Skip to main content

Orient Beverages


Orient Beverages is in the business of supplying ‘Bisleri’ branded mineral water.  It is also engaged in real estate activities.

The company has reported no growth in revenues but reported consistent net profits (including rental income – see below) over the last five years.  It reported a net profit of 1cr on revenues of 13cr in the last financial year.  It operated with a relatively high net debt load of 5cr (as at 30th September 2010).

The mineral water business has been on a declining trend and is exposed to further deterioration of revenues as a result of slowing demand for its products with no real prospect of a turnaround.  It has been a victim of labour unrest at its plants and there doesn’t appear to be a reason why this wouldn’t happen again in the future. 

It has also veered away from its core business and into real estate with currently one major rental customer (United Credit) generating its rental income – this would require a different assessment of its business prospects and there doesn’t appear to be a sufficient track record to make sensible judgments on its long-term future.

Moreover, the company appears to have a number of unquoted investments and disbursed loans - whose value is uncertain.

Furthermore, promoters have pledged a portion of their shares and this may result in management changes if those shares are revoked for any reason.

Management haven’t declared dividends in any of the last five years.  This is perhaps unsurprising given the above mentioned activities.  Nevertheless, this appears to be an illogical policy given the lack of profitable growth in its core competence (mineral water) and management inexperience in real estate activities – the appropriate policy would be to return shareholders’ funds that aren’t used in the core business.
Labels:

Comments

Post a Comment

Popular posts from this blog

On The Radar: India's Small-Cap Equities (Concluded)

We have been running a series of articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in December 2011 - and followed up twice - with the last article in December 2013. We would like to conclude this series after updating the small-cap index level and returns, comparing it to our expectations ex-ante, and analysing the current scenario.  Following this, we have also outlined where we may take this blog in the future. The small-cap index closed at 11,087.07 on December 31 st , 2014.  This compares to a level of 6,150.65 in our last article – resulting in an advance of over 80% to date. This is a handsome absolute return by any standard, particularly compared to Indian government bonds, which yielded around 8-9% for the period.  This justifies the conclusion at the end of our previous article that “small-caps in India offer among the most attractive bargains during any time since 2006 and certainly in the entire Indian stock market today...
1 comment
Read more

Under the Radar: India’s Mid-Cap and Small-Cap Equities

Indian stock markets have been one of the worst performers in 2011 – worse than their BRIC peers, worse than the rest of Asia and far worse than the US with the leading indices declining about 25% during the year.  Foreign investors in India have also suffered substantial declines of nearly 20% in INR currency value. There appear to be several reasons for the market’s dislike for Indian equities in 2011, which include persistent inflation (including food inflation, which constitutes the major proportion of the typical Indian household), political paralysis (e.g. rollback of foreign investment in retail etc.) and global concerns about the solvency of several Eurozone countries. As a result, estimated GDP growth for the next financial year has been revised downwards from about 8% earlier in the year to about 6% now - with many market commentators wondering whether this rate of growth is India’s ‘new normal’.  This is still, however, substantially higher than global av...
2 comments
Read more

Under The Radar: India’s Small-Cap Equities (Part Three)

In February of this year, we summarised the valuation parameters of the BSE Small-cap Index in India (now the S&P BSE Small Cap Index) - following on from an earlier report we wrote in December, 2011 - and drew certain conclusions. We would like to update the valuation scenario with the data today, review those conclusions, and form new ones based on the available information. The small-cap index closed today (17 th December, 2013) at 6,150.65 with an indicated price to book value of 1.04. The closing value as on February, 2013 was 7,006.73 representing a decline of over 12% as of today. The current index value masks a greater fall of over 27% to a low of 5,085.56 in August, 2013. This represents an unsatisfactory overall performance for those who invested in small caps at the beginning of the year. In our earlier report, we made two assumptions towards the end of our report to form a conclusion as to prices then:          ...
Post a Comment
Read more