300 cr.
Company has cash balance of 170 cr in books and its investment in Bharat Seats Ltd (a listed company) is worth 150 cr.
This cash position will allow the company to expand in future without much debt and utilization of future profit.

If we exclude the above investment value and cash balance from market cap then company’s valuation comes at attractive PE of 13.

As on June 30 promoter has ~73% holding in the company.

I request Forum member’s view on the above company, and help in identifying its capacity and addressable market size.

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@vikas_sinha wrote:

Focussing on integration of Aquaculture process from Hatchery to Retail with complete traceability.

The material here is majority taken from the company’s AR, this company is small shrimp compared to others, I could not find much info elsewhere. From reading up on Avanti Feeds and Waterbase, I found the information credible and of OK quality. Rest I trust VPers to add

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NOTE:

Screener threw up this company, when searching for a fast growing, low price bet.
Both Avanti and Waterbase are launching seed business though it will take them roughly a year or two atleast to approach the current scale of about a billion seeds of Oceanaa.
Traceability is the non-tarrif barrier imposed by US regulators, from seed to harvest, is the key.

Avanti CEO in concalls, keeps emphasizing on ‘providing good quality seed’ to farmer. Apparently disease can affect shrimp stocks and have severe consequences, seed quality is a factor here.

OBIL (oceanaa biotek india ltd) is also now going to make feed. My rough guess is that feed making involves buying the feed components and mixing them. No wonder, so many new feed making plans are getting launched recently.
https://www.thehindubusinessline.com/markets/stock-markets/oceanaa-biotek-joins-hands-with-thailand-co/article23273999.ece

a) Company’s Overview [latest AR page 5]

India is fast emerging as a major aquaculture destination. Aquaculture in India got more than its fair share of opportunities, especially after 2009, to credit, shrimp producers in India immediately lobbied with the central government to allow import of white leg or Pacific white shrimp (Litopenaeus Vannamei) from the US for cultivation.

Company started with food testing laboratory aims to achieve complete safety by sampling and testing of each day’s production and to make sure that the seafood process adheres to the highest industry standards and meticulous product specification.

On gaining grip over the Shrimp Cultivation and with the help of Promoter’s expertise & aptitude in Hatchery business, the Company purchased a Hatchery business with a capacity of 400 million seed per annum (the survival has taken into 40%) during August, 2014 located at keelaiyur village, sirkali talk, nagapattinam District, Tamil Nadu. For a sale value of Rs. 3.9 Crores allotting 7,81,850 shares with a premium under consideration of cash. As a favorable outcome of Hatchery business Company has recorded revenue of Rs. 46.47 crore in 2015 compared to Rs. 6.70 crore in the year 2014. Resulting in increased profit of Rs. 80 lakhs in 2015 compared to Rs. 34.79 lakhs in 2014. In the year 2016 Company recorded profit of Rs. 2.17 crore reflected radiant progress in business.

Without the maturation facility the company had struggled in producing the good quality seed at right time. To cope up with the magnified evolution of the Hatchery Industry and eternal support received from the stakeholder, the Company invested in acquisition of another Hatchery which possess capacity of 250 million seed production and a big maturation facility which can hold 1600 pairs of brood stock at a time from a partnership firm, a Chennai based firm engaged in rearing of prawn seeds and trading of prawn seeds. To give effect to the purchase Company allotted 33,65,275 shares with Premium to the partners for consideration other than cash amounting sale value of Rs. 20.19
crore.

To bring lot of prawn farmers to purchase our seed, the company is giving the testing service as discount to the farmers for which the value for one test is very minimal when we compared to their purchase volume and value. That is why we were able to sell huge quantity of our own manufacturing seed and rather than trading in the year 2017.
The company has recorded a revenue of Rs. 36.70 crore and profit margin Rs. 2.70 crore in the year 2017.

Going forward, the favorable monsoon is expected to result in the significant trading opportunities. Company is planned to introducing new and innovative technologies to cope up with global advancement.

b) Company’s Business

1. BROOD STOCK MANAGEMENT [95% of Turnover]

Method Involves manipulating environmental factors surrounding the brood stock to ensure maximum survival and increase fecundity. Matured, full grown SPECIFIC PATHOGEN FREE (SPF) Broods measuring 36 to 40 gms were imported from United States for reproduction, under goes a detailed examination by Aquatic Quarantine Facility, Chennai, to facilitate a regulated mode of introduction of non-native L. vannamei[ White leg Shrimp] into India.

2. Testing Services Offered [5% of Turnover]

• Food Microbiology: Microbiological analysis is important to determine the safety and quality of food.
• Molecular Biology - Molecular biology explores cells, their characteristics, parts, and chemical processes, and pays special attention to how molecules control a cell’s activities and growth.
• Food Analytical Chemistry - Analytical Chemistry can determine the presence of a known chemical in a food. The nutritional value of food is determined by chemical analysis for components such as protein, fat and carbohydrates. Even the calorie content is calculated from chemical analysis. Our trained staff use state-of-the-art equipment in this practice.

c) MANAGEMENT DISCUSSION AND ANALYSIS REPORT [latest AR page 59]

Industry Structure and Developments:

On the basis of increasing demand of shrimp and fish in global markets, the export of Indian sea food has risen by over 23 per cent to USD 5.78 billion in 2016-17 Shrimp farming has changed from traditional, small-scale businesses into a global industry. Technological advances have led to growing shrimp at ever higher densities, and brood stock is shipped worldwide. Farming implies some form of intervention in the rearing process to enhance production, such as regular stocking, feeding, protection from predators, etc.
Indian aquaculture shrimp production is set to grow at 4.9 per cent annually during 2014-18. The projected growth rate is second highest among the major shrimp-producing regions. This provides opportunities for Indian firms to expand further,
Companies that supply quality seed and feed, and share the right aquaculture practice with farmers, stand to gain in the market.
As per an estimate, currently, India’s aqua feed consumption is around 1 million tons and assuming on an average 1.5 feed conversation ratio (industry standards), the demand for aqua feed comes to around 7 million tons by 2017-18, the report said.

State of affairs/Segment-wise or product-wise performance:

During the year under review, the Company has majorly focused on production and sale of shrimp seeds and testing of their quality before sale to farmers or end customers. Our major customers are spread across Tamil Nadu, Andhra Pradesh, Maharashtra, Gujarat and west Bengal.
In seafood cultivation, the most stringent bio-security measures are adhered to, to produce 100% antibiotic-free seafood that meets international food safety standards.
During previous year, the Company received permit from the Coastal Aquaculture Authority, Ministry of Agriculture and Farmers Welfare, Government of India to import 4400 numbers of SPF L. Vannamei brood stock (shrimp) per annum for rearing to adult brood stock for seed production at the Hatchery located at Keelaiyur Village, Poombuhar, Sirkali Taluk, Nagapattinam District, Tamil Nadu.
The permission to import is valid from April 01, 2016 to March 31, 2020.
We are nurturing our indigenous L.Vannamei (Vannamei shrimp – Litopenaeus Vannamei, formerly PenaeusVannamei) seeds and selling to farmers across India.
The specific pathogen free (SPF) LitopenaeusVannamei has the capacity to produce quality seeds with faster growth and higher survival rates.
Even though shrimp farming has taken a downfall this year as compared to last year, our reputation in the market has contributed to our increased sales. Also, our group companies have a good reputation in the market. We are scaling on this factor to expand our business further.

