Investing Reflections On India

MVL Industries operates in the consumer electronics (CE) industry. The company largely supplies televisions, vcd/dvd players and the like.  It owns the ‘Media’ and ‘MVL’ brands. The company operated with a high debt load in the last financial year - which comprised largely of secured loans from banks. The company also owns quoted investments – the largest of which are holdings in MVL Limited, which has seen a decline of over 75% in value over the last year – resulting in market value of holdings amounting to about 40cr. The balance sheet largely comprises of receivables although they are reported to be less than six months old.  It is difficult to ascertain their recoverability from publicly available information. However, the company has reported consistent growth in operating profits and revenues over the last five years – reporting over 30cr in operating profits on revenues of over 470cr in the last financial year.  The interest expense, arising out of the abo

Mafatlal Industries operates in the textile industry engaging in spinning, weaving, and processing of textiles. The company was de-registered from BIFR in 2011 as a result of restoring its net worth and paying down debts.  It did this by selling one of its properties to the Piramal Group for 600cr and using the proceeds to pay off outstanding debt. The balance sheet revealed a much more comfortable debt position as at the end of the last financial year as compared to the year before. Management now plans to incur capital expenditures of 65cr for enhancing processing capacities along with 10cr for power generation.  They also intend to raise additional bank loans to finance these capital expenditures. The company reported large operating losses in nine out of the last ten years – enough to wipe out equity and then some – landing it with the BIFR.  Apparently, it is stuck with old equipment and high labour costs.  This isn’t helped by aggressive competition from low-co

Windsor Machines manufactures capital equipment machinery for use in injection moulding and extrusion activities – both dividing sales equally. It has technical collaboration with Italian and German manufacturers for producing its plastic processing and pipe machines. The company reported accumulated losses in the past as a result of a combination of poor aggregate operating performances and an extraordinarily high debt load.  Its shutdown was avoided by secured lenders taking a 55% haircut on their loans.  It had a more manageable debt load as at 30 th September, 2011 (if the company can continue to be reasonably profitable). Its debts comprised of unsecured loans from a company and a smaller inter-corporate loan – implying that their terms are likely to be softer than secured loans from banks and therefore subject to less stringent action should operating conditions turn worse. It reported 18cr of deferred tax assets (as at 30 th September, 2011), which have valu

Frontier Springs manufactures coil and leaf springs. It is a market leader in this niche segment and supplies to prominent customers such as Indian railways, BHEL, BEML, etc. Moreover, Siemens Germany approved its manufacturing facilities for use in its switch gears production. Management aims to focus on exports to increase future profitability. The company reported growing operating profits on growing revenues in the last five years, although this has taken a slight dip in the last twelve months (see below) – with operating profits of over 5cr on revenues of over 35cr.  It operated with a modest net debt load as at 31 st March, 2012. The business is largely dependent on the capital investment cycle for its revenues, which is adversely impacted by high interest rates (such as now). It is also exposed to increasing costs of steel, its primary raw material.  This is, in turn, dependent on the global steel demand/supply scenario.  Management is attempting to enter

Haldyn Glass is in the business of manufacturing glass bottles for use in the liquor, pharmaceutical, retail, food and beverage, and other industries. The product is more hygienic and eco-friendly than substitutes. Management expects good growth in the customer industries – particularly liquor, which has grown at 12% p.a. in the recent past.  They are investing in advanced technologies and bottle-printing and decoration facilities to add value to its offerings to the food and beverage sector. The company reported good growth in revenues and operating profits in the last five years – reporting over 45cr in operating profits on revenues of about 175cr in the year ending 31 st March, 2012.  It operated with minimal net debt as at that date. The company’s order book is dependent on the global and domestic economic cycles. The business requires investment in up to date technologies to remain competitive.  The product is largely a commodity and doesn’t appear to be di

ABM Knowledgeware executes IT projects primarily for state governments. It primarily executes e-governance projects, which enjoys a virtuous circle when government departments see the results of successful implementation with their peers.  The company is currently operating in Maharashtra but plans to expand to other states. The company reported consistent growth in revenues and operating profits in the last five years – reporting over 20cr of operating profits on over 90cr of revenues in the last twelve months.  It operated with a net cash balance of just under 15cr as at 31 st March, 2012. The primary risk facing the business is government apathy and/or spending cuts, which curtails projects and reduces revenues. The business also faces substantial risks in technology obsolescence in meeting client objectives, and acquiring and retaining skilled manpower at reasonable costs. Other risks include execution difficulties (leading to cost overruns), lack of citizen

Sicagen is a trading outfit based out of Chennai. It is primarily engaged in trading commercial vehicles and construction materials.  It is a distributor for Tata Motors. It reported marginal operating profits on growing revenues over the last five years – reporting over 25cr in operating profits on revenues of 900cr in the year ended 31 st March, 2012.  It operated with a moderate debt load relative to its current assets as at that date. The company reported 38cr in market value of quoted investments as at 2011 year-end – this would be lower as at 2012 year-end but not by too much. The reported assets on the balance sheet are largely comprised of sundry receivables and other loans and advances – their recoverability is unknown from publicly available information. The business is totally dependent on the interest-rate environment – being adversely exposed to high interest rates, crimping demand for its products. It is also impacted by the cyclical factors fr