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Note: The artciles are not research reports but assimilation of information available on public domain and it should not be treated as a research report.

Registration status with SEBI: 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”

Disclosure: It is safe to assume that I might have the dkiscussed companies in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments
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Saturday, November 26, 2016

Dubai Workshop and the amazing small cap multibagger

Finally our first International ShareBazaar Workshop comes in Dubai in 2nd week of December. Register folks here:- tinyurl.com/qgfcqaz Guess the stock folks:- · In 1991 the company graduated from the traditional business of Iron & Steel trading with investment of Rs 30 lakhs and than ventured into manufacturing of bead wire for tyres. · Current annual capacity is at 30000 MT each both in India and Thailand plants. Both can go up to 48000 MT each if required. Currently they are operating at 82% utilization levels. · Currently 85% sales are contributed to Tyre Sector and rest is attributed to value added products. · For tyre companies its products constitute around 3% of total expense hence they always prefer to go with superior quality products since it very important component of tyres . · The company had a technical collaboration and joint venture agreement with Gustav Wolf, Seil-Und Drahtwerke GmbH & Co of Germany, which was terminated in the first week of October 2003.They had 25% stake in company and promoters bought that stake in 2003. · Currently in India company's market share is 39%, Tata Steel is 25% and Aarti steel is 12%.Aarti steel is a Ludhiana based company and is much bigger in size compared to My today's pick. But they have other business also hence this business is small part of their total sales. · All major tyre companies are clients for the company. · Current Thailand market is of 5000 Mt size and company’s market share is 20%. Till now company was supplying on to small players in thailand market since they were in process of getting approval from big players. They plan to get 50% market share on ASAP basis. · A high carbon wire is their major raw material. · Entry barriers in this business are big since approval from Indian tyre companies take 4 years and Japanese companies take 5 years for approval. · Thailand Plant was set up in 2008 and took 8 years for break even. They invested $13 million at that point of time. · Company is only player in Thailand Market for bead wires business. · But recently company has got approvals from Sumitomo and Bridgestone hence their sales have shoot up in Thailand markets. In last year they did sales of 17000 tonnes in Thailand with gross profit margins of 50%.Sales realization was at Rs 60000/tones. · In last financial year Company did sales of Rs 180 crores of sales from Indian markets and Rs 100 crores sales from Thailand markets. · In Indian Market company has done EBITDA margins of 12% and Pat margins of 5% in bad times and EBITDA margins of 17% and PAT margins of 9% in good times. · Company expects improvement in sales for 40% in Thailand 12% in Indian markets. · In Thailand they have accumulated losses of last 8 years hence they don’t have to pay taxes for next 2 years. · Company is trying to get Michelin tyres as a client for their business in Indian Markets. · Sumitomo currently consumes 9600 tonnes/ year of Thailand capacity which is good part of sales generated from Thailand plant. Sumitomo’s 50% business requirement is fulfilled by the company in Thailand. · Bridgestone consumes 2040 tonnes/year in Indian market and more than 8000 tonnes/ year in Thailand Markets. · Over next 3 years capex required is Rs 20 crores in Thailand market. · Overall Industry size is 1.2 MT and Company constitutes only 5% of overall Industry hence there is big scope of improvement. Kisewires from Korea and Bekert from Belgium are the Global giants in this business. · Thailand business have become profitable from this year hence company is going to approach local Thai banks for restructuring existing loans which is currently services by ICICI bank. These restructuring will help to reduce interest cost by 7%-8% for debts taken related to Thailand plants. · Overall capex required is $1 million for installing 1000 tones plant. · Working Capital requirement is 120 days in India and 90 days in Thailand Plant.

Wednesday, September 28, 2016

The turnaround Capital goods bet with Multibagger potential

The company was suggested to the premium members few weeks ago. It has moved a good 30% since then. Still looks a company with multibagger potential. People interested for our coming Mumbai workshop as well premium small cap services pls fill the below form. For assistance do whatsapp/contact Ujjal at 9831291631 or dip at 9007652301.

AGM Updates:-

Improvement in operational efficiency by reduction of manpower and raw material cost (thereby improving ebidta margin). Being 70 yr old co., the cos main strength is offering diverse product range & designing and customising products according to the clients requirements. Supplying products & services to almost all the Fortune 500 companies.

Improving topline and market share in Railways & Defence segment, incurring R&D expenses to develop and introduce new technology driven products and thereby improve application of product line in steel, sugar, textile, cement, energy etc. Trying to get back in defence business where we were 15 yrs ago. Looking forward for better results in Q3 and Q4 due to good order inflow for (Mysore plant for oil fill transformers) and growth seen in the abovementioned sectors. Getting orders (revenue) is not a problem for the co, main aim is to reduce the working capital debt and interest burden cost & improve distributor network. Certain defence orders are in L1 stage(lowest bidder in tenders).

Expect huge market for renewable energy in India. Cos top mgt executives have been touring and meeting power station companies.

The co will bid for a Water Grid project (Irrigation scheme - provide drinking water from various rivers near AP to all its various cities) and expecting to get an order worth 50 Cr in Telengana state for supplying 1000+200 high and low voltage Pump Set (of 12 Lac each). Execution will come in Q3 & Q4. Recently, the co has got solar project order worth 60 Cr. It is the biggest opportunity for revenue growth.

Restructuring undertaken with banks in 2014 for working capital and improving cost of capital. The co has been gradually reducing the Deposits (of 24 Cr) and ICD (of 22 Cr).

Make company debt free over a period of time by disposing non core real estate assets of the co. in Hubli of 100 acre near hubli airport, initially earmarked 20 Cr, which will fetch them 120cr (waiting for approval from the state govt to ride over the crisis), Mysore - 5 sites worth approx 50 Cr, Regional Office spaces in Delhi, Hyd, Pune, Bglr etc. (probable model to be adopted by the co. is disposing of and taken back on rental basis). Reducing debt with corporation bank.

Total real estate non-core assets of the company is more than 1000 Cr.

My view: Recent step taken by the mgt regarding sale of treasury stock worth 18 Cr and QIP issue of 37 Cr was one of the brave and bold step. It has brought positivity and optimism among all the employees of the company and they will work really hard to bring it back to the top. Initial issue of working capital is solved and they have started concentrating on the business.



Scuttlebutt from the biggest distributor who is with the company for last 20 years:-

If you order LVM motors today u will get it tomorrow. So there is no problem of dispatch in standard motors but if you demand for specialized one then depending upon size, features delivery time gets from 1 month to 6 months.Recent speech from Chairman was fantastic. Expecting very good profit in next 2 years Crompton and abb are also aggressive.This company has huge land bank in banglore and hubli.

•Ravi series is doing good because of terminal arrangement on top & side both available. Earlier only side terminal arrangement was available but now both.70 to 80% more efficiency achieved in ravi series, complaint have came down drastically.In terms of sales & network, the company is like maruti & lupin.They have purchased new land 5 to 6 years back.It is Trying to increase market share.It is trying to hire big guys from market.

2 to 3 wrong people have chaired in the company due to which last 5 to 7 years were not good. New MD had come recently and is cleaning all dust from the company. He removed all wrong people, all inventory were cleaned. Also fired people who were thinking company like government organization.New MD is silent and aggressive. I have personally felt that he is working very hard.In my 15 to 20 years of experience at the company I can definitely say that things are improving sharply and next 2 to 3 years will be fantastic.I am very optimistic.

