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Bhagwandas Metals


Bhagwandas Metals trades in steel products.

The general demand outlook for steel appears to be positive with government expenditure on infrastructure projects and improving consumer demand – although the company’s ability to outsmart competitors is not as certain.

The company reported reasonably stable revenues and operating profits (albeit with wafer-thin margins) over the last five years – reporting 63lacs of operating profits on revenues of 70cr.  It operated with a net cash position of about 2cr as at the end of the last financial year.

The primary issue with the company is that it’s a trading outfit and does not own manufacturing facilities – while this gives it flexibility to adjust to market conditions, it doesn’t own the value-generating activities that is essential for building competitive strength in its industry.

Demand for steel is subject to the interest rate cycle and a period of high interest rates (such as currently) results in delayed government projects and consumer spending.

Moreover, the industry suffers from bouts of overcapacity and stiff competition that depresses sales and profit margins.  

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