Investing Reflections On India

Weizmann operates in the textile and financial services segments. The company undertook a restructuring exercise in the last two years, spinning off its power and foreign exchange businesses – hence, current financial position and performance is not directly comparable to the prior year.   The company reported marginal losses after depreciation in the six months ended 30 th September but operated with a moderate debt load. The company also has several other associates operating in the power sector. The company processes textile fabrics on a job work basis.  Management stated that their focus will on textiles, which exports to Europe/US and now to Africa via its Malawi operation.  This segment had grown 11.5% per annum in the recent past.  The financial services business, however, employs about 75% of net assets. The textile business faces intensive competition from neighbouring textile processing countries such as Bangladesh and Sri Lanka...

Dolat Investments is in the business of stock and now, commodities trading (major % in last financial year). The company lost a portion of its net worth only in 04/05 but managed to stay afloat in the 08/09 as well as current market downturn.  Otherwise, the volatile performance corresponds reasonably well with the stock market cycles over the last five years.  The balance sheet revealed large liquid (cash) balances in excess of 70cr as at 30 th September, 2011. Management claims to operate with a diversified portfolio in a conservative manner.   Moreover, they are now applying for a brokerage license. Trading in the stock and commodity markets is inherently risky when exact trading strategies are largely unknown particularly when short positions are involved which exposes the company to potentially unlimited losses.  Moreover, operations in the financial markets are subject to all the myriad risks impacting the capital markets such as economic a...

Twenty First Century Management is an investment company with a small brokerage operation. The company largely invests funds for its own account and the brokerage business is a relatively small part of its operations with a largely institutional focus. The company possessed liquid assets including securities, cash and other net current assets on a consolidated basis of about 40cr (after accounting for a 10cr loss in the standalone company) as at 30 th September, 2011.  Consistent with the nature of its business, it has reported volatile performance over the last five years generally corresponding with stock market booms and busts. The business is subject to all the risks relevant to investing in financial markets and those specific to its trading strategy (largely unknown).  It is also subject to intense local and global competition in the brokerage business. Management don’t have a notable dividend paying record over the last decade.  Further, the compa...

Pennar Industries is in the business of manufacturing steel strips, metal profiles and related items. It operates primarily in the railway (coach works) and auto segments.  It also has a presence in the white goods and pre-engineered buildings businesses.  It is attempting to shift focus to become an “engineering company” (which feeds off the steel strips business) with custom solutions and higher value product mix.  It is also exploring entry into the defence, nuclear engineering and aerospace segments.  The company reported consistent growth in its revenues and operating profits over the last five years – reporting about 140cr of operating profits on about 1100cr of revenues. It operated with a conservative debt load. It is primarily exposed to rising steel prices.  It is also exposed to the interest rate cycle – which has a follow-on impact on capital goods investments, infrastructure investments, auto purchases etc.   Moreover, gover...

Tyche Industries operates in the pharmaceutical industry - manufacturing chemicals, bulk drugs, and drug intermediaries – largely Glucosamine Hcl and Racemic Sertraline, used for depression, Alzheimer’s etc. The company reported moderately growing revenues but declining operating margins over the last five years.  It reported about 5cr of operating profits on about 45cr of revenues in the last financial year.  It operated with a moderate net debt load and reported net current assets of about 10cr as at 31 st March, 2011. The business is largely export-based and is hence, exposed to a strengthening INR.  Management have purchased items from related parties amounting to 5cr.  Moreover, it has incurred heavy capital expenditure in purchasing leasehold land amounting to 6cr – purpose unknown.  Including this expenditure, the company has not generated free cash flows in the aggregate over the last six years. Management haven’t put in the effort to...

Elgi Equipments is in the business of manufacturing compressors (approx. 85% of revenues) and other auto equipments. It supplies primarily to the infrastructure and construction segments.  It owns subsidiaries in China and France.  It plans to expand by increasing exports (currently 10% of revenues), introduction of new products and opening of new manufacturing facilities. The company has reported consistent growth in revenues and operating profits over the last five years – reporting 130cr of operating profits on about 770cr of revenues in the last financial year.  It operated with a large net cash position. It is primarily exposed to the interest rate cycle, which impacts infrastructure investments and auto purchases.  Further, it is vulnerable to government policies on infrastructure (or lack of it), which directly impacts demand for its products.  It is also subject to risks impacting the auto demand such as high fuel costs etc.

Wim Plast operates in the plastics business manufacturing plastic moulded furniture and related items. It owns the well-established ‘Cello’ brand, has an extensive distribution network and has plans for expanding capacities. The company has reported consistent growth in revenues and profits over the last five years – reporting about 30cr in operating profits on about 170cr of revenues in the last financial year.  It operated with a net cash position. It is primarily exposed to polypropylene prices (crude oil related).  Moreover, it faces competition from local small manufacturers.  It is also exposed to the risk of technological obsolescence, which requires it to regularly update production equipment to stay competitive.