Trying for new supplier with new people.New MD is pure finance guy and cleaning all inventory.I have personally seen all plants of it and felt that, recently accountability & responsibility has improved for each and every person. Getting quarries from lost customer which is big achievement as of now.In terms of brand, Crompton, this company, abb is preferred (Order).


Summary:-

What happens when a family managed company with good products and a great brand recall changes its PSU approach to be a well managed private one? That's precisely the story of this company.They have given two professional rockstars a free hand to run the show. VB,who was the CFO of the company got promoted to be the MD around 2015. AH,the star salesman with wealth of experience in the industry took the charge of being the sales head. They are churning inside out to transform the company and take it to the coveted league.

The problem of the company started with the acquisition of LDW in 2008,a German company known for its technology. The recession followed which made the matter worse for the company. Inspite of every possible support from the Indian parent the German subsidiary couldn't turnaround. Few quarters back it finally gave up and booked the losses. They have imbibed the German technology and with the sector it caters to looking up,better days finally prevails for the company.

The company posses rich non core assets to the tune of over 1000crs(mostly land parcels and factories which are not needed). They are in active dialogue to dispose of the same worth 400crs and make the high debt entity a debt free one. Over the course of next 2-3 years,Company would be a lean entity with no more interest cost obligations. Would be prudent to note that the present interest cost of the company would be near 40crs.

The end users of its products aka the sugar,power,steel and cement industries have started seeing times changing for good. If your output user marks a rich turnaround,the vendor too will turnaround right? Often common sense is very uncommon,notably in case of retailers in terms of selecting listed entities.

Our channel checks from its dealers network across the country vindicates the point on the demand front. Customers are having a waiting period of 2-3 weeks for its Ac-Dc motors. Dealers also suggests about the renewed focus from the company's end. It has a near monopoly status in "Oil Filled Transformers" where it's seeing huge demand. Last year they did around 18cr sales. This year they already have orders worth 90crs in hand,comes with double digit EBITDA margins.

The company always had orders but owing to working capital crunch they couldn't execute most of it. The condition went so precarious that it had to resort to selling its treasury shares in and around December 2015. It garnered 20crs and finally scripted a turnaround after a very long time. They did a QIP of 36crs recently at 46rs which would further provide relief and help it to achieve the 700crs targeted topline figure.

What's a blessing in a disguise? How about accumulated losses of hundreds of crores in its book which means no tax obligation till it surpasses the accumulated losses within the tax window of 7 years. Management did clarify about no MAT either.

Conclusion: After exactly 8 quarters or in the December 2015 numbers,company finally came in green. Last 2 quarters been profitable too for the company. It targets a 30% growth where its sales are expected to surpass 700crs this fiscal. Estimated EBITDA of 9% gives us a PAT figure of around 15crs(63crs minus interest cost of 36crs and depreciation of 12crs and with no tax obligation). Company quotes at 23 times fy16-17 earnings. Fy17-18 will see it clocking 880-900crs of sales with higher margin orders. EBITDA expected of around 11% makes the company quote at just 7 times. Turnaround bets are greeted with higher valuation and with the company catering to core sectors,it would always quote in a range band of 15-20. Peers group which are notably the behemoths,your Alstom,Siemens and Abb of the world are quoting at over 30 times fy18 earnings. Also as mentioned earlier in the reports they are targeting to be a debt free entity over the next 3 years. In case that happens,Company could well pen a scripture for itself with shareholders making multi fold over the next couple of years. A delight of a bet in a quintessence meant for your core portfolio. Now don't bother asking the target folks.

Thursday, July 21, 2016

The Microcap Adhesive player(Extension of previous post)


ShareBazaar whole day Workshop this August in Cities like Bangalore,Hyderbad and Delhi.FIll the form if that interests you.

tinyurl.com/glwucbp

Note: Extension of the earlier micro cap posts. Of those 5 companies,eastern treads and ramco systems got already covered. It's the time for the 4th stock from that list. Oh yah Sebi compliant too.

Quote: Since tweeting about it in last September at 30 bucks,company has been a near 5 bagger in a very short period. It took huge amount of work and time to have the required inputs and compile the note. I mean they haven't even got a proper website. There's absolutely nil info in public domain.At present price it seems pretty overvalued though remains a microcap with just around 50crs of market cap. 

2014-15 Annual report inputs:The company is engaged in the business of manufacturing of Wood Adhesive. It has built up a reputation as a manufacturer of “high quality” products and is known for its ethical dealings in business. The company supplies its products to leading Hardware & Plywood Stores in all over India.The company is presently in a phase of financial consolidation. The difficult times faced by the company during its initial years of operations had resulted in carried forward losses, which the company has been able to wipe off in the last few years. On account of its prior experiences, the company is presently working in certain low volume high margin niche products and also limiting its sales to few select prestigious customers. Consequently, the profits of the company are presently seen to be inadequate.However, the company is now focusing on adjusting its growth strategy with the rapidly changing economic scenario. The present consolidation phase will provide a good launching pad to the company. The company is also working with some domestic merchant for increase its business as also trying to identify some high volume, low margin products to improve capacity utilization of its facilities. Based on the buoyancy of the Indian economy, the over all scenario and the steps taken by the Management, the future outlook of your Company looks bright.

Company meet update:

1)Established in 1988, Company started as a paints manufacturing company.In 2006, they decided to take a plunge in white adhesive market and compete against Fevicol. This Ahmedabad based company gradually started expanding from Gujarat to Rajasthan to MP. Penetrated Maharashtra and acquired at a pace of 2-3 retailers per day.Product sells under brand name of Euro Marine,D3,Xtra,Grip etc.

2)They had a horror time initially to convince dealers about taking the Euro brand. Nobody was ready to keep anything other than Fevicol. Times have changed and they are enquired on a daily basis about dealership and distribution opportunities. Have presence in 13 States and 130 cities with a network of 7000 dealers. Company also have got a very strong motivated sales team.Targeting Pan India presence by next 3 years. Company does meticulous due diligence before giving dealership to anyone.

3)Debtor days at around five months from 7 months earlier and to be reduced further. Creditor days at around 75 days. Chances of bad debtors minimal. Company further ensures the same by providing rich cash discounts and incentives.

4)Senior Patel had a dream of having a listed company. Junior Patel,who seems to be a focussed humble chap,dream is to be known by his "Euro" adhesive Brand. Hired a management Guru called Himanshu Buch to train and motivate the staff(When the company was much smaller and the training continues till today)
https://www.linkedin.com/in/himanshubuch

5)Bought and shifted to a bigger 8000sqft office in Ahmedabad. To hit the FA this quarter. On being asked about the extremely high asset turns,promoters claimed it happens in this business. Also the capacity was there since last many years. No new capacity required for next 2 years.

6)Promoter claimed they have a " Sales like Hot Cake" adhesive product called "Xtra" which Fevicol copied and it came out with "Sh Xtra".

7)Promoter claimed of almost nil attrition as they take care of the employees well. All employees are send on a tour every year. Some 180 odd guys on payroll.

8)Pidilite acquired smaller adhesive companies like Bluecoat and Supershva at over 2X sales. They were also targeted but no plans to sell out for next 2-3 years.

