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Choksi Imaging

The company is in the business of manufacturing photo-sensitised materials (X-Ray Films and Accessories) and supplying of other related products for the healthcare industry – particularly for hospitals and diagnostics centres.

The company has reported profits in each of its last five years with about 7 crores of operating profits on 168 crores of revenues in the last financial year.  However, it has a relatively high level of net borrowings amounting to over 25 crores (as at 31st March, 2011) exposing it to not insignificant downside risks should the business encounter operational bumps along the road.

The company also has a relatively high investment in working capital resulting in cash outflows from operations – with cash tied up in inventories and receivables.

It apparently has a large distribution network across India enabling it to gauge customer demand and supply them effectively.

The company faces a significant business risk in the long-term obsolescence of X-ray technology – being replaced by computer radiology.  The company appears to be adapting by acting as an agent importing and distributing the latest products but that means that the company doesn’t have valuable manufacturing facilities (for X-rays) any more and has been relegated to a traders’ role albeit with a large distribution network.

As a result, it faces substantial risks of greater competition from smaller players - since barriers to entry are low for a trading business - and from large multinationals entering the market with their own products.

It also faces risks of adverse foreign exchange fluctuations since most goods are imported – although these effects are largely passed on to customers.

Management appear to be generous in their dividend payments considering that they bleed cash from operations and require loans to finance them.  This may call the sustainability of current dividends into question.
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