Past investments
AJANTA PHARMA ltd.
Fundamentals: Sales ~ Rs 1500cr, ROCE > 60%, ROE > 40%, OPM > 30%, NPM > 20%, Dividend payout < 20%. Nearly debt free.
High growth & Profitable growth: Sales growth > 20% p.a., PAT growth > 30% p.a.
Manufactures & markets branded generic formulations in India & emerging markets (Asia & Africa). 67% revenue from emerging markets & 33% from Indian market. It focuses on niche therapeutic segments (un-met patient needs) & geographies (under-served). Has leading brands in Ophthalmology, Dermatology, Cardiology, Anti-malarial, Erectile dysfunction and pain management. Strong research focus: R&D spend is 6% of sales. It has approved manufacturing facilities in India. It has recently entered regulated market of USA, and is building a portfolio of ANDAs.
Indices: BSE Small cap, BSE 500, BSE Healthcare
LA OPALA RG Ltd.
Fundamentals: Sales ~ Rs 225cr, ROCE > 50%, ROE > 30%, OPM ~ 25%, NPM > 20%, Dividend payout < 20%, Nearly debt free.
High growth & Profitable growth: Sales growth > 24% p.a., PAT growth > 40% p.a.
India’s leading manufacturer of branded “tableware” segment (opal glass & lead crystal). One of the largest organized crockery players in India. Manufactures & markets opal glass Tableware & Crystalware products within & outside India. Exports < 20% Sales. Exports to more than 40 countries.
Brands: La opala, Diva, Solitaire. It moved from La opala (starting range) to Diva (mid range) to Solitaire (high end). Kept widening the product range & is present at all price points.
Opal glass products include plates, bowls, dinner sets, tea coffee soup pudding dessert sets. Crystalware products include barware, vases, bowls, stemware.
Has the largest installed capacity of 13,000 TPA across 2 plants. Manufacturing facilities in Madhupur (Jharkhand), and Sitarganj (tax efficient location in Uttarakhand). Present in 500 towns in India, and wide dealer network.
Beneficiary of under-penetration in semi-urban & rural India, urbanization, rising nuclear families, and gifting. Benefitted from the anti-dumping duty imposed by Indian govt. on import of opal glassware from China & UAE for 5 years wef Aug 2011.
Challenges: Competition from international players, stiff competition from unorganized sector, cheaper imports.
New launch: Heat resistant borosilicate range of cookware (sourced externally & re-branded). Adding capacity at Sitarganj unit.
Indices: BSE Small cap, BSE 500, BSE Consumer discretionary
CAPLIN POINT LABORATORIES ltd.
Fundamentals: Sales ~ Rs 250cr, ROCE > 60%, ROE > 50%, OPM > 20%, NPM > 16%, Dividend payout < 20%. Nearly debt free.
High growth & Profitable growth: Sales growth > 30% p.a., PAT growth > 40% p.a.
Manufactures & markets generics formulations (products on the WHO essential drugs list) to semi-regulated markets of Latin America, Carribean & parts of Africa (Francophone, Southern Africa). Dominant in Latin America (90% of revenues).
Therapeutic segments: Anti-biotics, anti-inflammatory / analgesics, dermatological, cardiovascular. Dosage forms: Liquid injectables, soft gels, ointments, creams, tablets, capsules, liquid orals, oral powders.
R&D spend is 3% of sales. Focuses on marketing. Outsources most of the manufacturing (55% of revenue). It has a unique business model that reflects in its negative working capital.
Plans to enter regulated markets of USA, EU, Brazil for sterile injectables & opthalmics. Seeking USFDA approval for a manufacturing facility.
Indices: BSE Small cap, BSE Healthcare
MPS ltd.
Fundamentals: Sales ~ Rs 224cr, ROCE > 80%, ROE > 30%, OPM > 30%, NPM > 20%, Dividend payout > 60%. Debt free.
Future growth mostly dependent on acquisitions.
Provides publishing solutions & services viz. Typesetting and Data digitization services to international publishers. It has developed its own software solutions. It provides outsourced services to the global publishing industry. It provides end to end services through every stage of author to reader publishing process. It helps publishers reduce production costs.