9)Shot in the arm moment for the company came when Prince Laminates,a large Mumbai based Distributor with access to 600 dealers ditched Fevicol to sell only Euro. Company expects similar developments in Bangalore.

10)Promoter stake at 60% including associates and relatives. 96% promoters holding was pledged which was completely released recently. No plans to hike stake as of now.

11)Would be a big beneficiary of GST if or whenever happens. Pays Excise,VAT and others at 27%. 18% GST cap would be a big boost.

12)Operates with around 50% Gross Margins. Not sustainable.Will get reduced if crude moves higher. Though 5 year average Gross Margins are healthy at over 45%.

13)The competitive intensity factor where product price is tied with leader Fevicol prices. Moment Fevicol increases their product price,it follows too.

14) Have grown nearly 12 times in last 5 years,from 4crs in 2010-11 to 47crs in 2015-16. 100crs is the peak capacity sales which they are targeting by FY18. Targeting FY18 Ebitda of 8% and NPM of 4-4.5%.

15) No plans of advertising big way through the TV medium or so.Joked how Euro has a good brand recall thanks to Euro underwear,Euro cup,Euro laminates and so on. 200crs is what they can achieve with a fast speed after that the growth will slow down to realistic level. They may think of selling out then at proper valuations. 

Scuttlebutt-Retailers,Sales manager and Distributors:-(Mumbai and Himachal)

Mahesh Sharma,Himachal sales manager:He will grow 70% in his region in the present fiscal.In some product,Euro does the same thing in 60 kgs which jivanjor takes 80kg and fevicol 100.Euro priced premium to fevicol in some segment.Promoters commited looks after the grass root guys.Company keeps guys inspired and motivated.People address Fevicol as adhesives-Its like they ask for euro fevicol.

1)Bhoomi Ply:Was only shop amongst 3 in a row to have Euro, the other two did not stock it, and drove me away as they were doing hissab.Said that he stacks loads of tubs of Euro, and showed me 4 big boxes full.Had no clue what was Euro D3.Says sales are good, customers like it, not just because of the lower price.Says incentives are given by both Pidilite and Euro, nothing out of the ordinary.‎ Fevicol to get done with stock, Euro to encourage sales.

2)Local furnishing store, Borivali: Resinova Zesta is our preferred brand.‎Why choose Euro when there are cheaper and better alternatives?Euro costs us around 120 per kilo and Zesta is 115 Per kilo when we buy a 12 KG tub.We need something that gives us good reports, that dries quickly and gets the job done.Euro isn't bad, but there are better ones that do the job cheaper. We use Euro and Fevicol as spares when we don't get our preferred brand.

3)Golden Ply and Laminates:Euro sells, no issues, they're adhesives in the end.I would recommend fevicol over the rest, and there's a difference of 25 rs per kilo.Falcofix is running well and is marketed by Pidilite as the low end replacement to Fevicol.

4)Maharashtra Laminate (Big shop)‎:Didn't know Euro 9000, and had 55 Kilo tubs with Euro Marine 7000 on display. Said Euro 9000 must be ultra marine.Euro gives us incentives like cutter machines useful for carpenters and also gives us bulk discounts as incentives. Pidilite gives us nothing.Euro selling the most among adhesives.

5)Parth Ply:Euro D3 is the product that gives the output of 2 kilos of fevicol in 1 kilo, but is more expensive.Euro 7000 and Euro 7000 D3 are different, and the former is cheaper than the latter. Didn't know what is Euro 9000.‎1 kilo of fevicol costs 180 rs, 1 kilo of euro 7000 D3 costs 230 rs per kilo, but ultimately Euro is cheaper because less adhesive is needed. Performance has been solid.Incentives are given by both.Fevicol is selling more because of brand name,.else the performance is great for both.

6)Lucky Electricals and Hardware(Friends shop): Stocks Euro 7000 Marine, but calls it Euro 7000 Fevicol, says people relate to it better that way.Says that 70 percent Fevicol, 30 percent Opt for this.The 30 pc, he says, is because people are happy with its strength, and often come back to buy it once they've tried it.Did not know about D3, says that this is the one thing he stocks and sells.Did not speak much about incentives.

7)Chedda Laminates:Euro is literally the best! People need to use it once! Every customer who has tried it has come back for it! They are extremely happy with the bond that Euro offers, and it's not just the price that makes them come back.Pidilite is overconfident about its brand, and has started paying more attention to other products and their marketing, but Euro is catching up very fast.Euro is taking care of their customers by assisting carpenters, giving those instruments in the big boxes and also coupons worth 10, 20, 50 Rs etc that makes the small folk happy.They are also giving trial packets, etc to people and telling them there's nothing to lose, if you find it nice, use it!. He believes that Pidilite is losing its share in the town area and even more so in the areas north of Bandra! (Andheri, Goregao, Malad, Borivali etc). Not that Euro is the only one gaining, but it is a prominent company that's gaining.I am still selling fevicol, but I recommend my customers to try Euro and (points to shelf) I'm trying to sell more of Euro than Fevicol. (Packets of Fevicol are placed behind Euro on the shelf.)D3 is a phenomenal product, but it isn't marketed a lot by the company, so isn't popular.

8)Logus Ply and Laminates:I'm selling both, and Euro is great, but people who want Fevicol buy Fevicol only.But Euro does have a substantial share in the market, it has been noticed and is being picked up enough for me to refill it often.Fevicol gives me more margin than Euro.Euro is being picked up because the customer is also seeing what is he getting in return. Pidilite doesn't give any incentives, Euro gives them as vouchers and tools, so people see where more advantage lies and go and take it.It's not that it's a bad performer either, it's doing pretty well infact. Which is why people don't mind buying once they've tried it. The money saving isn't a huge deciding factor, it's the overall advantage.No idea what Euro D3 is."Fevicol vs Euro is like Colgate vs Pepsodent"Is Euro that popular? That it can be compared with giants of their industry like that?"Not yet, there's time for that, but it isn't impossible"

9)Laxmi Timber Mart:I don't stock Euro at all. I don't think it's a great product.I think people are greedy for those cutter machines more than they are looking for the adhesive.The machine barely costs 1500 Rs, why sacrifice the best adhesive for that tiny amount?

10)Plypoint:Euro is pretty nice quality-wise, I have had people come back and ask me more, not many, but several. It has a decent market share and is doing well.The adhesive business barely gets us any money, the margin is negligible.Both Fevicol and Euro go at almost the same rate as they come in, hardly any earnings in them.

11)Ravi Ply:Even if Euro tries hard, it can penetrate only 20-30 percent of Fevicols share.It's a good product and it definitely has its presence in the market today.It has a chance to grow if it pushes very hard for the next 5 years, with advertisements, contractor benefits, carpenter incentives, low price, bulk discounts etc.Do you think it is working hard enough?"Definitely."You stock araldite and Fevicol, but not Euro. I don't keep Euro on display that much, but I do stock it. I do have an advantage selling Euro, because it is cheaper,it sees a lot of orders quantity wise, margins are also a little better than Pidilite.Fevicol is like the Sharukh/Salman Khan of the adhesive industry, newcomers will have quite a challenge to try to topple it.

