Investing Reflections On India

Prima Plastics is in the business of manufacturing Moulded Furniture and Aluminium Composite Panels.   It supplies usually to retail outlets.   It also owns a profitable joint venture in Cameroon. The company has reported reasonably consistent growth in revenues and operating profits over the last five years.   It reported almost 6cr in operating profits on revenues of almost 60cr in the last financial year while employing modest net debt of about 3cr. The business is exposed to high risk of poor performance in recessionary conditions.   It is also exposed to crude oil and aluminium price spikes, polypropylene (plastic) supplies - mainly dependent on Middle East capacity, heavy competition incl from China, price competition in low-value products, foreign exchange risks on imports as well as exports, etc. Management initiated dividends in FY’10 and continued it in FY’11.   Its continuance would appear to depend on the impact of business risks mentioned above.

PG Foils is in the business of manufacturing aluminium foils and supplying to the retail and pharmaceutical sectors for packaging as well as long shelf-life benefits. The company has reported reasonably stable revenues and operating profits over the last four years – generating about 14cr in operating profits on revenues of about 140cr. It employed negligible net debt as at 31 st March, 2010. The business is exposed to the risks of aluminium price spikes, cyclicality (incl periods of excess capacity) and adverse movements on currency rates. Management appears to employ a niggardly policy towards declaring dividends considering the amount of net profits it generates - presumably for retaining profits for business expansion.  The problem, however, is that management have not employed capital efficiently in the last few years as reflected in poor profitability ratios – shareholders ought to demand an accounting by management for this inefficiency with their money and ought