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Sudal Industries


Sudal Industries is in the business of manufacturing aluminium extrusions, which h are used in several basic industries such as construction, buses/trucks, power, electrical, defence, railways, infrastructure, packaging etc. with new applications still being discovered.  Moreover, aluminium penetration in the Indian market is very low by world standards (like a lot of other products) indicating potential for a lot of future growth.

The company reported a recent spurt in revenues and operating profits of 10cr and 110cr respectively.  It employed moderate debt of 12cr as at 31st March 2011 but this is set to increase substantially over the next few years as a result of capacity expansion plans (see below).

The business is exposed to rising aluminium prices and is subject to the general economic cycle.

Management have planned large capital expansion projects with capital expenditure equivalent to about 60% of current resources planned for next year alone.  Needless to say, the additional financing required for such aggressive expansion will increase the risk for minority shareholders at least.

It is important to note that the company had reported negative reserves until 2008 as a result of accumulated losses in the past casting an unfavourable light on management competence.

In addition, management have made interest-free loans to related party partnerships and issued optional warrants to themselves in the past casting further unfavourable light on management commitment towards minority shareholders.
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