12)National Ply:Relatively large store,has loads of huge tubs of Euro lying around. Euro 7000 Marine more than the regular Euro 7000.Most Fevicol Tubs are smaller than Euro tubs and are kept on top of Euro.Euro was given more preference in display than Fevicol. Most low level, illiterate employees refer to Euro as Fevicol itself.Was a busy shop so didn't ask a lot of questions, but he seemed confident about his views on Euro.But as he flicked through the receipt book, I saw plenty Euro. However, Euro Ply was also sold there, so I could be wrong. 

Misc points: As on date they have got debt of around 8crs,mostly working capital related short term loans.They spends a fortune in sales promotions and marketing expenses. They were of the opinion that company will have to incur marketing expenses in order to penetrate new markets and establish EURO as a brand across various cities and states.The expenses will remain more or less same in the absolute terms and thus in terms of percentage of total income will gradually reduce considering economies of scale.Promoters supported the company with interest free loans during difficult times. No related party transactions. Some associates of promoters manipulated the stock price in the year of 1995  for which Sebi penalised them. Since then the promoters have turned extremely cautious and reports to Sebi themselves even in small stock price rise.
........................................................................................................................................................................................................... Btw:About to launch some "SEBI compliant" smal an  midcap services only meant for long term patient disciplined investors. Do fill the form if that interests you. Happy investing folks.

http://tinyurl.com/zw3vvjt
.................................................................................................................................

Note: For issues or assistance kindly contact Dipendu at 9007652301.

Friday, June 17, 2016

The Microcap Multibaggers(Extension of previous post)



"The quintessential 8 para to know everything about your desired microcap". Let's run:

1)Quote:This is not a fresh stock idea but an extension of the previous post. The intention is to have a detailed coverage of those 5 companies. The desi cloud player one was already long done. Today's note pertains to the 3rd company of the previous post. Indebted to dearest brother Bhaumik for his assistance and scuttlebutt.Its been on a good ride since few days for reasons not known to me. Its an expensively valued stock for sure at present levels( been an expensive stock always yet a 5 bagger in last few quarters).Oh yah, Damn! Trying the SEBI compliant way of penning again.

2)Story: 1200 cr Group based out of Kochi – their flagship company is E.Condiments (into spices and curry) with 900 cr. revenue – held 74% by promoters and 26% by Mccormick (US based Fortune 1000 company that manufactures spices, herbs, flavourings). Other group companies are ET(tyre retreading), E.Mattress (beddings with Sunidhra brand) Eastea (into teas), King Richards (garments). There are no cross holdings among group companies. ET is the only listed company and it’s likely to remain such. No plans of listing E.Condiments. 

3) ETs revenue mix – 70% open market, 26% SRTC (state road transport companies) and 4% exports. Gross margin are 26%, 35%, 38% respectively. Debtor days are 40-60 days, 90 days and 90 days with L/C respectively. CVs constitute 96% of revenue and 4% comes from PVs.Retreading is gaining traction led by improving awareness, brand creation by players like ET, Indag etc. and cost consciousness for fleet owners. A new truck tyre costs 20k, while retreaded tyre costs 5k and has 80% life of new tyre. Value chain – fleet owners give tyres to dealers/retreaders, who in turn procure retreading material from players like ET and do the retreading and give it back to fleet owners.Most retreaders in the market are non-exclusive i.e. they work for all players.Pre-cured retreading is used for CVs, PVs, etc. while hot retreading is used for OTRs, mining vehicles etc. which run on hard surfaces and required more strenuous working.Globally too hot and pre cured retreading technologies are used. There hasn’t been any material change in technology over many years.

4)50% of replacement demand is met by retreaded tyres in India. Globally that is much higher – in US it is 80% retreaded tyres. Gradually India will move higher towards retreaded tyres as awareness of its benefits increases and also these are environmentally more efficient. So over time share of retreaded tyres will go up.Retreading industry in India is a 3200 cr. industry – 50% organized – organized growing at 10% volume growth. This growth is likely to sustain with some gradually shift from unorganised segment. GST can provide a fillip to this shift. ETs volume growth in FY16 was 10%.Apollo,MRF etc are looking to enter retreading space – but they don’t see this as a threat. One these guys have a conflict as they also sell tyres and secondly it’s too small an industry for them. However, globally there is a big retreading market but it’s also a very matured. India will take years for tyre OEMs to look at this industry meaningfully.

5)They are in the process of changing their distribution network from only distributors to a mix of distributors and exclusive franchisees. In FY16, 10% of revenue came through franchisees in FY16 (6% in FY15) and they expect it to go up to 40% in FY17. They currently have 46 franchisees and will keep adding these. The advantage is they can charge higher prices by 15-20% through exclusive franchisees and also save on channel margin. This results in 5% higher gross margin. For instance, earlier Midas was selling at 140/kg and ET at 120...now ET is able to sell at 170/kg. Elgi Rubber currently follows this model of exclusive franchisees. While Indag was following this model but moved to distributor model as they found it difficult to scale it up. In franchisee model the other benefits are there is good brand loyalty and they can control the entire ecosystem and ensure better sales and servicing. However, scalability is an issue which ET is trying to address through ensuring focus on each franchisee and incentivising franchisees by ensuring minimum business etc.

6)They also have 2 retreading centres in Chennai and Bangalore which showcase retreading process and also act as brand centres. They also have Infinity Zones which are for brand visibility and are premium outlets. These outlets also provide marketing support to retreaders. They also organize fleet owners campaigns in each regions wherein they call 100-150 fleet owners and they educate them about the benefits of retreaded tyres and other services and also hear their feedback. This way they are able to get closer to fleet owners. This has helped them target fleet owners directly in some regions rather than depending on retreaders. ET is looking to position itself as a one stop solution for retreading – supply of quality retread material, accessories (gum, cement etc.), maintenance of machinery, skilled labour availability, marketing and awareness of retreading. They have started outsourcing machinery mfg and they supply these machines to retreaders – this ensure consistent good quality material and retreaded tyres. It will not involve any major capex. They also have a training institute where they train labour.

 7)Management focus has increased considerably in the last few years and they have also inducted professionals which has led to the above changes. Also earlier the Meeran family was only focused on E. Condiments. But now Mccormick as partner and also that company having stabilized, it will help increase their focus on ET. Raw material price movement is a pass through 1 month lag – so price risk is limited to 1 month. Typically gross margin will improve in times of falling rubber prices and vice versa because of numerator denominator effect. In case of retreaders, falling rubber prices is helpful as they typically don’t pass on that benefit while they take up the prices in times of rising rubber prices.Rubber prices have shot up ~40% in Mar-Apr’16 – they have taken a price hike of 11% in May’16 – this will largely cover the raw material price hike,they expect rubber prices to correct going forward and eventually not impact gross margin over time.

