Investing Reflections On India

Inhouse Productions appears to be in the business of producing films/television (tv) programs and providing outsourcing services for the medical industry. The company reported declining and marginal operating profits on declining revenues in the last five years – reporting 27lacs of operating profits on revenues of about 8cr.  Its debt load appears to be effectively backed by its net current assets. Although healthcare revenues and profits are substantially higher than the tv segment, curiously enough, management have devoted all their attention to discussing the tv segment and have scarcely mentioned healthcare. Even more intriguingly, management have not mentioned the name of a single film or tv program in their lengthy discussion of the business and its prospects, casting severe doubt on the legitimacy of the whole operation. Scanning through the balance sheet, the company has 2cr of investments in miscellaneous unquoted companies in leasing/finance, websites, and

PVP Ventures is in the business of real estate development. It has one residential project at Perambur, Chennai  - which appears to be completed but where the company is yet to start receiving rental income although management assert that it will receive substantial cash flows from this project over the next five to seven years.  The company also owns a plot of land in Hyderabad. The financial statements, however, reveal the imprints of mismanagement. It generates no revenue, reported continuous losses over the last five years, and carries a debt load that doesn’t appear to be backed by asset values. The audit report is a scathing read of the company’s prospects and finances – and a good starting point in this case for someone unfamiliar with the company.  First and most importantly, the auditors do not believe the company will continue operating beyond the next twelve months and the state several reasons including: lack of business activity, dependence on other

Coral India Finance and Housing operates primarily in the construction business. The company generates rental income from owned properties and expects a favourable long-term outlook as demand for real estate increases along with the economy.  The company reported reasonably stable performance over the last five years – reporting 6cr of operating profits on 7cr of revenue in the last financial year.  It owed no debt but owns several marketable securities including about 6cr worth of Coral Labs stock (as at the end of last financial year). Management have not bothered to discuss the business and its prospects in the annual report – probably shedding light on their commitment to minority shareholders. The real estate business is exposed to the construction and economic cycle.  Further, the accounting involves the use of a lot of estimates that requires careful attention when making an investment judgment of the company.  Of note within the accounts is 30cr under ‘Pr

Longview Tea, contrary to its name, is primarily in the business of making loans and advances. These loans and advances appear largely uncollectable.  Moreover, it is the recipient of interest-free loans from other companies – the repayments appear to be in doubt. The company generates no revenue and reported continuous operating losses in the last five years.  It also owes about 50lacs of net debt as at 30 th September, 2011. Management haven’t bothered with discussing the company and its plans – perhaps their mood is killed by the company’s large accumulated losses. The company’s auditors have pointed to the lack of provisioning of 35lacs for uncollectable debtors, 41lacs for uncollectable loans and advances and 1.43cr of uncollectable interest.  The loans and interest haven’t been classified as ‘non-performing assets’ per RBI norms. Further, the company still hasn’t obtained registration from RBI for its lending activities – although these appear to have ceas

Eimco Elecon is in the business of manufacturing mining and construction equipment. The equipment is used in the coal and metallic (iron ore etc.) mining, and construction segments. The user industries are expected to grow along with India’s GDP over the long run as fuel, manufacturing, and infrastructure are basic cogs in the economy, which will trigger demand for mining and construction equipment.  This is aided by India’s rich coal and mineral reserves, which are conducive for mining if managed properly.  Furthermore, there appears to be substantial scope for underground mining that could further fuel growth. It is one of the few Indian companies producing such equipment.  It has a tie-up with a European manufacturer for producing higher capacity and more sophisticated mining equipment. The company reported growing revenues but stable operating profits over the last five years – reporting about 24cr in operating profits on revenues of 184cr in the last financial y

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