It has clients in North America & Europe. MPS is the beneficiary of trend towards increased outsourcing by global publishers to reduce production costs, and vendor consolidation. MPS plans to grow via acquisitions to add new customers.
Indices: BSE Small cap
ACCELYA KALE SOLUTIONS ltd.
Fundamentals: Sales ~ Rs 300cr, ROCE > 100%, RoE > 60%, OPM > 30%, NPM > 20%, Dividend payout > 50%. Debt free.
Future growth is an issue.
IT solutions & IT services company that provides its own packaged software solutions to Indian & global airlines. It’s the leading solutions provider to the Airline industry. These solutions help airlines with financials (revenue & cost accounting). It also provides outsourced services (process, technology & hosting services) to global airlines. It earns revenue from license fee & pay per use basis. Customers include all major airlines in every country.
Indices: BSE Small cap, BSE IT
www.accelyakale.com
ATUL AUTO ltd.
Fundamentals: Sales ~ Rs 500cr, ROCE > 40%, ROE > 30%, OPM > 10%, NPM > 8%, Dividend payout < 30%. Debt free.
High growth & Profitable growth: Sales growth > 15% p.a., PAT growth > 30% p.a.
Manufactures 3 wheelers (auto rickshaws) both Passenger & Commercial vehicles (< 1 ton category) out of its Gujarat plant. Focused on Semi urban & Rural markets. It sells in India, and exports to Bangladesh & African countries.
It sells 45 variants of auto rickshaws (front engine & rear engine) under 4 brand names: Atul Shakti, Atul Smart, Atul Gem and Atul Gemini-Dz.
It continues to increase market share yoy in both passenger & cargo segments. In passenger segment, it manufactures the diesel & CNG powered carrier for carrying 3 to 6 passengers. In cargo segment, it manufactures vehicles with a rated carrying capacity of around 0.5 ton. It also sells special purpose vehicles with customized applications (such as chicken carrier, tripper, water tank carrier, soft drink carrier, mobile shop, vegetable vending).
Exports are increasing yoy. Exports are growing much faster than India sales. Launch of new Petrol engine variant is expected to trigger future growth in foreign markets. It is adding capacity: New manufacturing plant coming up at Ahmedabad.
Indices: BSE Small cap
www.atulauto.co.in
EICHER MOTORS ltd.
Fundamentals: Sales ~ Rs 10,000cr, ROCE > 40%, ROE > 30%, OPM > 10%, NPM > 8% (Margins should improve in future), Dividend payout < 25%. Debt free. High growth & Profitable growth: Sales growth > 20% p.a., PAT growth > 30% p.a.
Owns Royal Enfield motorcycle business & Commercial vehicles business (JV with Volvo since 2008: VECV - VE Commercial Vehicles Limited). Also, started a JV with Polaris USA in 2012 to enter a new vehicle segment.
Royal Enfield motorcycles constituted 33% of Sales in FY14. Its share in overall sales is rising yoy. Was 24% of Sales in FY13. It has more than 95% market share in premium motorcycle segment (250cc to 750cc) in India. Volumes growing at 50% p.a. for the last 3 years. Manufacturing base in Chennai. Its adding capacities in Chennai. It is benefiting from growth in motorcycles in India and global market.
Royal Enfield’s product line‐up includes the Bullet, Classic and Thunderbird models in 350cc and 500cc, and recently introduced Continental GT 535cc. Sold in India and exports to over 50 countries across the world (including USA, Japan, UK, several Europe, Latin America, Middle East, South Asia)
VECV designs, manufactures and markets trucks and buses. Volumes de-grew yoy given the downturn in CV industry. VECV comprises of Eicher Trucks and Buses, Volvo Trucks, Eicher Engineering Components, VE Powertrain, engineering design services businesses, sales & distribution of Volvo Trucks & aftermarket support to Volvo Buses in India.
JV with Polaris: Currently in start-up phase. To design & manufacture four wheeled personal vehicles out of Rajasthan.
Indices: BSE 500, BSE 200, BSE 100, BSE Large cap
CERA SANITARYWARE Ltd.