8)Long term vision is to achieve no. 2 position.Their target is to maintain RM/sales ratio of 65% (66.5% in FY15-16).  Over time they can do gross margin of 37-38%.Current capacity of 12000 MT and utilisation of 45%. They can reach 60% utilisation in FY17. They can do 200 cr. revenue with current capacity and 5 cr. capex. Capex of 7-8 cr. over 2 years – 5 cr. on capacity and 2-3 cr. on automation at plants. Maintenance capex of 50 lacs.Exports is 4% of revenue and they are targeting to grow it big. This year they are participating in 5 major exhibitions in Germany, Hannover, Kuala Lumpur Delhi etc. They are targeting 50% p.a. growth in exports. No salary is paid to directors as all are family members and most of them own shares in the company. Also they are not actively involved in the running of the business.Discounting trend is up as market is slow. Discount is accounted for as part of other expenses.OPM declined 230bps QoQ in Q4FY16 owing to higher promotion expenses on franchisee ramp up and higher staff costs (bonus).While Chinese tyre imports is a threat, their retreadability is bad. Also quality of tyres is bad and is considered unsafe and these tyres breakdown also a lot.They don’t have any plans of entering any other segment. Indag Rubber has not increased prices post expiry of excise exemption – they will be bearing the costs.No plans of fund raising or increasing promoter stake.KSIDC which holds 11.75% stake is looking to exit and any day expect a big fat bulk deal to happen.No dividend distribution policy in place.
 Btw: As it can be seen it takes huge efforts to dig into small unheard companies which can be the bluechips of tomorrow. No Reliance or boring Hind Unilever can provide you the kind of money which can help you retire rich early. About to launch some "SEBI compliant" small and midcap services only meant for long term patient disciplined investors. Do fill the form if that interests you. Happy investing folks.
Note: For issues or assistance kindly contact Dipendu at 9007652301.

Saturday, May 21, 2016

The 5 interesting small and midcap counters


It's been a long time since the blog got updated. Life has changed for good after the launch of  Sharebazaar android app. Search "Share Bazaar Arun" in playstore to download it. In a very short time as you know folks we attained the scale of nearly 30000 subscribers,without resorting to any publicity or marketing gimmick.From conferences to conducting pan India workshops,many things kept me occupied. Soon,will be conducting International workshops,starting from Dubai shortly.

Sebi too definitely stood out in terms of screwing the retailers in a better manner. Hence,won't like to name any stocks but hints may just help you to make out the names and dig further on the stories.

1) Been mighty impressed with the Chinese compounder which has also recently changed its name to signify its renewed focus. The parent has achieved an astounding track record of growing 65% CAGR in the last 20 years or so. The Chinese parent quoted at an average PE of over 50 since its listing. Even if it can do a fraction of what parent has done,the stock which comes with almost nil floating stock,would move in a different orbit. It's been a doubler since my Twitter rants.Company has recently bagged big orders from IFB and Symphony. Company's fortunes are further set to change as its biggest clients are shifting base from countries like Australia to outsource everything from India. Should keep outperforming coz of its 500crs expansion,parentage and growth prospects.Expensive at present levels but with its expected 50% bottom line growth for next 3-4 years,stock presents an interesting opportunity at slight dips. It's debt free as on date with market cap of around 800crs. Results which should be outstanding comes on 30th May.

2) The desi cloud player hailing from chennai has been a favourite of mine for the last 3 years. Company recently delivered decent set of numbers. Exclude the employee costs and it would look awesome. The company also refrains from taking any orders with gross margins beneath 65-70%. It's a massively scalable business with cumulative addressable market size of 2.5 lakh cr which is crazily expanding and set to expand further at 26-30% for coming atleast 5 years.Operating leverage coupled with strong rich tailwinds and an ultra super sales guy(
He had started off with a staff of three people in Singapore for Satyam in 2000, and went on to scale up the business into 15 development centres and 33 sales offices across 20 countries with over 4,000 employees. Quit to join HCL-During his time, HCL's growth in the region was spectacular,60 percent year-on-year growth, for instance.It became the fastest growing region for HCL)makes a perfect recipe for a potential multibagger. The fiscal 2016-17 should be the best for them. Oh yeah in case the same gold standard honcho resigns,spare no time in exiting it right away. That remains the biggest risk of this particular company. It's debt free as on date with market cap of around 2000crs.

3) Had an amazing Sharebazaar whole day workshop in Cochin recently. Had some spare time which was coolly utilised in visiting the areas of God's own country. Did get a chance to get glimpses of this company's plant. It comes with a highly credible management which is doing everything possible to create loads of shareholders wealth.Tyre 
Retreading is gaining traction led by improving awareness, brand creation by the players and cost consciousness for fleet owners. A new truck tyre costs 20k, while retreaded tyre costs 5k and has 80% life of new tyre.They are in the process of changing their distribution network from only distributors to a mix of distributors and exclusive franchisees. In FY16 10% of revenue came through franchisees in FY16 (6% in FY15) and they expect it to go up to 40% in FY17. They currently have 46 franchisees and will keep adding these. The advantage is they can charge higher prices by 15-20% through exclusive franchisees and also save on channel margin. This results in 5% higher gross margin. For instance, earlier Midas was selling at 140/kg and the company at 120...now It is able to sell at 170/kg. Company is almost debt free as far the long term debts are concerned. Company is set to grow at 30% CAGR for next 5 years.Tyre radialization would be a big theme to watch out for and look no further to ride the theme. Kerala"s Buffett did make it expensive with his tweets but long term prospects look more than robust. Marketcap stands at around 60crs.

4) It so happened was hell bent on searching for a player which is snatching market share from a giant. Jivanjor,the adhesive player seemed the best fit and I continued with my research. For Scuttlebutt means,interacted with lot of dealers and sales managers but the result wasn't that appealing. Finally,ended my research after a former sales manager disclosed a lot of uninspiring stuff which forced him to quit the company. He also mentioned of his new company and how it has kept him motivated to the extent which has led to a scorching 70% growth in his region. Incidentally,the same company happened to be a listed one which at that time had a tiny Marketcap of just 15crs. The company with a brand name of Euro 7000,is into white glue adhesives,scaled up 11x in the last 5 years and looking to achieve a 100crs bounty by next 2 years. Company got a phenomenal product named D3 which takes 60kgs to provide the required bond while Fevicol does the same in 100 kgs.They have pricing power,got a gross margin of 45-50% and spends a fortune in its marketing front. Company also posses a very strong supply and distribution reach of 7000 dealers in 13 states and 130 cities. Fevicol,over the last couple of years acquired similar companies by paying over 2x Sales. Stock since then has more than doubled with present Marketcap still at a paltry figure of 40crs. Promoters shareholding where 97% of it was pledged has recently been fully released.

5)Its not even required to pen anything for this one. Prem Watsa with his large investments in it,opines craftly.
In 2010 Nahoosh Jariwala and three childhood friends and their families were holidaying together at a tiger reserve in Central India. Nahoosh and his older cousin Rajan had founded the company in 1985 and listed it on the BSE in 1995. While Nahoosh had big dreams for the business, Rajan was not so keen, so while still on the holiday Nahoosh’s three friends decided they would buy out Rajan and support Nahoosh’s aggressive growth plans. Over the following five years until we came to hear of This company,Nahoosh had exponentially grown its  manufacturing capacity from 8,000 to 45,000 metric tons per annum.It is an oleo chemicals company. Oleo chemicals are, broadly, chemicals that are derived from plant or animal fat, which can be used for making both edible products and non-edible products. In recent years the production of oleo chemicals has been moving from the U.S., Europe and Japan to Asian countries because of the local availability of key raw materials.It occupies a unique niche in this large global playing field. It has developed an in-house technology that uses machinery manufactured by leading European companies to convert waste generated during the production of soy, sunflower, corn and cotton oil into valuable chemicals. Those chemicals include acids that go into non-edible products like soap, detergents, personal care products and paints, and other products that are used in the manufacture of health foods and vitamin E. The company’s customers include major multinational companies including BASF, Archer Daniels Midland, Cargill, Advanced Organic Materials, IFFCO Chemicals and Asian Paints.Co operates out of a single plant in Ahmedabad.It has the largest processing capacity for natural soft oil-based fatty acids in India. Over the last ten years, sales have grown at 23% per year to $27 million, and profit after tax has grown at 30% per year to $2.3 million.On February 8, 2016 we purchased 45% stake from the three friends of Nahoosh and other shareholders at rupees 212 ($3.12) per share.

