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Rubfila


Rubfila is in the business of manufacturing and supplying heat resistant thread rubber, which is used in basic products such as diapers, socks, fishing, food, furniture, catheters, hosiery, toys etc.

The company had reported erratic financial performance prior to 2008.  It’s reported high growth in revenues and profits since then – generating about 4cr in operating profits on about 80cr of revenues.  It’s last reported financial position (as at 31st March, 2010), however, is a complete disaster – with negative equity and about 23cr in net borrowings.

It’s net worth had turned negative in the past as a result of operating losses and was referred to the BIFR.  It’s business is subject to the risks of rubber price spikes, cheap imports, better credit terms by competitors etc.  It’s operations are located in the state of Kerala, which is plagued by frequent labour disputes, strikes etc., which poses a long-term risk to profitable business operations.

Management, unsurprisingly, haven’t declared any dividends in the last five years due to the abysmal financial position.  Despite the recent growth in revenues and earnings, it will take a while to clear out the borrowings and is subject to a rapid relapse into its old condition (and probably worse) if one or more of the above mentioned business risks came into play in a significant manner.
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