Investing Reflections On India

Precision Pipes is in the business of manufacturing PVC Profiles and Extrusions for the auto and white goods (refrigerators) industries with autos being the dominant segment (90% of revenues) by far. The company has a prominent customer base including the likes of Maruti, Tata, GM, Toyota etc.  Its white goods customers include the likes of Voltas, Godrej, Videocon etc.  It primarily operates with a cost advantage to global peers and a technological edge to domestic competitors.  It has a technical collaboration with two Japanese companies.  The industry is set to grow at 10%+ over the next decade. The company reported consistent growth in revenues and operating profits over the last five years – reporting over 50cr in operating profits on revenues of over 200cr in the last financial year.  It used no net debt (as at 30 th September, 2011) to finance its operations. It is primarily dependent on PVC prices, which is dependent on crude oil prices a...

Torrent Cables is in the business of manufacturing power cables, insulated cables etc.  Specifically, it manufactures XLPE and PVC cables.  The company has reported fluctuating profits on revenue levels of about 200cr – reporting 11cr in operating profits on revenues of over 250cr in the last financial year.  It employed minimal net debt to finance its operations as at 30 th September, 2011. The business is exposed to the risks of price increases in its major inputs such as aluminium, copper and PVC compounds etc. Further, the nature of business is such that contracts are negotiated on a fixed price basis and tenders generally take a while to get finalised, which exposes the company to risks of intervening input price increases.  The business is also exposed to INR depreciation resulting in increased import costs.  Of course, the business could hedge against commodity and currency risks, but these are fraught with the risks of opportunity costs as we...

Puneet Resins is in the business of manufacturing and trading rubber products for supply to the non-tyre segment of rubber users. The sales mix of trading revenues to manufacturing revenues varies widely from year to year depending on demand conditions. The company has reported consistent growth in revenues and profits over the last five years.   It reported operating profits of 7cr on revenues of about 50cr in the last financial year.   It operated with no net debt. The business is subject to price spikes of its raw materials (PVC, Synthetic Rubber etc.).   It is exposed to further weakening in its negotiating power with suppliers as a result of increasing importance of competing (petroleum-based) user industries.   It also has apparently little pricing power with its end customers.