My two cents: A tremendous scalable business with high entry barriers. Present headwinds provides an opportunity of a lifetime for value seekers looking to multiply capital over the next 5 years.


Btw: We are set to launch some interesting services only meant for long term investors. Interested guys pls mail at arunsharemarket@gmail.com for details. Also you can whatsapp dip at 9007652301. Happy investing folks.

Monday, December 7, 2015

Cheviot company and Pan India Workshop of Share Bazaar App






Seminars and workshops: About to have long 8 hours Investors Workshop in places like Delhi,Hyderbad and Kolkata over the coming 3 weeks. Do pen a mail at arunsharemarket@gmail.com if you interested in being a part of it. In last Mumbai Workshop,the themes of Jute got discussed and Cheviot incidentally was quoting at about 700 then. Let's pen what attracted me in this company.

Scripscan:Cheviot Company Ltd
Code:526817 

Traded in: Bse

Note: This days am pretty much occupied with the workshops and seminars which we are having Pan India. The latest venture "Share Bazaar Android App" has been a huge hit with nearly 30000 downloads over the last few months. Blogs are about to be obsolete owing to technological advancements and hence the decision to migrate everything in the App. Do download the app guys if you haven't done yet. Just search Share Bazaar Arun in play store.

Quote: Cheviot Company is one of the prime examples of a corporate that makes a lot of money from green fibre and sound investments.Harsh Vardhan Kanoria has created Gold out of an Industry, on which the Sun had literally set with the departure of the British in 1947.Today, with its processing units and a turnover exceeding Rs 265 crore, Cheviot Company makes more money out of Jute and its Corporate Investments, in a year, than most companies would ever make in their lifetime.While Kolkata may hold a different meaning for different people, for the current owners of Cheviot-the Kanoria family, the "Sun Never Set On Jute" even with the collapse of the British empire.


Introduction: Cheviot Company Limited (CCL) which was incorporated in 1897, is the flagship company of the Cheviot group, which has interests in the jute, tea, and leather businesses.CCL manufactures high-value jute yarn and fabrics, such as precision-wound fine jute yarn, sacking cloth, hessian cloth and bags, sacking bags (for packing food grains and other allied purposes), and superior hessian cloth.Spearheaded by Mr. H. V. Kanoria under whose leadership the group has shown exemplary performance year after year. He is an eminent industrialist with 40 years of vast experience in successfully handling Jute, Tea and Leather Industries.The company also ventured into new product category by adding jute shopping bags in their existing product lines. The company caters to both the export and domestic markets. It has two manufacturing units in West Bengal: one in Budge Budge and one in the Falta Special Economic Zone (export-oriented unit). 

Demand for eco-friendly bags: The demand for green products jute goods like gardening products, shopping bags, geo-textile, pulp and paper, home textiles, floor covering and non-woven textiles is very high at the consumers’ level in the international market due to the growing awareness about environment. Of those products, jute-made shopping bags are now the best-selling items. Many countries like the United States (US) and the United Arab Emirates (UAE) have already gone for replacement of plastic shopping bags by jute-made shopping bags. The demand for eco-friendly bags is also increasing in Western Europe, Australasia, Middle East, Asia and African countries. The global market size of jute-made shopping bags will be 500 billion pieces, equivalent to seven million tonnes of jute products, in the coming days, as efforts are on to totally stop use of polythene or plastic materials all over the world because of their adverse impact on environment.

Fibre of the future: Composite and Compounded materials from man-made fibres (i.e. glass fiber, carbon fiber etc.) are already available as products for consumer and industrial uses. Jute is one such natural fiber that can reduce the impact on the environment. It is available in abundance, strong and is increasingly being referred to as the “fiber of the future”. Jute filled PP composites are today being successfully used for various components and materials. . India is still largely an agrarian economy, which needs to generate massive employment in rural areas for a rapidly growing population. Technological breakthroughs such as jute-filled PP compounds show the way for economic development of the masses by marrying state-of-the- art technology and research with cash crops to create rural and industrial prosperity.

New Advancement in Jute Compound: Bengaluru-based STEER makes new advancement in jute compounds that ca help in use of fibre in automobile parts (under-the hood),housing construction materials or even microwaveable cooking containers. This New compound can have ripple effect not only on the jute sector, but the entire India economy by opening up a huge market opportunity. Jute polymers to provide excellent opportunity for new sunrise industry to emerge, creation of thousands of jobs in West Bengal, Orissa and Bihar. The popularisation of jute polymers is expected to help provide a major thrust to the Government’s Make in India campaign, by popularising new usage of jute in other sectors, thus stimulating industrial activity. Jute polymers are certain to greatly benefit the jute industry with its ability to transform the traditional use of jute for modern day products, thus, touching human lives. 

Advantage over Bangladesh :India and Bangladesh together accounts for the 95% of worlds jute production. The cost of producing quality yarn is 40 per cent higher in Bangladesh than in India because of the technological disadvantages. India has set up composite jute mills with modern machinery and technologies for production of fabrics, dyeing or lamination under one roof. Bangladesh has nearly 250 jute mills, but none of them has the dyeing and lamination facilities, which are essential to producing diversified products, according to exporters.

Potential for an anti-dumping tax: Around 125 lakh bales of jute sacks are needed just to package crop seeds in India. Indian jute mills can produce only 25 lakh bales of jute. The Indian Jute Mill Association (IJMA) has already pleaded for an anti-dumping tax in case Bangladeshi goods enter India. The Indian jute commission is considering the plea, and is soon to give a decision about it. This decision is aiming provide a monopoly to Indian jute mill owners which is a very big positive as there are barely few survivors in the industry.

Jute Particle Board: They are used as substitutes for wood. The availability of the technologies for producing particleboards and its high socio-economic value are arguments in favour of the future development of this product. The use of wood in house construction, furniture, etc. is slowly being discouraged due to environmental reasons. The use of jute particle board as a substitute has been found to be quite acceptable both in terms of quality and price.

Strong Financial Risk Profile: CRISIL's ratings on the bank facilities of Cheviot Co Ltd (CCL) continue to reflect CCL's strong financial risk profile, marked by a robust net worth, low reliance on external debt and strong liquidity. The ratings also factor in the strong business risk profile, with an established market position in the jute industry, a diversified product profile, and a wide distribution network.

