Investing Reflections On India

Torrent Cables is in the business of manufacturing power cables, insulated cables etc.  Specifically, it manufactures XLPE and PVC cables.  The company has reported fluctuating profits on revenue levels of about 200cr – reporting 11cr in operating profits on revenues of over 250cr in the last financial year.  It employed minimal net debt to finance its operations as at 30 th September, 2011. The business is exposed to the risks of price increases in its major inputs such as aluminium, copper and PVC compounds etc. Further, the nature of business is such that contracts are negotiated on a fixed price basis and tenders generally take a while to get finalised, which exposes the company to risks of intervening input price increases.  The business is also exposed to INR depreciation resulting in increased import costs.  Of course, the business could hedge against commodity and currency risks, but these are fraught with the risks of opportunity costs as well as large hedging cost

Precision Wires manufactures copper winding wires for rotating and static electric equipment manufacturers used in the electric power generation industry. It is the market leader in India and is recognised for its product quality as evidenced by sales to OEMs constituting 90% of revenues. The company has reported reasonable growth in its operating profits and revenues – reporting 63cr of operating profits on revenues of 873cr in the last financial year.  It employed moderate debt to finance its operations in relation to its net current assets and book equity. The company is primarily exposed to copper price increases.  It is dependent on the fortunes of the power industry and is hence, at the mercy of government policies on resource allocation and reforms in the power sector apart from cyclical slowdowns marked by interest rate increases.  Further, it is exposed to intense competition from small scale companies.  Since it is a net importer, it suffers from significant IN