Fundamentals: Sales ~ Rs 850cr, ROCE > 30%, ROE > 20%, OPM > 12%, NPM > 8%, Dividend payout 12%. Nearly debt free.
High growth & Profitable growth: Sales growth > 20% p.a., PAT growth > 30% p.a.
Manufactures branded vitreous Sanitary-ware (EWC’s, urinals), Faucets-ware, Bath-ware (showers, kitchen sinks, mirrors), Tiles (wall & floor tiles) and captive wind power out of its Gujarat plant. Over the years, it moved into related categories like faucets and tiles. Sells mostly in India.
It has a well recognized brand (brand ambassador: Sonam Kapoor), wide distribution network, deep penetration in tier 2 cities. Besides distributors, it sells via CERA style studios & CERA style galleries in different towns of India.
Challenges are competition from international brands, chinese imports, and slowdown in housing construction. It is adding capacity yoy. Future growth is expected on the back of Swach bharat abhiyan, and tier2 towns.
Indices: BSE Small cap, BSE 500
ASTRAL POLYTECHNIK ltd.
Fundamentals: Sales ~ Rs 1400cr, ROCE ~ 20%, ROE ~ 20%, OPM > 10%, NPM > 5%, Dividend payout ~ 5%, Comfortable debt: D/E ~ 0.2.
High growth (but growth is not profitable): Sales growth > 30% p.a., PAT growth > 20% p.a.
Manufactures branded PVC & CPVC plumbing systems (pipes and fittings) for both residential and industrial applications. Its pipe product portfolio covers all possible applications. Sells mostly in India (Exports just 1%). It has a well recognized brand (brand ambassador: Salman Khan), wide distribution network across India.
Also manufactures branded Adhesives (~18% Sales). Its subsidiary “Advanced Adhesives Ltd” carries out adhesives & sealants business. In 2014, Astral acquired controlling stakes in Seal UK & Resinova India. Post acquisition, Astral offers full range of branded building construction chemicals, sealants & adhesives.
Was the 1st to launch lead free PVC pipe in India in 2004. Astral grew on the back of Replacement of conventional metal pipes (GI pipes, CI pipes) by plastic pipes, and Construction of new houses in tier 1, 2 & 3 cities. It is the beneficiary of replacement demand, and growth in construction activity (residential, office, retail) in tier2 and tier3 cities. Plants in the West [Ahmedabad & Dholka (Gujarat)], North [Baddi (Himachal Pradesh)], South [Hosur (Tamilnadu)] and Depo in East.
Future growth expected from its expansion in South india, demand from Irrigation (agri & column pipes), and Chemicals (building construction, adhesives, sealants). Added another plant at Dholka, Gujarat. New launches: Agri pipes, column pipe, Bendable CPVC pipe, Blazemaster (fire sprinkler pipe), solvent cement (adhesive). Expects margins to improve in future.
Indices: BSE Small cap, BSE 500, BSE Industrials
KAVERI SEED COMPANY ltd.
Fundamentals: Sales ~ Rs 1000cr, ROCE > 40%, ROE > 30%, OPM ~ 20%, NPM > 15%, Dividend payout < 20%. Debt free.
High growth & Profitable growth: Sales growth > 30% p.a., PAT growth > 45% p.a.
Produces & sells hybrid seeds in India. Hybrid seed portfolio includes: Cotton (>66% sales), corn, paddy, vegetables (tomato, okra, chilly). Owns ~ 600 acres farmland. 2nd largest producer of hybrid cotton seeds in India. Cotton seed brands: ATM, Jadoo and Jackpot. It has 10% market share of organized seeds business. It sells only in India mainly in AP, Karnataka, and in Gujarat, Maharashtra. Also sells micro-nutrients (3% sales).
It entered into a licensing agreement with Monsanto for use of BT cotton technology in 2004. It pays royalty to Monsanto for use of this technology. Kaveri focuses on R&D (biotech): Breeding of hybrid seeds. It has a rich germplasm bank. Hybrid seeds are genetically modified for higher crop yield and pest resistance.