Jute has always been a dull and boring sector. However, several positive advancement drew my attention to this sector.Several innovations ranging from diversified uses of Jute and Jute compounds (as discussed above) implies a turning tables for this sector.Also there has been a rise in demand for jute products all across the globe. Several countries have already banned use of plastic bags in their grocery markets and shopping malls. Thus, demand has been projected to increase 50 times within next five years if the eco-friendly trend continues.Potential for an anti-dumping tax which is a game changer, would provide a monopoly to Indian jute mill owners as there are barely few players in the industry.Recently MD of Gloster (one of the leading Jute players) emphasized in an interview that this is a ‘golden period’ for the jute industry with several sectoral tailwinds. He guided a robust rise in export demand in coming quarters. He also said that the upcoming quarters will see a very sleek growth which they have never seen before.

Concerns: Adverse regulatory changes in the jute industry may impact the top line and thus the regulatory risk would always prevail.Revenues coming in from exports have been a significant rise in past several quarters, fluctuations in currency can pose a threat. Also the RM prices which is Raw jute been on a recent upswing which can put pressure on its margins.

Financials: Company over the past 5 years have grown its topline and bottomline at a CAGR of 8% and 13% respectively. But the half yearly results of 2015-16 presents an entirely different picture where the company has delivered an impressive sales growth of 25% to register a figure of 150crs vs 120crs. Profits have more than doubled to 23crs vs 11crs. The third quarter numbers probably should be the best since its inception.

Conclusion: I liked Cheviot for its attractive valuations (in terms of EV) along with strong financial risk profile, marked by a robust net worth and low reliance on external debt.It has huge investments and cash on book worth Rs. 200 Cr and it’s almost debt free. Thus,on EV basis it is available at a very reasonable price.Currently it is quoting at a 6 forward PE and given the tailwinds even a meagre rerating up to 10 PE would make it move way higher. Promoters are owning 75% stake of the company.CCL has also been very generous with its consistent 20%+ dividend pay-out policy in past 5 years. So even dividends will be 2x with 100% rise in bottom line.Also, CCL doesn’t needs any capex and has huge reserves so one can expect another bonus due to low equity base. (Last bonus was in 2006) .There are very few listed players in Jute industry in India. All are with very tiny equities and limited floating stock. So even average accumulation can make them run into circuits.


BTW:For different stock market related services and also for techno-Funda tutorials,rush a mail at my mail id arunsharemarket@gmail.com to know more about it.


Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.

Registration status with SEBI: 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”
Disclosure: It is safe to assume that I might have Cheviot in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.

Saturday, October 17, 2015

Microsec Financial services:Agm Notes

After the launch of my Share Bazaar android app,the workload has increased many a times. Hardly there's any time to do blogging. As you all know the app has been a huge hit with downloads been nearly 25000 in a very small time. For the uninitiated,to download-go to play store and search Share Bazaar Arun. Do give your reviews and ratings folks.


Microsec Financial Services AGM Notes (Q&A)

E-commerce Divisions:-
 
1. Are we planning to raise Private Equity for both our E-Commerce division?
Ans: We were anxious when we started both e-com divisions but in retrospect we believe it was one of the greatest decision we ever made. Usually in a typical e-commerce start up, it takes huge amount of cash burning to achieve a GMV of 100crs but we are aiming to achieve that feet by remaining debt free. We are going to set a benchmark by achieving this only from a single state in India (West Bengal) which has been unprecedented in the world of E-commerce. And yes we are looking to raise money for both the verticals.


2. What is the USP of our E-com Services? Will ban on selling online medicine(if at all happens) affect us?
Ans: The USP of the company is our last mile delivery where 99% of the logistics costs are borne by the franchises. (Company gave the examples of newspaper where the logistics costs are Zero.) We don't sell prescribed drugs online. Sastasundar forwards the lead to its offline brick&mortar franchise/healthbuddies and they deliver the order to the customer. It's just a lead generation medium.


3. As medspa, Apollo pharmacy, netmeds, pm ventures are all in the same business as Sastasunder, What are we doing to thwart competition?
Ans: Competition makes business and the arena is too large. The retail pharmacy market is worth over 70000crs and there's a room for everyone to have their own pie.


4. We are entering Karnataka. What would be the strategy? Are we also entering other states?
Ans: Strategy is to repeat what we are doing in Kolkata. Sastasundar will further expand in Mumbai and other big cities by 2016.


5. In medicine distribution we need large inventories. Even we supply the inventory to our franchise owners. How are we playing it? Are we ready for addition in future debt?
Ans: Company is against too much debt however we may need some for taking care of our WC requirements.


6. What is the ratio of repeat customers to new customers? What are we doing to retain our old customers?
Ans: Repeat Customers contribute to 75% of the present top line. Company is taking all initiatives to retain its existing customers.


7. What is the credit cycle from where we procure the medicines?
Ans: (Didn't gave a clear answer but hinted of a good credit cycle once they garner in big volumes)


8. How many franchises we have till date? What is out average franchise revenue? What is the number of franchise we are looking to add over the coming few years?
Ans: 87 in total, 81 franchise and 6 company owned stores. Company looking to appoint more franchises. Aims for a number of 225 within the next fiscal.


9. What is the ebitda margin we will have after counting for 15% discounts and 8% commission to franchises? How can we compete with the retail pharmacist stores?
Ans: Our medicine distribution margins are 30%. The retail pharmacist averages margin of around 20%. So there's nothing to worry on that front. Sastasundar makes around 7%.

 
10. How many brands are attached with foreseegames.com as on date?
Ans: It's around 120 and yes the target is to tieup with 500 brands ASAP.


11. We brag about 11 lakh users in foresee then why is the revenue is not even 50 lakhs?
Ans: Foreseegame will see increased monetization from Brand partners going forward, however current strategy is more focused on acquiring more brand partners.


12. Foreseegame itself is engaging but the worst part is we have just 33k likes Facebook on user base of 1.1 million. Why aren't we looking at it? One of our peer latestone.com came into the arena much later yet they have 7-8 lakh fans in no time and increasing at a rapid speed.
Ans: (The Company appreciated the fact and promised to look into the issue at the earliest.)

 
13. Why aren't we marketing enough? We don't see foresee ads in TVs. They are nowhere. We haven't even done a SEO, let alone AdWords. Nobody can see us if they Google up online games. Why is it so?
Ans: Not fond of marketing in the television world. SEO and other needed necessities are actively looked upon which will help the company to increase its users.

 
14. Have we got a break even target in our verticals? When we will break even in e-com verticals?
Ans: Company looking to break even by fy17-18. Both e-com verticals are exceeding expectations as of now.


15. Do we make profit from every transaction? What is the ratio of our private level biz to the medicine biz? What is the margin we make from our private biz?
Ans: We are making profit from most transactions, if not all. The ratio is hardly much to talk about as of now. Private level business margins around 50%.

 
16. What about our recent launches: chef on and others? Are we seeing any traction? What has been the acceptance of our customers?
Ans: Chefon: the made to order segment has seen immediate traction after its recent launch. Company is getting 400-500 enquires on a daily basis.

 
17. In Foreseegame we often provide Sastasunder currency to our game buddies which in turn inflates the topline. Out of 21crs topline in Sastasunder, what has been its contribution last fiscal?
Ans: That is less than half a percent of the total turnover.


18. Any revenue guidance for foresee and Sastasunder in the present fiscal? Next year 17 and by 2020?
Ans: Foreseegame should more than double its turnover this year. Sastasundar's GMV should be heading to 100crs within the next few quarters.


