Investing Reflections On India

MRO Tek operates in the computer hardware industry within the networking and communications segment.  It manufactures digital modems and converters and aims to cater to 3g/broadband demand. The company has reported a consistent decline in revenues and operating profits over the last five years, representing a decline in competitiveness – it reported operating losses on revenues of about 25cr in the last financial year.  However, it had a net cash position of about 16cr as at 30 th September, 2011. The business operates in a fast-changing field where new technology renders business models obsolete.  This, perhaps, is the reason for the company’s massive revenue decline.  It is also exposed to the risks of delayed launches and large gestation periods of own products, which could be lethal in such a dynamic industry.

Hind Rectifiers manufactures rectifiers and converter/inverter equipment for the power electronics and power conversion industry. The company is a leader in several of its market segments.  It has a prominent customer base including Indian Railways and other multinational companies located in several countries including those in Europe.   It also carries out trading activities in semi-conductor devices and capacitors amounting to less than 10% of total revenues. The company has reported reasonably stable operating profits on similar revenues over the last five years – reporting about 15cr of operating profits on revenues of over 100cr in the last financial year.  It employed minimal net debt in financing its operations as at 30 th September, 2011. The primary risk pertains to a concentration of sales to the Indian Railways.  Although a large, stable and prominent customer, revenues would decline substantially if it were to lose this customer for ...