Investing Reflections On India

Rajkumar Forge is in the business of manufacturing forgings for heavy engineering and machine building industries. 90% of its revenue consists of exports. The company reported stable revenues and operating profits over the last five years – reporting over 4cr in operating profits on revenues of about 33cr.  It had net debt of about 17cr as at 30 th September, 2011, which appeared to be amply backed up by its net current assets and book equity. The company had negative reserves until 2007 as a result of past losses.  The business is primarily exposed to increases in steel prices, its primary raw material.  It is also exposed to INR appreciation as a result of its large proportion of export revenues.  

Sudal Industries is in the business of manufacturing aluminium extrusions, which h are used in several basic industries such as construction, buses/trucks, power, electrical, defence, railways, infrastructure, packaging etc. with new applications still being discovered.  Moreover, aluminium penetration in the Indian market is very low by world standards (like a lot of other products) indicating potential for a lot of future growth. The company reported a recent spurt in revenues and operating profits of 10cr and 110cr respectively.  It employed moderate debt of 12cr as at 31 st March 2011 but this is set to increase substantially over the next few years as a result of capacity expansion plans (see below). The business is exposed to rising aluminium prices and is subject to the general economic cycle. Management have planned large capital expansion projects with capital expenditure equivalent to about 60% of current resources planned for next year alone.  N...

Vikram Thermo operates in the pharmaceutical industry and manufactures excipients i.e. inactive drug coating. The company owns the relatively popular ‘DrugCoat’ brand and has a reasonably prominent customer base. The company has reported consistent growth in revenues and profits over the last five years – reporting about 6cr of operating profits on about 30cr of revenues in the last twelve months.  It employed minimal debt in financing its operations. The company did report negative reserves about a decade ago as a result of accumulated losses.  This is largely irrelevant to the business as of today but may be a factor for consideration in case there appear to be indications of aggressive financial policies (e.g. taking on greater debt financing for expansions etc.), which isn’t the case at present. It is exposed to a lot of competition in the generics field (although somewhat mitigated by its brand).  It is also subject to the risk of crude oil price in...

Cybele Industries is a manufacturer of cables – it supplies all types of cables to various industry segments including power cord, power cable, railway cables etc.   The company has   not generated any operating profits in the last five years – losing about 30 lacs on revenues of 56 lacs in the last financial year.   It didn’t have much debt but had negative profit reserves eating into its net worth. The company lost its equity and was referred to the BIFR and the business is subject to heavy competition from the unorganised sector. Needless to say, management haven’t declared any dividends in any of the last five years as a result of the poor financial performance. Any turnaround possibility in the business appears to be speculative at this point in time.