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Tirupati Starch and Chemicals


Tirupati Starch and Chemicals, based out of Indore, is in the business of manufacturing maize starch powder and dextrose anhydrous, which are used as additives in the food industry.

The company has generated reasonably consistent operating profits but somewhat erratic net profits as a result of debt financing – thereby exposing it to the interest rate cycle.  It generated about 3 crores in net profits on revenues of 50 crores in the last 12 months and has a reasonable debt/equity ratio of around 1:1.

The business, although appearing stable, is exposed to the risk of price spikes on its principal raw material – maize.  It is also highly dependent on power for its operations exposing it to the risks of inadequate coal supply and power shortages.  Moreover, the business doesn’t appear to possess any definite competitive advantage in this basic industry.

Management have not declared dividends despite lack of reinvestment of profits for growth.   Further, there is a listing of adverse remarks on the audit report.  Although these remarks don’t make the financial statements completely unreliable, they do shed some light on management’s commitment to clear and transparent financial reporting.  Moreover, management haven’t bothered to provide an intelligent discussion of the company’s business prospects - shedding light on their true attitudes toward minority shareholders.
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