Investing Reflections On India

ANS operates in the food processing industry.   It is a supplier of frozen foods including vegetables, fruits etc. The company has reported erratic revenues and profits over the last four years – reporting marginal net profits of 86 lacs on revenues of 2 crores in the last financial year (31 st March 2011).   It operated with no debt as at 31 st March, 2010. The business is subject to fluctuating monsoon conditions and agricultural prices.   It uses third party facilities for storage and hence, exposed to storage risks outside their control (e.g. insufficient security, theft, damage etc.). It is exposed to Chinese competition in this business.   Moreover, it is subject to government regulations on food pricing and import duties etc. Management have not declared any dividends in the last five years – presumably as a result of its volatile performance.

Olympic Oil was a dormant company until the last quarter when it showed a spike in operating activity.   The company is currently promoted by a Mr Sunil Varma and a Mr Uday Desai from Kanpur holding a combined 31% equity stake (after an open offer in 2010).   The public still holds 69% equity in this company. A perusal of its public filings reveals changes in its memorandum of association to include trading activity for all kinds of commodities (agri-commodities, extracts, oils etc.).   Further, there appears to be substantial additional financing in the past few months to enable this business. Latest balance sheet is unavailable – therefore, the amount of external debt to equity capital is not readily ascertainable.   The company appears to have generated 48 lacs of profits on substantial revenues of 38 crores in the last 12 months compared to nothing in the last year.   The profit margins are marginal, as expected in a trading business, but the interest cov...