Investing Reflections On India

Rama Pulp & Paper operates in the business of manufacturing paper (>80% of revenues) and trading chemicals. The company manufactures various types of paper including carbon base paper where it has a 40% market share.  It does not appear to face major infrastructure issues of land, water, power etc. The company has reported erratic profitability on moderately growing revenues – reporting operating profits of about 5cr on revenues of about 70cr in the last financial year.  The company operated with a moderate debt load.  It also reported net current assets of about 20cr as at 30 th September, 2011. Management plans to incur capital expenditure equivalent to the current total resources of the company to expand into the fertiliser business and manufacture phosphate fertilisers.  Such a step away from the company’s core competence is baffling.   These large investments would require substantial additional financing that would surely require the raising of substant