Investing Reflections On India

Apar Industries operates in the power sector manufacturing Transformer Oil and Conductors. The company is one of the leading companies in both segments and revenues are split about equally among both.  Management expects to benefit from the myriad steps taken by the government to build up power infrastructure and address the persistent demand/supply gap in this sector. The company amalgamated ‘Uniflex Cables’ into its business in the last financial year.  This was considered a sick industrial company under the BIFR.  See discussion of cable business below. The company reported reasonably steady growth in consolidated revenues and operating profits considering the nature of the industry – reporting about 180cr in operating profits on revenues of about 3,000cr in the last financial year.  It employed minimal debt to finance its operations. The business is generally exposed to rises in commodity prices, particularly those of non-ferrous metals and base oils, which form

Balasore Alloys is in the business of manufacturing high carbon ferro chrome used as a raw material in stainless steel production and other alloys steels. The company owns several chromite and manganese ore mines in India to source its raw material supplies and is looking for more sources domestically and internationally.  It is in the process of setting a captive power plant with a joint venture partner to secure its power needs.   It also intends to expand production capacities in the near future. The company is a corporate debt restructuring (CDR) case as a result of past inability to repay debt.  Therefore, it is hampered in carrying out investing and financing activities unless it obtains permission from its bankers. The company reported somewhat volatile operating performance over the last five years – it reported over 100cr in operating profits on revenues of over 620cr in the last twelve months.  It employed a moderate debt load to finance its operations (as at 3

Murudeshwar Ceramics manufactures ceramic and vitrified tiles. The demand scenario appears to possess tailwinds such as improving living standards, government emphasis on housing, rural penetration etc.   The company has also outsourced some manufacturing by licensing its brand name that has helped save costs and may improve competitiveness. The company reported somewhat volatile operating performance over the last five years – reporting about 50cr of operating profits on revenues of about 200cr in the last twelve months.  It’s debt load of 140cr (at 31 st March 2011), although not comfortable, appeared to be manageable particularly in relation to net current assets. The business is exposed to changing consumer preferences and high competition - including the unorganised sector, which adversely impacts the retail market that forms the largest tiles market segment.  The business model is characterised by heavy capital investment – both in fixed assets and working cap

Tirupati Starch and Chemicals manufactures maize starch and dextrose products. Maize Starch finds applications in basic industries such as textiles, paints, detergents, paper, ceramics, pharmaceuticals etc. and Dextrose is used primarily in the food processing and pharmaceutical industries.  It has two plants located at Indore that is currently running at full capacity. The company reported steady performance in the last five years – reporting about 6cr in operating profits on revenues of about 50cr in the last financial year.  It employed a moderate debt load to finance its operations. Management haven’t discussed the business and its prospects in any intelligent manner to the company’s shareholders, which is a definite negative in their appraisal. The business is exposed to increases in maize and raw starch price as well as power costs arising from power shortages. The audit report contains several qualifications – a lot of which question the accuracy of the in

BLB operates in the brokerage industry serving retail customers. It also does arbitrage and commodity trading for its own account and real estate investing through a subsidiary. The company reported erratic performance over the last five years including net losses that have reduced net worth during market downturns.  It reported net losses on revenues of about 130cr in the last twelve months.   However, it also reported a net worth of 122cr (at 30 th September, 2011) consisting of 80cr of net current assets and just over 20cr of investments, which should have a minimum market value of 5-10cr on quoted companies and mutual funds unless the composition has changed significantly from 31 st March, 2011. The business suffers from various issues such as lack of retail interest in the stock market, severe competition, increased technology outlays, increased regulations and compliance costs, etc.  It is likely to downsize its operations from that existing in the past.

Trans Freight Containers was operating in the business of manufacturing containers. The company currently has no operating activity and management is considering diversification into other businesses such as specialised fabrication of multi-purpose accommodation units.  It has had no operating activity for the last several years. The container business was subject to heavy Chinese dumping that made the business so unprofitable it had to stop operations altogether.  The company does, however, have fixed assets – building, estate, plant and machinery along with loans and advances (earning interest income), some inventory of marine cargo containers and cash balances.  It reported its net worth at just over 30cr alongside a debt load of 10cr, which is covered by cash balances of 13cr (as at 30 th September, 2011). Management has been selling land holding as well as liquidating fixed assets and inventories, and recovering loans in the last couple of years.  They have

Hira Ferro Alloys is in the business of manufacturing ferro alloys – mainly silico manganese.  They are used as intermediates in manufacturing steel, acting as deoxidant and alloying agents. The company recently acquired an 8.5mw biomass power plant as a going concern.  Apart from servicing their ferro alloys business, they intend to scale up sales of power in the short-term market through merchant sales.   Management intends to focus on the power segment in the future since they believe it will provide a more predictable and sustainable earnings model.  The company reported erratic revenues over the last five years where last year’s revenues appear to be around the mid-point of about 150cr.  It has, however, been consistently profitable – reporting 35cr of operating profits in the last financial year.  It employed a moderate debt load to finance its operations. The fortunes of the ferro-alloy business are tied to those of the steel industry. Consequently, it is expo