In order to expand the business, the Company acquired existing operative Maturation and Hatchery facilities from a Partnership firm, having office at Chennai at a cost of Rs.20,19,16,500/-. The Company issued equity shares for consideration other than cash under preferential issue in the joint names of Partners jointly designated by the said
Partnership Firm against the assets to be taken over by the Company. To meet this requirement Company increased its Authorised Capital from Rs. 10.2 crore to Rs. 15 Crore.
The objects of the preferential issue is to accelerate growth and earning power by acquisition of an existing operative Maturation and Hatchery as stated above. The Company allotted 33,65,275 equity shares at Rs.60/- per Equity Share (inclusive of Rs.50/- per Share as Premium)

Company Outlook:

We have been operating all our business operations from India and are planning to broaden operations through exports.
India’s aquaculture industry continues to strive and the Company is positive that it will continue to factor on this to establish its credibility in the market.

Strength and weakness:

The Company has been in the field of aqua culture industry engaged in manufacturing high quality Shrimp seeds. The Company has well trained technical team in production and marketing of shrimps. The Company also provides technical support to the farmers and assisting farmers with information and knowledge of shrimp farming and also updating developments in culture methods and processes. Presence of strong dealership network, farmer base and committed work force stands in good stead in sustained growth of company’s business.
Time gap is longer in adoption of technological advancement used across the world.

Opportunities and Threats:

We are striving continually to adopt the best aquaculture methods, ensuring regular incomes for farmers, while encouraging environmentally sound and sustainable practices. By distributing the best seeds as well as continuously monitoring and testing for quality, and providing a buy-back guarantee, we ensure that only the best products bear our stamp.

- Risks:

 Due to unfavorable monsoon predictions, our business would be affected and would result in increased
costs of feed and other raw materials required for production of seeds. Volume featured with
temperature, salinity, pH, rain fall and other climate parameters affect the rearing of seeds.
 Our performance also depends upon the prices in the International Shrimp markets.
 General business and economic conditions and change in government regulations could affect business.

WEBSITE: http://www.oceanaabiotek.com/
2016-17 AR:http://www.oceanaabiotek.com/pdf/AnnualReport/2016-17/Annual%20Report%202016-17.pdf [quoted here]

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Discl: 4% of PF.

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@basumallick wrote:

Newgen Software Technologies Ltd (NS) is a software products company. They operate in the following product areas:

Enterprise Content Management (ECM)
ECM systems provide for the management of unstructured content – that is everything that is not transactional and therefore managed in databases. Content types have increased greatly over the past few years and now include documents, images, audio files, drawings, social media content, email, and faxes. ECM is an umbrella term for the large number of complementary technologies (and often separate products) that are tightly integrated to provide a platform that, in some cases, provides the end-to-end management of content from creation to deletion or transfer to a permanent archive.

Case Management
Case management is a subset of ECM technologies, which combines content, people, and process. Case management refers to the technologies, features, and functions required to address a particular “case” or task. These tasks are process-driven and generally require a combination of transactional data and content.

Business Process Management (BPM)
A simplistic view of BPM is to define it as a discipline involving a combination of modelling, automation, execution, control, monitoring, and optimization of business activity and workflows to support enterprise objectives encompassing different IT systems and participants (e.g. employees, customers, and partners) within and beyond the boundaries of an enterprise. A BPMS is a software product used for driving process improvements and supports the entire process lifecycle, including process discovery, definition and modeling, implementation, monitoring, and analysis and continuous improvement.

Customer Communication Management (CCM)
There are two elements to customer communications: the first is content creation and the second is the management of the output process, whether this is via print or electronic format. The most common use case of CCM is the batch production of monthly, quarterly, or annual bills or statements in a wide variety of formats for delivery through multiple channels. CCM is also used for ad hoc communications, which may be automatically produced as part of a process. Customer communications is an area served by some, but not all, ECM vendors as well as by specialist niche vendors.

Revenue Streams
The Company’s business has multiple revenue streams including from:

• Sale of software products: one-time upfront license fees in relation to the platform deployed on-premise. 137 cr, grew 17% yoy

• Annuity based revenue: recurring fees/charges from the following: (grew 25% yoy)

  • SaaS: subscription fees for licenses in relation to platform deployed on cloud
  • ATS/AMC: charges for annual technical support and maintenance (including updates) of licenses, and installation
  • Support: charges for support and development services

• Sale of services: milestone-based charges for implementation and development, and charges for scanning services
  

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• Revenue split geographically - India comprises of 35% of revenues, EMEA 33%, USA 23% and APAC (excluding India) 9% of revenues.

• Active customer base of 520+ clients running their businesses and critical operations on our platforms in 60+ countries. Added 120 new customers including some Fortune 500 companies.

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• R&D expenditure comprised approximately 7% of revenues

• Generally this business is very sticky because the profile of customers they are either banks, insurance companies, large governments, so once they make an IT initiative it is a very integrated product doing their mission critical job.

• The co derives a significant portion of revenue from customers in the Banking, government/PSUs, BPO/IT, insurance and healthcare verticals. In 2017, 2016 and 2015, total revenue from customers in these verticals was 85.87%, 83.21% and 78.76%.

• Company has declared and paid dividends for the fiscals 2017, 2016, 2015, 2014 and 2013 on the Equity Shares at the rate of 10.00%, 15.00%, 75.00%, 50.00% and 20.00%, respectively.

• Some of the key active customers include Trust Company of America, Mercantil Bank, ICICI Bank, Trafigura, Bajaj Electricals, United Arab Bank, National Commercial Bank Jamaica, Axis Bank, Yes Bank, Kotak Mahindra Bank, Bank Islam Brunei Darussalam, Philippines Resource Saving Bank, ICICI Prudential Life Insurance, Reliance General Insurance, Max Life Insurance, Strides Shasun and Shriram Transport Finance.

• Gartner ratings:
  - A “Challenger” in Magic Quadrant for BPM-Platform-Based Case Management Frameworks
  - A “Niche Player” in Magic Quadrant for Enterprise Content Management, 2016
  - A “Niche Player” in Magic Quadrant for Intelligent Business Process Management Suites, 2016
  - A “Niche Player” in Magic Quadrant for Customer Communications Management Software

• Solution Frameworks across verticals
  - Banking - Account Opening, Retail Lending, Commercial lending, Corporate Lending, FATCA compliance, Trade Finance, Collections and Payment Systems
  - Government/PSUs Correspondence Management, Agenda Management, Citizen Centric Services, Office Automation and Grants Management
  - BPO/IT - Accounts Payable, Accounts Receivable, Invoice Processing and Vendor Portal
  - Healthcare Provider Contract Management, Complaints, Appeals and Grievances Management, Mobile Member Enrolment and Claims Repair

WHAT IS INTERESTING

• Software products have a non-linear business model. The revenues can rise with significant margin expansion with addition of new clients.
• Increasing use of SaaS (software-as-a-service on the cloud) canbring in long term annuity kind of revenues.
• Diversified customers including a large part coming through annual maintennance / support contracts providing earnings visibility
• Very sticky business. Long term customers usually do not leave once they have been using the products for some time.

RISKS

• Receivables is quite high at 222 cr on Mar31, 2018. Debtor days are above 150 days. The co acknowledges that this is an issue and is looking for active measures to reduce this. However, due to the long term nature of contracts, it will not come down drastically.
• There is seasonality in revenue generation. Most of revenues come in Q4.
• Product business is lumpy and there is usually needs an upfront investment in terms of sales and marketing expenses. New customer acquistion is expensive and time consuming.
• Very competitive field with large global majors in each of the product areas that the company operates in
• Technology change and obsolense is fast. Company needs to continuously upgrade their product to be in the reckoning.

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DISCLOSURE:
I do not have a position currently in the stock. I am studying the business and may or may not decide to take a position in the future. Please do your own due diligence before investing.

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@vinloop wrote:

Q4 FY 18 numbers were really good for Coal India (CIL) but just looking at the bottom line of Rs 1295cr, it could be misleading.

