Investing Reflections On India

Vikas WSP is in the business of producing guar gum powder, which is used primarily in food products and also for oil drilling activities.   It claims to be the leading producer of guar gum polymers in the world with customers such as Nestle, Mars, Heinz, Sara Lee, Unilever and CSM. The company has shown consistent growth in profitability and revenues over the years with 145 crores in operating profits on 550 crores in revenues in the last 12 months.  It also sports modest debt on its balance sheet. It hasn’t, however, generated free cash flows (operating cash flows – investing cash flows) over the last seven years due to excessive capital expenditure and expansion programmes.  This has been financed by debt financing and a particularly large preferential allotment of equity to promoters in 2008. The business is subject to risks of inadequate monsoon and water supply for the principal raw material (guar).  It is also exposed to risks of adverse regulatory changes in the food and