19. Zapak games recently got valued at 1000crs, be it alexa rank or minutes spend in the site it’s beneath foreseegame by every standard. Are we looking to unlock value by divesting a stake?
Ans: Lot of offers from private equity. Foreseegame will dilute in favour of a private equity to unlock value. Should be done at a good valuation.


20. Ironically whenever we announce our results, we see our stock being hammered owing to higher losses. Would we see the same in future?
Ans: (We aren’t bothered about stock prices or market cap. The company is in a solid footing and with time, the right valuation should definitely chip in.)


Financial Services Division:-

21. It’s been quite a while since the demerger/divestment news was announced by the company. When is it actually happening?
Ans: Our core was finance and it's a pretty emotional decision to hive off the same. However, we believe in being ahead of the time and hence will soon do what’s best for the business.

 
22. We have a capital employed of over 100crs in the financial vertical. We have got large holdings running worth several Crs. We did a PAT of 10crs. It's a brand with intangibles adding up to a good few Crs. Tailwinds are blowing with few recent brokerage deals. Sudhir Valia acquiring fortune financial at 35crs and Sudip banerjee buying out JRG sec at 100crs. So we should get a good valuation right?
Ans: (They appreciated the fact and hinted about a good deal coming soon. Fathoming the body language, it seems like they will just sell the finance arm rather than demerging it as the full focus is on ECOM.)


23. Presuming we will sell out the Financial Services Division as admitted by Mr mittal earlier, how are we going to deploy that money? Would it be fully on Ecom? Or can there be a special onetime dividend?
Ans: As of now we are not in favour of a dividend as the stock price would just adjust it immediately. The money received would be deployed in the ECOM ventures.


24. Promoters own 71% in the company as on date, bit below the max permissible limit of 75%. Why aren't you buying out the rest? This fiscal year the promoters hardly bought anything.
Ans: Microsec is the only stock we acquired in last few years. We desire to own the maximum permissible limit of 75% soon.

 
25. We had an internal target of achieving a billion dollar market cap by 2020. How achievable does it look under the present juncture?
Ans: Futile to discuss about market cap at the present juncture. We believe in long term wealth generation for the stakeholders.


26. Is there any chances of selling out fully provided we get an extravagant offer, at a much premium to the present price?
Ans: No chances of selling out in the next 5 years.

 
What I Perceive: Finance business to be sold soon and then in due course would be demerged in two separate companies. Sastasundar and Foresee to be separately listed in the future.

P.s:Please refrain from asking buying/selling stuff. 


BTW:For different stock market related services and also for techno-Funda tutorials,rush a mail at my mail id arunsharemarket@gmail.com to know more about it.



Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.
Registration status with SEBI: 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”


Disclosure: It is safe to assume that I might have MICROSEC in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.
 
 

Sunday, August 23, 2015

Makers Lab AGM notes: Please it's not a Stock idea

In Mumbai from 11th to 13th of September. Hope to meet a few of my readers. Please whatsapp my guy Dibyajit at 9804238412 for more details. 

Hope you readers have all downloaded the Share Bazaar Android app. It's already been a mega hit with nearly 25000 downloads. Go to playstore ,find share bazaar app by Arun and download.

Am really really scared to put anything on public domain. Everything has been perceived as a stock idea. I pen a tweet to find the same in circuits. It's not a stock idea guys. Please read before your acts. Thanks to my Junior Abhijit for presenting it in such a brilliant yet witty way.

Following is a candid description of my visit to the Makers Labs AGM. Why Annual Grotesque Meeting? Wait till the end of this article to find out.
Scene 1: It was a sunny Tuesday morning, half past ten, I arrived at the IPCA Lab office located in Kandivali, Mumbai. As soon as I entered the gates, I saw a small white board in a corner. Some text was scribbled on it with atrocious handwritings. After a thorough analysis, I figured out that it was written ”Welcome to the 30th AGM of Makers Laboratories” (with two giant spelling mistakes, WELCOM and LABORATRIES).
There was nobody at the gate. After a few minutes of waiting, I observed a guard running towards me from the corridor. He was panting heavily and said: ”Sary Sur Hum thoda sa pishab karne gaya tha” (I wondered why only thoda, why not full?)
Scene 2: After I managed to find a chair in the shady looking premises of the office, a really beautiful lady came to serve me some chai with a gracious smile. Considering the texture of the steel glass (especially the deposits of dirt in between the texture), coupled with the bright red colour of the chai, I decided to give it a pass.
Scene 3: Recovering from a semi-trauma merely caused by the sight of that chai, I went out to get some fresh air. There I witnessed a gentlemen accompanied by his wife, entering the premises. After a basic introduction with him, he expressed how unhappy he was with the financials of the company and how much pissed he was with the company secretary Mr X for being a d**k on phone calls.
Scene 4: 11 o’clock, I did enter a small room where the AGM is supposed to take place. I was greeted by a sight of this really dingy and old school poster of Makers labs which didn’t even have a logo (or do they even have a logo in first place?). I saw several oldies roaming around in that room who apparently looked like shareholders. (PS: I did overhear them discussing on piles issue)
Scene 5: I heard someone fighting loudly at the entrance. It was that angry gentleman with his wife, who expressed his grudge towards company secretary before. Unfortunately, he stumbled upon Mr X at the entrance. Somehow people were able to separate them from their verbal barrage.He was accusing Mr X of treating him badly on the phone and complained that Mr X called him a ”gate crasher” and accused him to attend AGM only for the ‘free’ snacks offered and nothing else. (I’m not kidding, this is exactly what happened and they were actually fighting like a baby for that issue).After things were subdued, Mr X told us secretly, how that gentlemen only held 5 shares of the company and harassed him on phone calls.
Scene 6: Chairman literally READ the speech from the Annual Report. After about 5 minutes, it was time for Q&A. I will make a future post on how stupid and hilarious questions people asked the chairman. Some of the questions were asked by that gentleman who had also brought the annual report with all the spelling mistakes underlined. I literally felt suffocated in that intellectually polluted environment.The whole AGM was wrapped up within 20 minutes, and the same red chai with a vada and some stinking potato chips were served. (PS: one of the oldies from that piles group, did give a generous suggestion to replace vada with a sandwich in the next AGM.)
Scene 7: I left the room just to avoid the sight of oldies hogging on cold vadas and almost black potato chips. Right outside, I met this sensible looking fellow. I felt like giving him a hug. He was the Marketing head of Makers Lab. I had a chat with him for 15 minutes about so-called Future Prospects of the company and he assured me to stay away from the stock with a 12-foot barge pole. I’m not even kidding, his candid remarks about how dull the Generic drug industry is with not much room for Makers Lab to grow, were enough for eliminating Makers Lab from my watch list.
Final P.S.: Guess what I heard from a director of IPCA Labs in an offline conversation: ”DONOT expect much from Makers!’ I’m serious. That were the exact words he used.

BTW:For different stock market related services and also for techno-Funda tutorials,rush a mail at my mail id arunsharemarket@gmail.com to know more about it. 

Note: Let me clarify this was just a funny experience I had at the AGM and please don’t take any serious offence. Also, this is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, nor I am a registered Research Analyst as per SEBI Regulations, 2014.

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