Q4 numbers in (cr)
(A)Sales 25168
(B)Offtake 160 MT
©realization per MT 157.3 (A/B)
(D)reported PAT 1295
(E)one-time provisions 7384
(F)other income specific to Q4 2000
(G) Adjusted PAT 6679 (D+E-F)
(H) Adjusted NPM 26.54 (G/A)

I am writing this post to evaluate my own understanding of valuation and future earnings prediction. I would like the fellow members to share their views on this post.

So given the NPM at 26 for Q4. and we also have the total offtake for Q1 (153.43 MT) and with realization to be greater than 157 (e-auctions have been higher this qtr), we can arrive at sales of 24089 cr. Using the NPM of 26% we can arrive at a profit of cr 6263. against FY18 annual profit of just 9266!!

Positive Triggers:

1. Govt is keen to cut down coal imports to save forex. current coal imports stand at ~150MT FY19.
2. Economic growth in-turn increases Power consumption which catapults Coal production. we may reach 1billion tons of coal by 2022.
3. Current logistic concerns will be eased out with Dedicated Freight corrider, Sagarmala projects and own CIL initiated rail projects.
4. Govts will use coal for foreseeable future due to employment it generates in rural areas.
5. AK Jha MD of CIL is a dynamic leader coming from Mahanadi Coalfields and has a credible record of making MCL a stellar subsidiary of CIL.
6. ~20% of additional thermal capacity is coming up in various states of the country. No matter how much solar power is generated, the Coal mix will stay atleast for the next decade.
7. Its like owning a proxy for Power companies in India which has a clear monopoly.
8. Coal-bed methane could be another revenue in future.

Current Negatives

1. Logistics
2. Labor issues / Wage hikes (but looking at their cash flows and future needs, this could be minor)

Disclaimer: Heavily invested in CIL from Rs. 250; Views may be biased.

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@narendra wrote:

CMP: 6000.00
Market cap: 869 Cr.
Disa India Limited(DIL) supplies moulding machines, sand mixers and surface preparation machines to foundries or OEM with foundry division to make metal casting.

Little introduction about foundry/casting:
Foundry are facilities which produces metal castings and offer casting related services. Metal is melted to liquid state and poured into mould of desired shape, mould material or casting is removed after the metal solidifies on cooling. These casting will have certain impurities/rough surface which has to be removed and smoothened by shotblasting.
Most common metals which undergo casting are iron and aluminium. Other materials include steel,bronze, zinc and magnesium. Watching the video from the recent movie Avengers-infinity, the scene of hammer making by Thor may help us understand it better https://www.youtube.com/watch?v=Fhc2lCoMgIY

Foundry is considered as mother of all industries. Approximately 90% of all manufactured goods depend on metal castings for component parts, with cars and trucks being the largest market. Castings are used virtually everywhere including household appliances which are used in daily life like cookers,plates,cups…etc. In the order of preferences, casting are used mainly in automobiles(32%), agriculture equipment, earth moving equipments, aerospace, railways, shipping, heavy equipment, mining, defence equipments, pumps, compressors…etc

DISA INDIA mainly caters to ferrous casting industries which are used in heavy commercial vehicles and tractors by providing complete foundry machines and solutions.
Wheelabrator division provides shot blasting machines for surface cleaning of castings produced at foundry.

DIL is an Indian arm of Denmark-based promoter company DISA HOLDINGS which owns 74.8% stake and in turn operates under the umbrella of NORICAN group. NORICAN group formed by Disa ltd, Wheelabrator, Italpresse Gauss and Striko Westofen.The following images gives overview of the Norican group.

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Disa India ltd(DIL) is a leading equipment manufacturer with advanced foundry and surface preparation technology. It supplies complete foundry system by integrating international range of moulding machines and sand mixers with proper combination of sand plant equipment.

Investment thesis:

Changes in Indian foundry industry:
Around 4,000 to 5,000 foundries are present in India with estimated capacity of 13 million ton capacity. The no. of foundries have reduced from around 6,000 to present no. due to bad economic condition in last few years. The total production of casting for last few yrs is :
2015-16: 9.8 million tons
2016-17: 10.3 MT
2017-18 : estimated around 11MT
With capacity utilisation of foundries going up, they need to expand for further growth which should benefit the market leader DIL.

Automation and manpower reduction: Indian foundries are facing problem with lack of skilled manpower and increasing labour cost. Disa offers complete automatic solutions to foundry industry which requires minimal manpower supply,reducing manpower cost and improves productivity. Currently out of 5,000 foundries, only around 300 are automated which gives DIL good opportunity.
Disa India growth is directly linked to growth of manufacturing industry and capacity expansion by various sectors like auto, agri, infra, engineering goods. Around 32% of foundry industries output goes to auto sector. After reaching peak sales in 2011-12, auto industry has suffered for next few years with slow economic development which in turn had adverse effect on foundry growth. Now with record sales of auto /tractors in FY18, foundry industry should be looking for further capacity expansion. This should automatically benefit Disa India. If we track the order book for last two years it is getting better with each quarter.
order book(in Cr) Q1 Q2 Q3 Q4
FY17 87 92 53 70
FY18 113 118 91 126
FY19 155

DIL as global supplier to Group companies: due to low cost of manufacturing at India, parent company considers DIL as manufacturing hub for its global supply. In the year 2016-17, it has passed resolution to increase transaction limit with other group companies for expected increase in exports from DIL.
Disa Industries A/s(Denmark) - 75cr
Disa Changzhou(China)- 20 cr
Wheelabrator Czech( Czechoslovakia)-20 Cr

Wheelabrator merging with DIL: In 2009, DISA group merged with Wheelabrator group which is leader in manufacturing of shot blasting machines. As a result of global merger, wheelabrator products are represented in India exclusively by Disa India ltd. Wheelabrator technology has been localized for production in India and marketed under wheelabrator brand by DIL.

Bhadra cast alloys: DIL acquired a local foundry in 2016 and renamed as Bhadra castalloy to supply casting to wheelabrator products and for global supply which has started contributing to growth. For fy18 it has net revenue of 9.8 cr and net profit of 0.4cr.

Filters: Filters contributes to around 15% of revenue. DIL is selling these products with foundry machines and as stand alone products. With strict environmental norms the use of filters is expected to improve.

Norican has acquired light metal casting solutions(LMCS)group in 2017 which is an equipment manufacturer and service provider for light metal casting alloys of aluminium, manganese and zinc alloys. This acquisition is contrast to present Disa focus on grey iron casting(ferrous segment). LMCS provides new opportunities for group in nonferrous segment. How this is going to benefit DIL needs to be watched.

Being in cyclical industry it has managed headwinds of economic downturn very well in last ten years by reporting positive net profit and remaining cash rich( 75Cr) which is the hallmark of quality company with good management in challenging business scenario.

Negatives:
Cyclical business:DIL depends heavily on foundry industry, manufacturing heavy casting for HCV and tractors. With economic downturns business may suffer.
Increase in raw material cost: with increase in Iron ore price, the offtake from foundries will reduce as the end customer will not easily accepts price increase. In January/ February of this year there are certain reports that how the utilisation of foundry industry went down with spike in iron ore prices.
Environmental issue: as most of foundries release poisonous gases, the Govt may impose certain restrictions which can further dampen the growth of foundry industry (it may turnout to be an opportunity for DIL)
Company doesn’t have much space to expand at the existing factory sites. It may have spend more on land /new factory when it takes up expansion.
China import effect on foundry industry: around 1-2 lac of casting is imported from China which in increasing every year. It’s difficult for Indian foundries to compete with China as govt provides 40% subsidiary.
I think the focus was shifted more to India as ex. MD Viraj Naidu moved up to global position in the group company. If he decides to quit, Will the parent company remains bullish on DIL needs to be seen.
Equity base of company is small and illiquid.

