Investing Reflections On India

Garware Polyester manufactures polyester films, which has a variety of applications in packaging, insulation, imaging, etc. among several others.  The company is the largest exporter of polyester films based out of India and is one of only two global manufacturers producing dyed polyester films.  It owns the “Global” brand of polyester films, which is prominent in the US and now introduced successfully in the Indian market. It produces polyester films in three broad categories, which are – plain (e.g. shrink film), sun control (used in automobiles), and thermal films, which is a recent addition. Management is looking to invest in research and development for launching new branded products in the solar film market; as well as market window films for offices, commercial buildings and malls to the premium segment of that market. The company reported reasonably stable performance over the last five years but has dipped in the last twelve months (see below) – rep...

MVL Industries operates in the consumer electronics (CE) industry. The company largely supplies televisions, vcd/dvd players and the like.  It owns the ‘Media’ and ‘MVL’ brands. The company operated with a high debt load in the last financial year - which comprised largely of secured loans from banks. The company also owns quoted investments – the largest of which are holdings in MVL Limited, which has seen a decline of over 75% in value over the last year – resulting in market value of holdings amounting to about 40cr. The balance sheet largely comprises of receivables although they are reported to be less than six months old.  It is difficult to ascertain their recoverability from publicly available information. However, the company has reported consistent growth in operating profits and revenues over the last five years – reporting over 30cr in operating profits on revenues of over 470cr in the last financial year.  The interest expense, arising ...

Mafatlal Industries operates in the textile industry engaging in spinning, weaving, and processing of textiles. The company was de-registered from BIFR in 2011 as a result of restoring its net worth and paying down debts.  It did this by selling one of its properties to the Piramal Group for 600cr and using the proceeds to pay off outstanding debt. The balance sheet revealed a much more comfortable debt position as at the end of the last financial year as compared to the year before. Management now plans to incur capital expenditures of 65cr for enhancing processing capacities along with 10cr for power generation.  They also intend to raise additional bank loans to finance these capital expenditures. The company reported large operating losses in nine out of the last ten years – enough to wipe out equity and then some – landing it with the BIFR.  Apparently, it is stuck with old equipment and high labour costs.  This isn’t helped by aggressive comp...

Windsor Machines manufactures capital equipment machinery for use in injection moulding and extrusion activities – both dividing sales equally. It has technical collaboration with Italian and German manufacturers for producing its plastic processing and pipe machines. The company reported accumulated losses in the past as a result of a combination of poor aggregate operating performances and an extraordinarily high debt load.  Its shutdown was avoided by secured lenders taking a 55% haircut on their loans.  It had a more manageable debt load as at 30 th September, 2011 (if the company can continue to be reasonably profitable). Its debts comprised of unsecured loans from a company and a smaller inter-corporate loan – implying that their terms are likely to be softer than secured loans from banks and therefore subject to less stringent action should operating conditions turn worse. It reported 18cr of deferred tax assets (as at 30 th September, 2011), which ...

Frontier Springs manufactures coil and leaf springs. It is a market leader in this niche segment and supplies to prominent customers such as Indian railways, BHEL, BEML, etc. Moreover, Siemens Germany approved its manufacturing facilities for use in its switch gears production. Management aims to focus on exports to increase future profitability. The company reported growing operating profits on growing revenues in the last five years, although this has taken a slight dip in the last twelve months (see below) – with operating profits of over 5cr on revenues of over 35cr.  It operated with a modest net debt load as at 31 st March, 2012. The business is largely dependent on the capital investment cycle for its revenues, which is adversely impacted by high interest rates (such as now). It is also exposed to increasing costs of steel, its primary raw material.  This is, in turn, dependent on the global steel demand/supply scenario.  Management is attem...

Haldyn Glass is in the business of manufacturing glass bottles for use in the liquor, pharmaceutical, retail, food and beverage, and other industries. The product is more hygienic and eco-friendly than substitutes. Management expects good growth in the customer industries – particularly liquor, which has grown at 12% p.a. in the recent past.  They are investing in advanced technologies and bottle-printing and decoration facilities to add value to its offerings to the food and beverage sector. The company reported good growth in revenues and operating profits in the last five years – reporting over 45cr in operating profits on revenues of about 175cr in the year ending 31 st March, 2012.  It operated with minimal net debt as at that date. The company’s order book is dependent on the global and domestic economic cycles. The business requires investment in up to date technologies to remain competitive.  The product is largely a commodity and doesn’t a...

ABM Knowledgeware executes IT projects primarily for state governments. It primarily executes e-governance projects, which enjoys a virtuous circle when government departments see the results of successful implementation with their peers.  The company is currently operating in Maharashtra but plans to expand to other states. The company reported consistent growth in revenues and operating profits in the last five years – reporting over 20cr of operating profits on over 90cr of revenues in the last twelve months.  It operated with a net cash balance of just under 15cr as at 31 st March, 2012. The primary risk facing the business is government apathy and/or spending cuts, which curtails projects and reduces revenues. The business also faces substantial risks in technology obsolescence in meeting client objectives, and acquiring and retaining skilled manpower at reasonable costs. Other risks include execution difficulties (leading to cost overruns), lack o...