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Rishiroop Rubber


Rishiroop Rubber is in the business of trading of industrial raw materials.

The company supplies raw materials to various industries.  Management expects to widen the company’s product offerings and customer base – both domestically as well as internationally.

The company reported losses or marginal operating profits in the years leading up to 31st March, 2009 – after which it reported growing operating profits on growing revenues – reporting about 7cr in operating profits on revenues of about 60cr in the last financial year. 

Investors ought to note that cash flows have not kept up (as is usually the case in rapidly growing enterprises due to working capital needs among other factors) and their commitments would also depend on how well management manages its financial position rather than just growth for its own sake.

However, the company reported liquid assets and cash of about 12cr as at 31st March, 2012.  Nevertheless, management have never declared a dividend to equity shareholders – raising questions about management’s fidelity towards them as well as the effectiveness with which management will deploy their capital in the future.

The business is a trading outfit and hence, does not own valuable long-term assets.  It is wholly dependent on suppliers for its products and has practically no pricing power with customers.  Moreover, it is exposed to intense competition in its business partly as a result of low barriers to entry.

Demand for its products is adversely impacted by a global economic slowdown.

The business is exposed to raw material price volatility that adversely impacts its profitability.  It is also adversely impacted by a weakening INR since it is a net importer of raw materials.  Other cost inflationary pressures reduce overall profitability since it faces resistance from customers on price increases.

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