Discl: invested around 9% of Portfolio.

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@Anontrader wrote:

Dear Experts of the Group,

I am a relatively new entrant to the stock market. I would like to know the views of long term wealth builders here, on the currently overvalued stocks like Nestle, Page, MRF etc. I was planning to buy MRF three years back and I felt it is overvalued and see now where it is? What is the best approach in scripts like there? I have an investment horizon of 5-10 years.

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@inxs_22in wrote:

Indostar Capital Finance Limited

About the company

Incorporated in 2009, Indostar came up with an IPO in May 2018. Promoted by Indostar Capital (Everstone group), the company started its business with corporate and SME lending. In FY 2018, they ventured into retail lending by adding Home Finance and Vehicle Finance Business. This is how they introduce themselves on their website –

“We are a professionally managed and institutionally owned organization which is primarily engaged in providing structured term financing solutions to corporates and loans to small and medium enterprise “SME” borrowers in India. We recently expanded our portfolio to offer vehicle finance and housing finance products through our wholly-owned subsidiary IndoStar Home Finance Private Limited.”

About Business

Indostar started its business with corporate lending and SME finance. The share of Corporate and retail (SME) lending in FY 2017 was 87.6% and 12.4% respectively. In 2018 they started Vehicle Finance and Housing Finance under the umbrella of retail finance. This resulted in change in their corporate and retail AUM mix which became 73.7% & 26.3% respectively at the end of 2018. Also they hired Ex-MD of Shriram Transport Finance Mr. R. Sridhar to take care of their retail lending business. Mr. R. Sridhar is the executive vice-chairman and CEO of the company. He is associated with the company since April 2017 and building his team.

Source: Corporate Presentation

Total assets of home loan and vehicle finance as of March 31, 2018 have been around INR 300 Cr. This year, they are targeting a run rate of 100 cr. Per month in VF and around 50 cr. in HF which makes a total of 150 cr per month or 1800 cr of book in FY 19 from these two verticals. Add another 150-200 cr of SME loan in it to arrive at 300-350 cr / month in total retail segment. That makes a book size of 3000+ cr in retail segment for the year 2019. (Source: Company Concall)

Strengths

• Promoters – Promoted by Indostar Capital which is backed by Everstone group and other global investors.

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Source: Corporate Presentation

• Indostar will possibly become a diversified NBFC with presence in wholesale and retail lending.
• 100+ Branch network & 1000+ employees -
• Major Shareholders post IPO – As on 25th May 2018 17.95% shares were held by FIIs, FPI, MFs & Banks. SBI Mutual Fund, Lenarco, BNP Paribas Arbitrage, SBI Life Insurance, ICICI Prudential Life Insurance, SBI Amundi Funds, Fidelity Investment Trust, ICICI Lombard General Insurance, HDFC Standard Life Insurance, Aditya Birla Sun Life Insurance, Reliance Mutual Fund, Bajaj Allianz Life Insurance, Max Life Insurance, Jupiter, Sundaram Mutual Fund & Reliance Nippon Life Insurance. 58.95% is held by promoters and remaining by others.
• Strong Credit Rating –
  
  Source : Corporate Presentation

Business Opportunities

• Retail loan which comprise of Housing Finance, SME Finance & Vehicle Finance to double from here in next 2-3 years.
• Vehicle Finance is going to be the growth driver for next couple of years. As mentioned above, they are primarily into used vehicle finance where yields are high and so are the NPAs however higher yields will take care of high NPAs.
• Focussing on Corporate Lending and vehicle finance business, where yields are high, and targeting it to be around 70-75% of total assets. Both the businesses are expected to have a spread of 600 basis points.
• Low base advantage – They have recently started VF and HF business and the AUM base is low at present. This is going to result in high growth rate in these verticals in the years to come.
• Aggressive expansion – In 2018 itself, company opened 100 branches. This aggressive expansion will ensure high growth in loan book in years to come. In short term it may have negative impact on costs and return ratios but gradually cost will come down and with incremental revenue flowing in; their ratios will improve as well.
• With change in borrowing mix, Cost of borrowing is coming down
  
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  Source: Corporate Presentation

Indostar, with a Market Cap of around 4800 cr. and sales of Rs. 715.54 Cr (expected to grow from here due to aggressive targets in VF business) look cheap on valuation front. CMP of Rs 510 and Book Value of Rs. 262.75 translate P/B to 1.94 which is cheapest amongst NBFCs. Also with EPS of 29.95, PE comes to 17.02 which again is not too expensive for a growing company.

However there are few risk areas which are as follows -

Key Risks

• Interest rate volatility – With interest rates rising in India, this could adversely impact their lending and treasury operations thus impacting their net interest income.

• Execution of new ventures – Not being able to execute newly started ventures could result in adverse impact on NIMs and overall results of the company.

• Increased in NPA

Company’s Gross NPAs were 890.00 million, or 1.7% of Gross Advances as of December 31, 2017,
as compared to 727.34 million, or 1.4% of Gross Advances as of March 31, 2017 and 100.00 million, or 0.2% of Gross Advances as of March 31, 2016.

Company’s provision for NPAs was 182.86 million as of December 31, 2017, as compared to 107.82 million as of March 31, 2017 and 20.00 million as of March 31, 2016. Company’s Gross NPAs and provisions have increased in recent periods and may continue to increase in future.

• Exposure to specific sectors – Housing finance (HF)/Real estate are the sectors which are not doing well these days and in used vehicle finance business deviation (NPA) is usually high. For Indostar, HF and SME segments have low yields and have a spread of around 200-250 basis points. These two verticals are going to drag down overall yields for the time being.

• Dependence on key Person – Hired Mr. R. Sridhar, Ex-MD of Shriram Transport finance to drive its retail foray. He is the key person as of now who is driving the retail lending growth. Over dependence on him is another key risk factor.

• Competition – Most of the verticals in which company operates in except Used VF business are such where there is high competition mainly from banks, HFCs, MFIs and NBFCs. In Corporate lending business, existing players Edelweiss, L&T and in real estate we have Piramal, PNB Housing & L&T to name few.

• Regulatory Changes – NBFC business is a regulated business and any change in regulations may adversely impact the company.

• Macro Factors – Sale of commercial vehicles (CV) is positively co-related to various macro factors like GDP growth and per capita Income etc. Any deterioration in Indian/Global Macro picture can adversely impact of CV sales and business verticals like Home Finance, SME & Corporate Loans as well.

Company details

Registered & Corporate Office: One Indiabulls Center, 20th Floor, Tower 2A, Jupiter Mills Compound, Senapati Bapat Marg, Mumbai - 400013, Maharashtra, India
Telephone : +91(22) 43157000, Facsimile : +91 (22) 43157010
Contact Person : Jitendra Bhati, Company Secretary & and Compliance Officer
E – mail : investor.relations@indostarcapital.com
Website : www.indostarcapital.com

Disclaimer: - I’m not a SEBI registered Investment adviser and this is not an Investment Advice. I have recently taken a tracking position in this company and my views are positively biased. Please consult your investment adviser before Investing.

