Investing Reflections On India

Mukand operates in the specialty steel and industrial machinery segments. The company supplies steel to the automotive industry; and is one of the leaders in manufacturing heavy duty electric overhead travelling cranes - with the one of the largest domestic capacities in its category.  It works with its group company Mukand Engineers in bidding for projects.   It also aims to jointly bid with IHI Japan in the future. The company has recently expanded steel capacities, which may lead to higher revenues in the near future. The company reported reasonably steady performance over the last five years – reporting operating profits of 200cr on revenues of 2,500cr in the last financial year.  It employed a debt load of over 1,750cr (as at 30 th September, 2011), which is high relative to its earnings and although it is backed up by assets, it may cause discomfort to shareholders under tight monetary conditions instilled by the RBI. The fortunes of the business are tied to the

Cinevistaas produces television serials. It produces a handful of serials (mythological, youth-related, etc.) for well-established television channels such as Sony, Star Plus, Star One, Channel V, Sun TV etc.  It entered the Southern market (Karnataka, Tamil Nadu, and Kerala) for the first time in the last financial year. The company reported declining profits on an erratic revenue base over the last five years – reporting net losses on revenues of about 30cr in the last twelve months.  It employed minimal debt to finance its operations. The primary risks impacting the business are the fickle and dynamic tastes of the viewers exacerbated by intense and innovative competition for viewing time.  This doesn’t bode well for predictability of the business’ earnings. Another major risk impacting the business is its low bargaining power with established channels that puts it at a disadvantage in a multitude of ways from responsibility for failures and pricing per episode (w

Morgan Ventures operates in the businesses of investments, windmill operation, and trading of capital equipments. It places funds with other companies through inter-corporate deposits, bills discounting facilities etc. It operates a wind project with 4,275mw generation capacity that is eligible for earning carbon credits under the UN framework.  However, this business is seasonal and exposed to uncertain wind patterns. It also acquires capital equipment in liquidation auctions and resells it as is or as scrap.  Future business would depend on the availability of liquidation auctions and similar opportunities.  Moreover, demand for capital equipment is cyclical and may be substantially diminished in down years. The company reported declining performance over the last five years – reporting net losses in the last twelve months on revenues of just over 2cr.  It employed only a moderate debt load to finance its operations. Management’s focus in the future is likely t

Haryana Leather Chemicals produces leather chemicals for tanners to manufacture leather products.  It also has a small acrylic division. The company is reasonably well-entrenched in India and China, and caters to all segments of the leather industry.  Indian tanneries are now competitive with European manufacturers on quality and compliance, and have relative low cost advantages, which bodes well for the company’s future prospects.  The company is attempting to constantly expand its customer base to countries such as Indonesia, Vietnam, Ethiopia etc.  The company reported consistent growth in revenues and operating profits over the last five years – reporting just under 3cr of operating profits on revenues of over 32cr in the last twelve months.  It employed no net debt to finance its operations. The business is impacted by declining raw hide availability and exposed to increasing costs of raw materials such as basic organics, crude oil, etc.  This leads to significant p

Shree Steel Wire Ropes manufactures stainless steel wire ropes and regulating equipment for Indian Railways (IR), its main customer. The company has developed new products for IR in the past, for which it has received approvals for production and supply.  The company is currently IR’s regular supplier in this product segment. The company reported stable performance over the last five years – reporting about 1cr of operating profits on revenues of 5cr in the last financial year.  It employed no net debt to finance its operations. However, the company can expect severe competition from new entrants as and when IR’s requirements increase.  Needless to say, the company is exposed to substantial customer concentration risk since IR is its main customer – any cancellation of business will practically wipe out existing revenues.

Ratnabali Capital Markets offers brokerage and depository services, and also trades on its own account. The company is a member of the BSE, NSE and MCX, and depository participant (DP) with the NSDL.  It operates in the capital, futures and options (f&o), and currency markets. The company appears to have morphed its business model from brokerage services to trading and therefore, current performance doesn’t appear to be comparable to the past – it reported marginal net profits of 2.5cr on revenues of over 700cr in the last twelve months.  It employed minimal debt relative to assets to finance its operations (at 30 th September 2011). The business is primarily exposed to low retail participation in the capital markets, which is largely sentiment driven and driven by a fear of falling prices and even stagnation.  Moreover, there is significant competition in this industry and rapid technological changes that have reduced barriers to entry and increased the need for te

Narendra Properties operates in the building construction industry.  It purchases land and converts them to residential houses, complexes, flats, commercial space (on selective basis) primarily near Chennai’s IT corridor.   There appears to be a lot of unmet demand for residential space from the working population. The company reported reasonably stable performance over the last five years – reporting about 3cr of operating profits on revenues of 11cr.  It did not employ any debt in its operations. The business is tied directly to general economic activity and more specifically to the fortunes of the IT sector in Chennai.  It is subject to the interest-rate environment, which impairs demand for house properties in a high interest-rate environment.   Moreover, its performance is dependent on its ability to execute projects in a timely fashion – the absence of which will lead to the disappearance of earnings. The business is subject to heavy competition in the real est