Skip to main content

Neelamalai Agro Industries


Neelamalai Agro Industries manufactures tea and may also be classified as an investment company due to its large liquid investments.

The company reported about 48cr in liquid investments and 4cr in net current assets in the last financial year and this appears to have increased by 5 to 10cr in the six months to 30th September, 2011.

The company reported declining operating profit margins on growing revenues – reporting about 1.5cr in operating profits on revenues of about 18cr in the last financial year.

The tea business is primarily subject to risks of uncertain monsoons, tea crop oversupplies, wage cost increases etc.

Management haven’t bothered to discuss the prospects for the business.  Moreover, they’ve committed resources to unquoted companies for which no financial information is disclosed – including a recent commitment for an apparently unrelated spice trading division in Singapore (although for only about 1cr).  

Further, the dividend appears entirely inadequate relative to the amount of liquid assets held within the company and lack of attractive growth prospects.

All of this raises questions about the extent of management fidelity towards minority shareholder, which the investor ought to satisfy in his own mind before making a commitment.

Comments

Post a Comment

Popular posts from this blog

On The Radar: India's Small-Cap Equities (Concluded)

We have been running a series of articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in December 2011 - and followed up twice - with the last article in December 2013. We would like to conclude this series after updating the small-cap index level and returns, comparing it to our expectations ex-ante, and analysing the current scenario.  Following this, we have also outlined where we may take this blog in the future. The small-cap index closed at 11,087.07 on December 31 st , 2014.  This compares to a level of 6,150.65 in our last article – resulting in an advance of over 80% to date. This is a handsome absolute return by any standard, particularly compared to Indian government bonds, which yielded around 8-9% for the period.  This justifies the conclusion at the end of our previous article that “small-caps in India offer among the most attractive bargains during any time since 2006 and certainly in the entire Indian stock market today”. Of cour
1 comment
Read more

Lakshmi Energy

Lakshmi Energy is in the business of processing and distributing rice to domestic and export markets.   It is also engaged in generating biomass fuel. The company has reported growth in revenues and operating profits over the last five years reporting about 200cr in operating profits on about 1200cr of revenues in the last financial year (ending 30 th September, 2010).   It operated with a relatively high net debt load of 780cr as at that date. The business, however, generates weak operating cash flows as a result of high investment in its working capital. The business is subject to adverse changes in government regulations/policies on procurement pricing, non-Basmati exports etc.   It is monsoon-dependent, subject to adverse changes in foreign exchange rates (for exports) and prone to heavy competition in its operations. Dividends have been on a declining trend for the last five years (probably as a result of above cash flow problems).   Management appear to be making a valiant
2 comments
Read more

Under the Radar: India’s Mid-Cap and Small-Cap Equities

Indian stock markets have been one of the worst performers in 2011 – worse than their BRIC peers, worse than the rest of Asia and far worse than the US with the leading indices declining about 25% during the year.  Foreign investors in India have also suffered substantial declines of nearly 20% in INR currency value. There appear to be several reasons for the market’s dislike for Indian equities in 2011, which include persistent inflation (including food inflation, which constitutes the major proportion of the typical Indian household), political paralysis (e.g. rollback of foreign investment in retail etc.) and global concerns about the solvency of several Eurozone countries. As a result, estimated GDP growth for the next financial year has been revised downwards from about 8% earlier in the year to about 6% now - with many market commentators wondering whether this rate of growth is India’s ‘new normal’.  This is still, however, substantially higher than global average.
2 comments
Read more