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@dc2727 wrote:

The company is in the business of production, manufacturing
and dealing in Kitchen appliances and Kitchenware which is
one such sector within the overall household segment that
has been in the limelight in recent past. Kitchen appliances
are gaining popularity due to the rising disposable income
and changing lifestyles of people, which in turn is narrowing
the price gap between similar consumer products offered by
different companies. In addition to this, technological
advancements in appliances have also catalyzed the growth
of kitchen appliances market. Easy and functional appliances
are the need of the hour, which has led to the development
of smart, standardized and efficient appliances. All products
of the Company are ISI certified and are sophisticated to
bring the age old domestic appliances to a new height. The
legendary products of the Company like BLOWHOT, ONLINE
reflect the sophistication of the products and the reliability
as well as exquisite look due to modernization of the design
of the product.
Changing household and commercial lifestyles, economical
availability of electricity, rising concerns regarding ecofriendly
appliances are expected to be the key drivers of the
kitchen appliances market size. Development of ecommerce
distribution channels, emergence of Information
technology and other smart technologies will support the
overall kitchen appliances market share in to 2023.
The company has only one segment of Home Appliances and
the products considered as part of the segment are, LPG
stoves, Gas Hobs, Gas geysers, Water Heaters and Kitchen
Chimneys.

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@siyaram7 wrote:

Hi All,

Please share your thoughts on this lesser know future group company, Here are some few points-

Praxis Home Retail ltd. a.k.a HomeTown ( A Future Group Co)

• Market cap 450 cr

• Demerged and listed on Jan 31 2018 from Parent Future Retail (Market cap - 25000 Cr)

Business - Furniture, Home improvement, Decor, Furnishings, Kitchenware.

Q1 Numbers - 158 Cr Turnover, Not in Profits yet.

Presence in -
Brick & Mortar - As HomeTown in 50 Cities in india.
E-commerce - www.hometown.in

Market Size and Forecast

• 20bn$ Furniture industry with 90% unorganized (Play for unorganized to organized)

-The market is expected to expand at a CAGR of 12.91% during the forecast period of 2016-2023. India furniture market growth is driven by various attributes such as rising trend for modular and state of the art furniture among the population living in urban cities, growing urbanization in Indian states, rising demand for durable and hybrid seating furniture. Moreover, the rising growth of wood industry in India further compensates the price of furniture. On the back of these factors the furniture industry is expected to propel in India. Further, the rising trend of online and mobile shopping in India is envisioned to bolster the demand for furniture through online channels.

• Aadi Financial AdvisorsLLP (Akash Bhanshali) holds 2.84 % stake as of June quarter 2018.

-Promoters holds 56.84% stake and have increased stake by 10% in last 1 quarter in open market purchase.

Disc- Not yet Invested

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@Yogesh_s wrote:

Story

HDFC AMC is the largest asset management company in terms equity-oriented AUM and second largest AMC in terms of overall AUM. Its focus is on mass affluent consumers who are increasingly investing in equity markets as a form of long term investments in addition to traditional investment options like bank deposits and real estate. HDFC AMC is thus a direct play on financialization of savings in India.

As of March 31, 2018, company served customers in over 200 cities through pan-India network of 209 branches and a network of over 65,000 empanelled distribution partners across India, consisting of Independent financial advisors, national distributors and banks.

Key Performance Indicators

Table below shows the assets under management for last 7 years.

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Source : IPO Prospectus

Company’s AUM has grown at a CAGR of 24% over the last 5 years, in line with industry but its equity-oriented AUM has grown at a faster rate of 37% over the same period. Majority of the assets are managed as mutual funds while AUM of PMS and other services is negligible. Company aims to serve mass affluent customers using mutual fund route rather than HNIs using PMS, AIF or other services.

Over the last 5 years, share of AUM from individuals has steadily increased from 55% in 2013 to 62% in 2018. Table below shows break up of AUM by catagory of investors and number of individual investors served by the company.

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Source : IPO Prospectus

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Source : IPO Prospectus

As the table above shows, number of individual investors investing in mutual funds has steadily gone up over last 5 years. This trend is expected to continue.

Company offers equity, debt, liquid, index funds, ETFs and closed end funds. Over the years % of assets invested in equity oriented schemes have made up a larger share of total AUM. Table below shows annual average AUM by type of asset class.

Source : IPO Prospectus

Company sources its customers using independent financial advisors, national distributors, and banks. A growing number of customers are investing directly with the AMC and AMC is passing on the cost savings to the cutomer in the form of low expense ratio. Following table shows breakup of AUM based on source

Source of AUM	Total AUM	Equity Oriented AUM
IFAs	28%	39%
National Distributors	21%	24%
Banks	17%	19%
Direct Plans	34%	18%

Source : IPO Prospectus

Although historical data is not available about direct plans, I feel higher proportion of direct customers will be beneficial to both AMC and customers.

Company has been offering mutual funds for more than 25 years and many of the company’s flagship schemes have generated strong track record. Table below shows some of the popular equity funds.

Source : IPO Prospectus

Company has also demonstrated its skill in managing large amount of funds and beating the benchmarks consistently. Table below shows alpha (excess return over benchmark) generated by company’s schemes.

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Source : IPO Prospectus

Systematic Investment Plans
SIP is a disciplined, risk mitigating and a convenient way to invest in mutual funds regularly. Many of company’s customers generate monthly surplus that they can conveniently and automatically invest in mutual funds. It provides a stable source of funds to the company. SIPs have been gaining in popularity over last 2 years and this trend is expected to continue. Table below shows trends in SIP.

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Source : IPO Prospectus

Financial Statement Analysis

Income Statement

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Company has been able to grow its top line and bottom line by a CAGR of 19% over the last 5 years with little volatility even when equity markets have been volatile over this period. Company’s AUM is linked to market but incremental sales has more than offset drop in market value of its AUM. This trend is also likely to continue provided volatility remains low.

Company’s major expenses are employee costs and business promotion expenses (which are included in other expenses). Expenses are more or less constant so company will see operating leverage as its size grows over time. Employee costs as a % of sales have been declining for years.

Balance Sheet

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Company has a clean balance sheet with no debt and low receivables. This business does not need fixed assets and most of the company’s assets are investments, which are invested in its own funds. Unlike Reliance Nippon Life AMC, there are no interoperate deposits.

Cashflow

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Company generates enough cash to grow the business and still has enough money left to pay 50% of profits as dividends.

Dividend policy.

Company has regularly paid dividends and is expected to pay 40-50% of profits as dividends given its high profitability and reinvestment requirements.

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Profitability

Company has consistently generated ROE in excess of 40% over last 8 years.

Valuation

Due to its high dividend payout ratio, I have used dividend discount model to value the company. Assuming a growth rate of 12% over next 10 years and a gradual slow down to 8.5% over next 10 years and a discount rate of 10.8%, fair value works out to be approximately Rs 1450 vs current market price of 1750. Stock is approximately 20% overvalued. However, given its long runway, investors are willing to pay next year’s price today.

Investment Rationalle -

Long runway - Popularity of equities as asset class is growing in India due to better awareness, poor performance of other traditional assets like real estate and improving governance level both at corporate india and capital markets. However, equities only form a small % of total household savings in India. Mututal Funds is a popular way for masses to invest in equities as most investors will not be able to build their own portfolio.
Brand Name - HDFC has a strong brand name in India and it will help the company grow its AUM and pay less commission to distributors.
Invisible Revenue - I couldn’t find a better name for this but the mutual fund customers do not even realize how much they are paying to the AMC. This is perhaps one the few industries where customers aren’t even aware of what they are paying. This is a truly win-win situation. Customers get a higher return on their investments than all other alternatives they have and AMC gets revenue without even sending a bill to the customer.
Growing consumer franchise - Company’s proportion of AUM from individual customers is growing as a % of total AUM. This should help in reducing pricing pressure (as institutions are likely to bargin for a lower price), reduce churn as individuals are less likely to switch AMCs often and build a strong loyalty that might get passed down generations.
Scarcity Premium - HDFC AMC is one of the only 2 AMCs currently listed in India. The other AMC is Reliance Nippon Life AMC. Compared to Reliance Nippon Life AMC, HDFC has better growth, more individual customers, higher % of equity AUM and better corporate governance. All these factors will result in higher valuation.