Kaveri entered the BT cotton seed market in 2007. Over the years, it increased its market share in cotton seeds, and delivered fantastic growth driven by increase in cotton acreages. However, cotton has matured. Selling price per packet of seeds is regulated by various state governments. It pays negligible tax due to income treatment as agricultural income. Kaveri is dependent on cotton, and exposed to risk of crop rotation by farmers.
Future growth is expected from new launches in hybrid corn and paddy, and new markets (central & north india).
Indices: BSE Small cap, BSE 500
AVANTI FEEDS ltd.
Fundamentals : Sales ~ Rs 1800cr, ROCE > 60%, ROE > 40%, OPM ~ 9%, NPM ~ 6%, Dividend payout ~ 20%. Comfortable debt: D/E of 0.2.
High growth & Profitable growth: Sales growth > 50% p.a., PAT growth > 60% p.a.
Manufactures high quality “feed” for shrimps & fish in India (Shrimp feed is 85% sales), and Exports processed shrimps from India (15% sales). It has 3 business segments: Shrimp feed, Processing & Export of Shrimp, Wind mills (0.1% sales).
To produce feed, Avanti operates Vannamei hatchery on lease. It manufactures & markets shrimp feed to the farmers. Farmers use this feed in aqua culture to grow shrimp. It purchases shrimp from the farmers, and processes & exports to USA, and rest of world (Europe, Japan, South east Asia).
India sales > 80%, and Exports < 20%.
Power: Avanti had installed 4 wind mills of total 3.2 MW at Chitradurga, Karnataka. Power is sold under PPA to Karnataka state discom. In addition, Avanti owns stakes in 17.2 MW gas power project via a subsidiary & 16 MW hydel power project via a JV.
Avanti has a JV with Thai Union Frozen Products (TUF) of Thailand, the world's largest seafood processor and leading manufacturer of feed for prawn and fish in Thailand with integrated facilities from hatchery to shrimp & fish processing and exports. TUF holds 25% equity stake in Avanti. It plans to set up a joint venture shrimp processing plant by end of 2016.
Since last 5 consecutive years, Avanti has been benefitting from an overall increase in shrimp culture both in terms of water spread area & stocking density because of success of Vannamei shrimp culture. Volume growth in shrimp feed 56% yoy. However, shrimp processing & exports were up only 3.6% yoy because of checking by USA for presence of antibiotic residues.
Risks: Floods & cyclones have a negative impact on aquaculture, Shrimps can get affected by virus & disease, Volatility in international shrimp prices
Future: Global shrimp consumption expected to increase in future. Plans to set up 400 million shrimp seeds hatchery in Vishakhapatnam. Plans to set up shrimp feed manufacturing plant with 1.1 lakh MTPA capacity in A.P.
Indices: BSE Small cap, BSE 500, BSE FMCG
PC JEWELLER ltd.
Fundamentals: Sales ~ Rs 6300cr, ROCE > 25%, ROE > 20%, OPM ~ 11%, NPM ~ 6%, Dividend payout ~ 15%. Comfortable debt: D/E of 0.3.
High growth, but not profitable growth: Sales cagr (3 year) ~ 28% p.a., PAT cagr (3 year) ~ 18% p.a.
One of the leading jewellery companies in India in the organized retail sector. Engaged in manufacture, retail and export of jewellery. It sells gold jewelry (68% sales), and diamond jewelry (32% sales, Rising share yoy). Focus on high margin diamond jewellery and wedding / bridal jewellery. Domestic sale (71% of sales) & Exports (B2B only and 29% of sales).
Headquartered in Delhi, it now has 54 showrooms covering 313,000 sq ft located across 45 cities in 17 states in India. However, the largest proportion of sales come from its showrooms in Delhi NCR. It plans to add new showrooms yoy.
It has 4 jewellery manufacturing units. It procures all its gold on lease, which protects it from gold price movements & hence, inventory gains or losses. Produces 65% in-house & outsources the rest. RBI re-activated the “gold on lease” scheme in June 2014 (the scheme was suspended in Aug 2013). RBI also withdrew the 20:80 scheme in Nov 2014. Both these measures helped.
Competition from other branded players is a challenge. New launches: Detachable inter-changeable jewellery.
Indices: BSE Small cap, BSE 500, BSE Consumer durables
www.pcjeweller.com