Investing Reflections On India

Alufluoride is in the business of supplying aluminium fluoride to practically all aluminium smelters in India to reduce the temperature for aluminium smelting. The company has not reported any significant growth in revenues or operating profits over the last five years.  It reported net operating losses of about 2cr on below-par revenues of 17cr in the last financial year and operated with a net cash position of about 6cr.

Orient Beverages is in the business of supplying ‘Bisleri’ branded mineral water.  It is also engaged in real estate activities. The company has reported no growth in revenues but reported consistent net profits (including rental income – see below) over the last five years.  It reported a net profit of 1cr on revenues of 13cr in the last financial year.  It operated with a relatively high net debt load of 5cr (as at 30 th September 2010). The mineral water business has been on a declining trend and is exposed to further deterioration of revenues as a result of slowing demand for its products with no real prospect of a turnaround.  It has been a victim of labour unrest at its plants and there doesn’t appear to be a reason why this wouldn’t happen again in the future.  It has also veered away from its core business and into real estate with currently one major rental customer (United Credit) generating its rental income – this would require a different asses...

Metrochem Industries is currently engaged in the business of real estate activities. It formerly owned a dyes and intermediates division, which was demerged from the company in the last financial year.   The proceeds from the demerger are currently deployed in real estate activities with the bulk of it tied up in advances for construction etc. Therefore, the past record of profitability is irrelevant to assessing future business prospects.   It operated with a net cash position of about 30cr (as at 31 st March, 2010). The business is exposed to the risks of the real estate industry including construction material price rises, low availability of land for construction, high competition, vulnerability to economic downturns, increasing customer bargaining power (as a result of greater information availability etc.), greater government regulations on real estate activities etc. The lack of a decent track record in real estate activities would prevent the formation of further se...

Flawless Diamonds is in the business of exporting cut and polished diamonds to the US, China, UAE and other countries. The company has not reported significant revenue growth in the last five years and operating profits have been somewhat erratic.   It reported 6cr of operating profits on revenues of about 400cr in the last financial year.   It operated with a relatively high debt load of about 60cr (as at 31 st March, 2010). It is exposed to demand drops during economic downturns due to the discretionary nature of its products, adverse foreign exchange movements impacting its export revenues, interest rate risks impacting its debts and other related risks. Management haven’t declared dividends since the 2008 financial crisis and appear unlikely to reinstate them in the near future due to recent quarterly losses.

Emmsons International is in the business of trading rice, wheat and other commodities. The company reported consistent growth in trading revenues and profits.   It reported operating profits about 50cr on revenues of about 1,350cr in the last financial year.   It operated with a relatively high debt load of 140cr. The business, however, generates weak operating cash flows as a result of heavy investment in its working capital. The business is exposed to the risks of commodity price rises, adverse government regulations on exports/imports, and adverse movements in foreign exchange – all of which directly impact its profits.

Tokyo Plast is in the business of manufacturing thermoware products used to maintain temperature such as insulated ice boxes, water bottles, food carriers etc. The company has reported reasonable growth in revenues and operating profits over the last five years – reporting about 7cr in operating profits on revenues of about 50cr in the last financial year.  It operated with a modest net debt position of about 13cr. The business is subject to crude oil price spikes impacting its raw material costs.  It is also exposed to Chinese competition in this product category and adverse movements in foreign exchange with a large proportion of exports constituting its total sales.

Ecoplast is in the business of manufacturing and supplying co-extruded packaging film, which is apparently a higher value-added packaging film. The company has reported growth in revenues and profits over the last five years.   It reported operating profits of about 6.6cr on revenues of 66cr in the last financial year.   It operated with a modest net debt of about 8cr. The business is exposed to rises in its raw material prices (poly-ethylene – petroleum based).   It is also subject to risks of increased competition as a result of low barriers to entry in this industry and adverse foreign exchange movements on purchase since it imports a large proportion of its raw materials.