Risk factors:

• Market risk - Company’s revenue is linked to AUM which in turn is linked to level of equity indices and interest rates. During bear markets, AUM may drop, new investors may not join and revenue can drop while costs will largely remain constant. This can result in a sharp drop in profits. Over the last few years, new sales have more than offset drop in average annual AUM during bear markets however there is no assurance that such trend will continue.
  Debt funds form majority of AUM. While expense ratio of equity funds is stable, expense ratio charged to debt varies based on market conditions and competition. In case of sharp interest rate rise, company will have to drop expense ratios on debt funds.

• Concentration Risk - A small number of schemes represent a significant portion of AUM. As on March 31, 2018, top six equity-oriented schemes constituted 79.1% of total equity-oriented AUM and top six debt schemes constituted 65.5% of total debt AUM.

• Alpha risk - Company’s funds may not be able to beat their benchmarks and may be be rated low on their performance by rating agencies. Such ratings have significant impact on sales. Historically, company’s funds have beaten their respective benchmarks but world over mutual funds have trouble beating their benchmarks. Company’s equity-oriented AUM is growing faster than overall market cap of indian equities so company may have trouble beating benchmark with a higher AUM base.

• Risks from Passive Funds - Over last decade, passive funds have gained popularity around the world because actively managed funds have not been able to beat their respective benchmarks. In India, passive funds are not very popular as active funds have done well and are sold by distributors who are unlikely to push passive funds due to low commissions. However, passive funds have significantly low expense ratios so growing popularity will dent profitability of AMCs.

• Mis-selling Risk - Over the last 2-3 years many investors have invested in mutual funds for the first time primarily based on advice from their financial advisors. These advisors are paid a commission by the AMCs and may have mis-sold funds to investors who do not understand risks of investing in these funds. Such mis-selling although has resulted in short term boost to the sales, can have long term negative impact on the growth of the industry.

• Regulatory Risks - AMCs earn their revenue by charging expense ratio to funds. SEBI has capped the rate at which such expenses can be charged. Expense ratios in India are already among the highest in the world and SEBI is likely to reduce the cap over time. HDFC being the largest AMC, will be able to mitigate this risk due to its scale.

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@utsav08 wrote:

This is my first post on valuepickr so am pretty excited and pretty sure that i will be making mistakes so pardon me for that and i will try to make amends as soon as possible.
The company we will be talking about is TAAL ENTERPRISE (BSE CODE:539956)
Background-
• It was a merged entity with taneja aerospace which went for a demerger during the mid of 2015.
• They were the first in INDIA to manufacture light transport aircraft in 1992 and then set up an academy for flying in 1994. (taneja aerospace)
• TAAL TECH is a niche engineering & technology solutions provider.
Mcap – 73 crs. (approx) Price – 235

The company is mainly into engineering design service. It is also engaged into Air charter services which due to licence issues is being operated by taneja aerospace and avaiation(TAAL).

(As per Clause 9.2 of the Scheme of Arrangement as approved I sanctioned by the Hon’ble Madras High Court on October I, 2014, Taneja Aerospace and Aviation Limited (TAAL) will carry on the business and activities relating to the demerged charter business for and on account of and in trust for T AAL Enterprises Limited (TEL) until the time TEL obtains the requisite statutory licences required for carrying on the demerged charter business. The said licences are yet to be obtained and accordingly the demerged charter business has continued to be operated by T AAL in trust for and on behalf of TEL including banking transactions, statutory compliances and all other commercial activities. Accordingly, the accounting entries pertaining to the demerged charter business are accounted in the books of account of the Company)

The air charter service has seen a revenue growth of around 23% from 7.14 crs to 9.28 crs and from a loss of around 3.37 crs it has posted a profit of around 1 crs. (which is mainly because of an other income of 3 crs.).leaving the other income if we calculate this segment would have reported a net loss of around 2 odd crs. Overall this segment is an hang on the company’s financials and the company would be better off striping this segment off.

There are multiple triggers for this business like there are far off locations with poor connectivity and projects in backward regions but the company has not been able to capitalise on it because there are very low entry barriers in the industry. As a result there are a few international players who own mixed fleet of aircrafts which are economical for short routes. In short they have not been able to make a mark in the industry as such.

The main business which caught my eye was the engineering design service which has been growing steadily for the past few years and this time reported a 18% increase in total revenue and a profit jump of 32%(The reason i say it is 32% is bcoz there ws a total other income of 8 crs of which 3 crs was for air charter division so the remaining 5 crs must have come from the EDS business so the profit from this segment comes to around 15 crs.)

TTIPL is a niche Engineering and Technology solutions provider serving global corporations in their pursuit for faster innovation and technological excellence. TTIPL provides Product Engineering Services, R&D Services and IT Services customized to the specific needs of every individual customer.
Over a period of three years i.e the company has clocked a CAGR on sales at 27.25% and PBT of 159%. The company is growing steadily and should continue to do so. Do not have too much info about this company but in hindsight the company seems to be performing well.
From a profit of 30.78 lakh in 2014-15 the company has clocked a PBT of 15.87 crs.(excluding other income).

Key risks
• Dividend payout is good but too much of dividend payout is a problem first they approved a rs 25 dividend and now they are recommending another 50 rs.
• The air charter business is a big overhang on their financials. Maybe it can change when it comes under their supervision but that remains a question to be seen.
• Their is not much info about their engineering division available and there is not much info about it in their previous annual reports as well. Waiting for this years annual report to get some insights.
Disclosure – am invested from 220 levels with around 3% of my folio and this post is just for informative purpose. Please consult your financial advisor before investing.

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@anubha wrote:

Grauer & Weil (Growel)

CMP as on 15/08/2018
Rs.51.65/Share
Stock P/E
18.36
Mkt Cap (Rs cr)
1171
52 weeks High / Low
85.5/39.0
Face Value (Rs)
1
Debt to Equity
0.02
Promoter Holding
68.98%
Promoter Pledge (%)
0%
Credit Rating
CARE AA-

Company Description
Established in 1957, Grauer & Weil (Growel) is basically a Electroplating & Speciality Chemicals and Engineering Equipment company. In 2005, Growel ventured into Real Estate development and built a sprawling 475000 sqft Shopping Centre in the Western Suburbs of Mumbai. In 2007, they have added Protective Coatings & Industrial Lubricants into their Portfolio. Electroplating is widely used in Automobiles, Jewellery, Consumer Products, Gems etc.
You can follow this link to understand basics about Electroplating:

Growel’s products find use in nuclear, defence and space sectors and counts Bhabha Atomic Research Centre, HAL and Isro among its clients.
The company has a small high margin aviation business supplying specialised components. In the paint business, it is into specialised paints which cater to pipeline coating, underground/underwater pipeline coatings etc. The engineering division offers turnkey solutions for effluent treatment.
The company also has a 99 year lease on 2 acres of prime Chembur land which currently houses only the R & D centre.

MANAGEMENT PROFILE
(Source: ICRA rating report)
The More family, promoter of the Growel group, took over this company in 1969 along with the Goenka family. Later, in 1991, More and Goenka families had split and GWIL was retained by the More family Mr. Umesh More (Executive Chairman), an automobile engineer from U.K. has been heading the business and possess vast experience in the electroplating industry. Later, he is assisted by his son Mr. Niraj More (Managing Director) a Bachelor of Business Administration from U.K. Under the present management, GWIPL has diversified to have multiple business segments along with six manufacturing facilities and two research centre. Besides, GWIL has an experienced team with well qualified professionals heading various functional departments.

