Investing Reflections On India

Vijay Solvex is in the business of manufacturing edible oils – primarily mustard oil under ‘SCOOTER’ brand.  It also operates in the ceramics and wind power industries (in an insignificant manner). The company has reported reasonably stable operating profits and revenues over the last five years – reporting about 11cr in operating profits on 600cr of revenues in the last financial year.  However, it operated with an excessive debt load and has suffered volatile operating cash flows as a result over the last five years. The business is exposed to the risks of weak harvests, lack of seeds and acreage in the domestic market, and commodity price fluctuations and (raw materials) as well as severe competition this highly fragmented industry resulting in thin profit margins.  This is worsened by government reduction in import oil duties since 2008 resulting in heavier international competition.   Moreover, customers are very price-sensitive resulting in a lack of pricing power when