Neelamalai Agro Industries manufactures tea and may also be classified
as an investment company due to its large liquid investments.
The company reported about 48cr in liquid investments and
4cr in net current assets in the last financial year and this appears to have
increased by 5 to 10cr in the six months to 30th September, 2011.
The company reported declining operating profit margins on
growing revenues – reporting about 1.5cr in operating profits on revenues of
about 18cr in the last financial year.
The tea business is primarily subject to risks of uncertain
monsoons, tea crop oversupplies, wage cost increases etc.
Management haven’t bothered to discuss the prospects for the
business. Moreover, they’ve committed
resources to unquoted companies for which no financial information is disclosed
– including a recent commitment for an apparently unrelated spice trading
division in Singapore (although for only about 1cr).
Further, the dividend appears entirely
inadequate relative to the amount of liquid assets held within the company and
lack of attractive growth prospects.
All of this raises questions about the extent of management
fidelity towards minority shareholder, which the investor ought to satisfy in
his own mind before making a commitment.
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