FINANCIAL PROFILE
GWIL’s top-line grew to Rs 5.6 bn in FY18 from Rs 4.6 bn in FY14.
During FY18, company recorded a 15.7% growth in Net Revenue, PBT registered a 18.4% and NP grew by 9.6%
Company is virtually debt free, it has been reducing its y-o-y.

Key Highlights
Paint Segment growth is highest amongst manufacturing divisions of the company, registering a growth of 24.87% from Rs. 729.03 Million to Rs. 910.32 Million. The Company has been able to establish a strong foothold in the Oil & Gas and Water Pipeline segments of the business. The new manufacturing plant set up at Dadra could achieve almost full capacity by the end of the year. Buoyed by the healthy growth and successes with strategic customers, the management is in the process of doubling the manufacturing capacity.
Mall segment is seeing increased occupancy, key cash generating business of the company
Moderate growth seen in Chemical segmentDegrowth of 8% in engineering segment
Lubricant segment yet to bear substantial fruits
Company spent Rs.94m in capex for FY18
Working capital has increased, but company doesn’t have much debt
ROE above 20% in last 4 years. Better capital efficiency leads to shareholders wealth creation, stock rallied 1200% in last 5 years.
GWIL has a few acres of surplus land, whose market value exceeds the company’s market capitalisation. This means at current valuation one is getting the stock virtually free.
Company is able to covert its profits into cash flows.

Disclosure – I am not SEBI registered, this is for information only do your research before investing.

You can also visit by blog here at http://www.valuespicks.com/2018/08/grauer-weil-growel.html

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@srnarayan wrote:

Incorporated in 2002, Fine Organic Industries Limited is a company engaged in manufacturing of oleochemical-based additives (Oleochemicals are chemicals derived from plant and animal fats. They are analogous to petrochemicals derived from petroleum). The company produces a wide range of specialty plant derived oleochemicals-based additives used in the food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries sold under the 'Fine Organics’ brand.

FOIL is the largest manufacturer of oleochemicals-based additives in India and a strong player globally in this industry. It has 631 direct customers and 127 distributors from 69 countries. The company has a well-diversified and reputed customer base. In the petrochemical segment, FOIL caters to companies like Reliance Industries Limited, GAIL, Haldia Petrochemicals Limited, SABIC (Saudi Arabia), Petronas (Malaysia), Braskem (Brazil), Petkim (Turkey), Quapco (Qatar), Exxon Mobil, Dow Chemicals, etc. Further, in the foods segment, the company supplies its products to companies like HUL, Mondelez, Coca Cola, Britannia, Parle, etc. No customer accounts for more than 5% of the overall sales.

Specialised products and business model:
Manufacturing additives from base oleochemicals is a highly complex process as it involves technical know-how and R&D for product innovationwhich makes specialty and formulated products difficult to replicate. This provides it with a significant advantage over new entrants, as they would need to invest a great deal of resources to gain a foothold in the markets.

Industry is largely Oligopolistic in nature:
Presence of Multiple entry-barriers such as product formulations, process technology and customer stickiness to established players. All the established players are enjoying their first-mover advantages. For an entry into this industry, new players won’t be able to procure product formulations and process technology from established players, which are reluctant to share their technology and other intellectual properties.

Strong R&D capability with a focus on innovation:
FOIL has created new additives and downstream products, such as Acetem, Datem, and Lactem. It is in the process of developing a downstream product called Citrem, which is a hydrophilic (attracted to water molecules and water-soluble) emulsifier used in the confectionary industry. R&D efforts are driven by customer needs, in terms of meeting specific needs that its direct customers communicate to the company prior to us manufacturing its products. Since 2014, contribution of new products developed through R&D was 0.02%, 0.13%, 0.74% and 1.13% of sales respectively.

Strong Financial Track Record with continued improvement in operating performance:

Rs.Crs	FY13	FY14	FY15	FY16	FY17	9MFY18	CAGR
Revenues	496	568	616	658	786	585	9.5%
EBITDA	52	116	118	155	150	116	24.5%
EBITDA margins	10.4%	20.4%	19.1%	23.5%	19.1%	19.8%
EBIT	40	105	95	125	126	101	27.3%
EBIT margins	8.1%	18.5%	15.4%	18.9%	16.0%	17.3%
CFO	49	3	79	113	52	69	13.5%
PAT	21	63	59	77	79	63	31.9%
EPS	7	22	20	25	26	27	38.0%

Rs.Cr	FY13	FY14	FY15	FY16	FY17	9MFY18
Net debt	93.5	98.3	92.9	55.4	26.0	9.5
Capital Employed	165.4	248.1	251.9	310.1	314.4	372.9
ROCE	24.4%	42.4%	37.8%	40.2%	40.1%	36.2%

Operating performance reported by the company has been robust driven by the successful commissioning of its new manufacturing lines coupled with healthy demand indicators for its products in the domestic and export markets. Further, debt has reduced consistently over the last few years and a large part of the company’s current debt includes unsecured promoter loans. With efficient supply chain management, FOIL consistently has exhibited a good ROCE level since past many years.

Expansion of production facilities and strategic JV tie-ups to augur next phase of growth:

FOIL currently has three production facilities: one in Ambernath (Maharashtra/ Plant 1); one in Badlapur (Maharashtra); and one in Dombivli (Maharashtra). The company also manufactures some of its products on contract basis through its group companies at its second facility in Ambernath (to be taken over by FY18 end).

a) FOIL is currently planning to set up an additional production facility in Ambernath (plant 3) with a planned installed capacity of 32,000 tonnes per annum funding through 2.3:1 Debt/Equity mix.

b) Patalganga and Ambernath Plant 4 – Preliminary Stages of Planning:
i) The Patalganga Facility will have a planned initial installed capacity of 10,000 tonnes per annum for additive products. FOIL has not yet decided on a date of commencement of operation for this facility. The estimated cost of setting up the Patalganga Facility is Rs. 50crs .
ii) In December 2013, FOIL paid Rs.24.2crs for a plot of land on which it plans to build its Fourth Ambernath Facility. This will be capable of manufacturing additives for food, plastic, cosmetics and other specialty additives. (Capacity details currently not decided).

C) Fine Zeelandia Facility:
Fine Zeelandia Private Limited is a 50:50 joint-venture between FOIL and Zeelandia International Holdings B.V.’s, a Dutch company which distributes range of premixes for bakery and confectionary products and pan release agents in India, Sri Lanka, Bangladesh and Nepal, but does not currently manufacture these products. The Fine Zeelandia Facility will produce premixes for bakery and confectionary products and pan release agents. The Fine Zeelandia Facility’s initial installed production capacity will be 10,000 tonnes per annum the estimated cost of the Fine Zeelandia Facility is Rs.60 crs to be funded in debt-equity ratio of 1.7:1 (FOIL’s equity share being Rs.11.3crs and rest investments by Zeelandia).

D) Fineadd Facility:
FineAdd is JV with Adcotec, to own and operate plant in in Leipzig, Germany. FOIL plans to manufacture specialty food emulsifiers and other food additives at the German Facility to be sold to direct customers and distributors in Europe. FOIL expects the German Facility to commence operation by the third quarter of Fiscal 2020 and it has a planned initial installed capacity of 10,000 tonnes per annum. The financing arrangements for the German Facility have not been finalized yet.

Experienced management team with technical know-how:
FOIL is led by Prakash Damodar Kamat, the co-founder and Chairman, who has more than 4 decades’ experience in the oleochemical-based additives sector. Further academic credentials from UICT Mumbai also give comfort in promoters who are technocrats and have the know-how in the oldeochemicals industry.

