Skip to main content

Mukand


Mukand operates in the specialty steel and industrial machinery segments.

The company supplies steel to the automotive industry; and is one of the leaders in manufacturing heavy duty electric overhead travelling cranes - with the one of the largest domestic capacities in its category.  It works with its group company Mukand Engineers in bidding for projects.   It also aims to jointly bid with IHI Japan in the future.

The company has recently expanded steel capacities, which may lead to higher revenues in the near future.
The company reported reasonably steady performance over the last five years – reporting operating profits of 200cr on revenues of 2,500cr in the last financial year.  It employed a debt load of over 1,750cr (as at 30th September, 2011), which is high relative to its earnings and although it is backed up by assets, it may cause discomfort to shareholders under tight monetary conditions instilled by the RBI.

The fortunes of the business are tied to the auto industry, which is cyclical and exposed to deteriorating demand in a high interest environment.

The industry suffers from periods of overcapacity, as currently, which distresses selling prices.  Moreover, the closure of scrap yards in Europe and the US as a result of adverse weather conditions (snow etc.) puts downward pressure on scrap sale prices.

It is exposed to shortages in iron ore and coking coal supplies, which increases costs and slows down steel production.  This is a result of erratic mining supplies, environmental issues, and logistical problems.   Coking coal supplies and costs are specifically impacted by natural hazards (floods etc.) affecting Australia, which is the world’s largest producer.  It is also exposed to rising commodity prices of nickel, chromium, other alloys, furnace oil etc.  It is unable to fully pass on these cost increases and any increase has a time lag, which impacts profits in the intermediate period.

The business exports some of its stainless steel production to Europe, US, Middle East, etc. since India is not yet a big enough consumer to absorb supplies – this exposes it to a strengthening INR, which makes its products uncompetitive in the global markets.

The crane business is subject to the vagaries of the capital investment cycle and is adversely impact by any slowdown in the execution of customers’ projects.

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

IFB Agro Industries

IFB Agro Industries is in the business of producing alcohol (70% to 75% of revenues) and marine products. The company is based out of the state of West Bengal (WB), which is well known for its regressive attitudes towards businesses.  In the alcohol segment, it distributes ‘Volga’ vodka, ‘Jubilation’ rum, ‘Benjamin’ brandy (latter two launched recently).  Demand in the Indian Made Foreign Liquor (IMFL) appears to have a promising outlook with growth estimated at about 20% per annum.  It has also installed a new plant to enhance its country liquor production capacity since demand was outstripping supply – however, licenses weren’t granted by the state as at the end of last year.  In the marine segment, it distributes frozen marine products in the major metros through retail chains under the “IFB Royal” brand.  It also has a 48% market share in the shrimp feed trading business.  It had recently enhanced capacities in the marine division includi...
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