Investing Reflections On India

Maithan Alloys is in the business of producing manganese ferro alloys. It has a reputed clientele with the likes of SAIL, Jindal Steel etc. in its roster.   It claims to differentiate itself from other ferro alloy producers by focusing on higher margin manganese alloy products used for special steel strengthening. The company has reported somewhat erratic revenue growth over its short public history likely due to its industrial cycle – reporting 110cr of operating profits on 600cr of revenues in the last financial year.  It operates with modest net debt of about 50cr. The company is heavily dependent on the availability and pricing of manganese ores – and hence, very exposed to adverse price spikes.  Moreover, it is exposed to cyclical risks of the steel industry – its primary customers and also to the oversupply within its own industry. 

Excel Crop Care is in the business of manufacturing agrochemicals. It is a leading producer with established brands. It is constantly developing new products and tapping export markets to grow its revenues. The company has shown reasonably good growth in revenues and profits over the last five years – reporting about 90cr in operating profits on 700cr of revenues in the last financial year.  It operates with modest leverage of about 115cr. The business is exposed to several risks including climate dependence, brand counterfeiting, import competition, negative public relations on agrochemicals, cyclicality of raw material supplies, adverse regulations in export markets.  It is also operating in an industry that is growing at a pace slower than real GDP.

The company is in the business of manufacturing ‘fluid couplings’, which are power transmission devices used in various basic industries such as thermal power plants, steel, cement, and other infrastructure-related businesses. The company has shown reasonable growth in revenues and profits in the recent past with no net debt as at 31 st March, 2011.  It generated about 2.5 crores in net profits on revenues of 18 crores in the last financial year.  The company was, however, a victim of financial restructuring several years ago as a result of severe losses (pre-2000) and erosion of reserves.  It has now recovered its former losses and built up its net worth as a result of the recent good performance. Management has deployed retained earnings at reasonably attractive rates of return in the past and recently declared a dividend of INR 1/share on its equity shares. The company has apparently expended efforts to build its brand in the Australian and New Zealand markets apart from the do