Key Risk:

a) Largely fixed nature of contracts (albeit LT in nature) exposing companies to volatility in RM prices

Primary raw materials are derived from vegetable oils, including rapeseed oil, palm oil, palm kernel oil, sunflower oil, castor oil, soybean oil, rice bran oil. The company enters into ST contract arrangements with its suppliers (<6 months) which exposes it to RM volatility risks. Further, most of the contracts FOIL has with its customers are LT in nature but are albeit fixed in nature (ie. Lumpsum contracts and without any minimum offtake arrangement). They also contain a meet or release’ provision, i.e., a provision pursuant to which a purchaser may terminate the agreement if FOIL does not agree to meet any lower offers that the purchaser receives from other suppliers which could also result in cash flow volatility.

b) Supplier concentration risks:
Heavy reliance on few suppliers which can indicate stringent payment terms and limited bargaining power also prone to risks of steady supply of procurements.

VALUATIONS:
The company claims to be amongst the few suppliers for its products globally.

At current multiples of ~ 17x stock is neither expensive nor too cheap. However with growing applications for FOIL products and with new capacities coming on stream in next few years expecting valuations to improve.

Additional references:

Oleochemicals.pdf (155.9 KB) (Source: Broker Reports)

Investor-Presentation-30-Jul-17.pdf (537.5 KB) (Source: Investor Presentation Fairchem Speciality Chemicals)

Views Invited
Disclaimer: Invested. These are purely my investment strategies and not a general recommendation of buy or sell. Please do your research before investing. All company references taken from DRHP.

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@dprashant wrote:

I just came across this company " Dixon Technologies" , could not find any thread about it so starting this new thread.
Dixon is in to contract manufacturing of consumer durables ( LED TV , Lighting ( LED , CFL bulbs ) and Semi Auto washing machines and Mobile phones ).
The manufacture for Panasonic, Philips , Lloyd , Geone etc. brands.
Company derives 78% of its revenues from OEM division which basically is pure play contract (design given by OEMs ) manufacturing and remaining 22% revenues form ODM segment where they design ,R&D , make the products which in turn gets distributed by others under their own individual Brand names.
they seems to be the largest player for LED , CFL and they supply to all the known brands such as Crompton , Philips , Syska , other few.
They are also largest player for security camera and DVR , they have their JV with another company whose name I am not able to recall but have seen their Ad on TV ( tagline - upper wala dekh raha hai )

Company came out with its IPO around a year back ( Aug,2017 ) at around 1760 rs / share. the stock got listed at around 50% listing gain.
currently stock is trading at 2500 rs.

company is growing 30% / year since last 3-4 years and expected to continue the growth momentum for another 3-4 years.
At current price the Market cap is ~2900 cr and annual sales of the company is ~2800 cr.

the operating margin of the company is very low at around 4.5% , however according to management they have done the backward integration for manufacturing of various product line and that along with operating leverage will help improve and increase the OPM.

According to their CFO ( x-VP at PVR ) , while they source/import their raw material but currency depreciation doesn’t impact their OPM much as they have clauses in the contract which allows them to pass it on to the OEMs with leg effect of 2-3 months max.

Management and Board members seems all professionals ( none of the members shares their last name with other members : . seems none from chairman’s family is on the board or at an of the key management position.

I haven’t done too much of research on financials , but it appears to be generating positive cash flows and capable of funding it capex. ( all most all the debts are paid out from the IPO proceeds ). and it does not have any significant debt as of now.
all the expansion required for next 2 years is already planned and expected to go live by next 2-3 months max.

according to their MD ( one one of the interview on CNBC Awaz ) has mentioned that they managing it with negative working capital of 2 days during Q1FY19.
I don’t consider myself very good at analyzing financials so request seniors to please look in to it to validate/suggest.

I could not come up with any significant negative except that , it being a technology business things changes very fast and leader of today can become laggard of tomorrow very quickly , however they aren’t in to niche are as most of the products in the consumer durables are more of a commodity now a days and if they have survived for last 24 years there is no reason they cant survive for another 20 years , specially at the time when the consumer durable segment is expected to grow at 20% CAGR over next few years.

Govt. spend on security camera , LED etc. can provide additional additional impetus to the growth.

this is my first post as I have joined VP just around a week back so would appreciate any suggestion w.r.t it so can work to improve details etc. to be covered in posts.

looking forward to your views.

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@basumallick wrote:

WPIL is in the business of water pumps

• The company is engaged in the business of fluid handling – from supply of pumps to turnkey project execution. It supplies a comprehensive range of pumps to the Industrial, municipal, irrigation and power sector. The company also has a strong project division which undertakes water management contracts in the above sectors.
• Promoter holding increased from 66% to 68.8% on Mar-2018 to Jun-2018
• About 33% of revenues come from Pumps and 66% come from spares & accessories. About 60% of revenues come from overseas subsidiaries / clients outside India
• WPIL has ~20% market share in domestic conventional/engineered pumps in power, irrigation, city and industrial segments. It is the only dominant player in sewage and slurry pump (Government projects like Namami Ganga and clean Narmada in addition to most of municipal corporations going for sewerage treatment plants).

The co has 3 main divisions and strong international operations
Engineered Pump Division

• Offers specialized water handling solution to conventional power generation, nuclear power solutions and industrial sector.
• In FY18, supply of firewater pump package to ONGC, large axial flow submersibles to Thailand, metallic volute pumps to Telengana Irrigation was done

Conventional Pump Division

• Standard pumps, largely utilized in the irrigation and water treatment systems
• In FY18, execution of a major package for Telangana Water Grid, large order for Royal irrigation Dept., large number of high horsepower Submersibles for irrigation and water supply was done.

Infrastructure Division

• Revenues of 170 cr in FY18
• In FY18, execution on large water distribution projects in Madhya Pradesh and Rajasthan and an Irrigation system in Africa was done

International Operations

• Company closed its operations at Mathers UK in July 2017 due to the continued downturn in the offshore oil market. The consolidated operations results were significantly affected by these onetime closure costs.

The co has many subsidiaries across geographies

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Subsidiaries are key to operating performance and margins

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Mathers Foundry has been closed down, so FY19 will see losses removed from it
Strong performance from Grouppo Aturia is expected to continue

Operations show improvement
Sales, margins and profits are on an uptick

Receivables & Debt seem to be a significant problem
Debt has reduced significantly from the past, but continues to be very high.
Receivables % is down to historical average levels, though still quite high on an absolute basis
Receivables % is down to historical average levels, though still quite high on an absolute basis
In 2018, receivables > 1 year has jumped nearly 3x

All return ratios are improving; current ROE is less than half 2009-2010 ROE

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Recent ROE improvement on the back of increasing margins

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Risks & Issues

• Company has very high debt.
• Company has about 19% of receivables which are pending for more than 1 year.
• Performance of the company depends on infrastructure spending. Any reduction can impact the prospects.
• Since the performance is linked to infrastructure there is cyclicality in results. The company works across geographies to minimize such risk.
• Currency fluctuations can alter revenues and profits as a large proportion comes for subsidiaries
• As the company operates across many countries, political & currency stability is important for the company.
• Company operates in a space where expenditure by clients is mainly discretionary. During down cycles, demand can shrink drastically.
• The company does not publish consolidated results on a quarterly results. It is difficult to understand & track operations across subsidiaries.

Long term price chart shows a new high

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Financial details

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Disclosure - Details of Financial Interest in the Subject Company:
I may or may not hold the stock of the company discussed above in my personal portfolio. Please consult your financial advisors before taking any buy/sell/hold decision. I may change my opinion post publication of this note and may not be able to update because of time constraints. The post is for educational purposes only. It is NOT a buy/sell recommendation.

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