Investing Reflections On India

Sandur Manganese is in the business of mining manganese and iron ore for eventual use in manufacturing steel. The company reported good growth in revenues and operating profits in the last five years – reporting 140cr of operating profits on revenues of about 350cr in the last financial year.  It employed no debt in its operations and had sizeable liquid assets of over 100cr as at 31 st March 2011.  This financial position, however, may change significantly over the next few years as a result of management’s expansion plans (see below). The company is expected to incur heavy capital expenditure in the next few years (see below), which will have an impact on future free cash flows for investors. The business operates in an industry that has high power requirements, which causes operational problems in a power-deficit country.  The business is exposed to the risks of periodic oversupply of ore in the industry (as currently with manganese ore) where there are...

Maithan Alloys is in the business of producing manganese ferro alloys. It has a reputed clientele with the likes of SAIL, Jindal Steel etc. in its roster.   It claims to differentiate itself from other ferro alloy producers by focusing on higher margin manganese alloy products used for special steel strengthening. The company has reported somewhat erratic revenue growth over its short public history likely due to its industrial cycle – reporting 110cr of operating profits on 600cr of revenues in the last financial year.  It operates with modest net debt of about 50cr. The company is heavily dependent on the availability and pricing of manganese ores – and hence, very exposed to adverse price spikes.  Moreover, it is exposed to cyclical risks of the steel industry – its primary customers and also to the oversupply within its own industry.