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Neelamalai Agro Industries


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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