Investing Reflections On India

Sicagen is a trading outfit based out of Chennai. It is primarily engaged in trading commercial vehicles and construction materials.  It is a distributor for Tata Motors. It reported marginal operating profits on growing revenues over the last five years – reporting over 25cr in operating profits on revenues of 900cr in the year ended 31 st March, 2012.  It operated with a moderate debt load relative to its current assets as at that date. The company reported 38cr in market value of quoted investments as at 2011 year-end – this would be lower as at 2012 year-end but not by too much. The reported assets on the balance sheet are largely comprised of sundry receivables and other loans and advances – their recoverability is unknown from publicly available information. The business is totally dependent on the interest-rate environment – being adversely exposed to high interest rates, crimping demand for its products. It is also impacted by the cyclical f...

Veljan Denison manufactures engineered fluid power products such as hydraulic motors, pumps, valves, etc. that cater to the infrastructure, construction and other manufacturing industries. The company reported reasonably good growth in operating profits and revenues in the last five years – reporting over 20cr in operating profits on revenues of over 80cr in the year ended 31 st March, 2012.  It operated with a very modest debt load as at the end of the last financial year. The demand for the company’s products is exposed to the infrastructure and construction cycles, which are linked to the economic cycles.  Therefore, being a relatively small player, its revenues are potentially exposed to disturbing declines during economic slowdowns. The company is subject to competition from both domestic and foreign competitors – who are both entering as well as expanding in the Indian market.  The operations are adversely impacted by high steel/pig iron prices, ...

Salora International is engaged in the distribution, supply, and after-sales service of consumer electronics, IT, Telecom, televisions, and other products. It supplies products for brands such as Acer, Motorola, MTS, Sharp, etc. along with some Chinese manufacturers.  It also supplies televisions under its own brand name ‘Salora’. The company reported declining operating profits (now losses) on declining revenues over the last five years.  It reported net losses of 8cr on a revenue base of just over 400cr in the year ended 31 st March, 2012.  Despite the losses, the debt load appeared moderate in relation to its current assets – assuming that its receivables and inventories were valued conservatively. The business is exposed to the interest rate cycle – with high rates adversely impacting both the servicing costs of the company’s debts and consumer demand i.e. those who finance purchases with loans. The business is also exposed to the considerable risk...

Solitaire Machine Tools manufactures ‘Centreless Grinder’ machines for use in the automobile, textile, steel, bearings and precision engineering industries. Management believes there is opportunity to increase sales on the back of manufacturers looking to outsource auto ancillary products from India. The company reported stable operating profits on reasonably stable revenues – reporting just under 3cr of operating profits on revenues of about 14cr in the last twelve months.  It operated with no net debt as at 31 st March, 2012. The company sold 37 machines in FY 2011 as compared 24 in the previous year – but this figure is likely to come under pressure in the near future as the business is adversely impacted by a high interest-rate environment (such as currently), which dampens customers’ capital investment plans. The company is also heavily influenced by government policies- particularly in the areas of import/export and incentives for investments, which can af...

International Travel House provides travel related services to corporate clients.  It is an associate of ITC Limited (ITC). It provides air ticketing, car rentals, inbound tourism, holidays packages, conference, events and exhibition management services to companies and conference organisers.  However, about half of revenues are generated from ITC. The company reported consistent growth in revenues and operating profits over the last five years – reporting 35cr in operating profits on revenues of over 160cr in the last twelve months.  It operated with no net debt as at 31 st March, 2012. The business is exposed to all the adverse factors impacting air travel including affordability, high fuel prices (both intrinsic and as a result of INR depreciation), government taxes, economic downturns, natural disasters, terror attacks, etc.

BITS Computer Education is in the business of providing software training. The company reported continuous operating losses over the last five years.  The balance sheet is largely comprised of receivables that appear to be outstanding for well over a year and unlikely to be collected any time soon, if at all. Management appears to be outsourcing jobs and assignments to consultants to save on employee costs and other administrative expenses. 

Bharat Gears supplies gear components to the light, medium, heavy, utility vehicle segments as well as construction equipment and agricultural tractors. It is the leading supplier of gear components in India with a strong customer base including the likes of John Deere, JCB, Toyota, M&M, Tata, etc. The company reported stable operating profits on growing revenues in the last five years – reporting about 45cr in operating profits on revenues of 430cr in the last twelve months.  It operated with a modest net debt load as at 31 st March, 2012. Demand for the company’s products is cyclical and strongly linked to interest rates.  These rates also have an impact the company’s existing debt servicing costs and future investment plans. A large portion of the revenues is derived from tractor and off-highway segments and is therefore largely dependent on agricultural conditions (monsoon factors, etc.) and demand from construction equipment manufacturers (infrastr...