Friday 11 October 2013

Astra Microwave Products

ASTRA MICROWAVE PRODUCTS LTD.

1.) Order Book = ₹1250Cr. executable within 3 years.

2.) Exports (defense offsets) / Order Book = 50% (2 orders from Israeli Aircraft Industries worth ₹650Cr.)

3.) Sales :

FY14E ~ ₹400Cr.

FY15E ~ ₹500-600Cr.

4.) OPM ~ 20% 

NPM ~ 12-13% (down from > 16% during FY 12 & FY13)

As margin on export orders is less due to "contract manufacturing" nature of the work wherein the OEM provides the tech.

5.) Revenues stagnated during FY06 to FY10 due to some projects which were in the pipeline getting delayed.

Also exports started only during the last 3 years. (note that over 60% of this years sales will come from exports)

5.) Co. already had "advances from customers" worth ₹186Cr. as on 31/03/13 so ₹400Cr. sales looks very doable this year.


6.) The present installed capacity is enough to execute the present orderbook.

Replacement Capex ~ ₹10Cr. p.a.

7.) Co. is a monopoly but competition sure to heat up going forward.

8.) Co. prime takeover target.

 Promoter : L&T has an eye on the company :


9.) Sales  ~ ₹1000Cr. possible in next 5 years.

10.) 8 years back when the order book was < 100Cr. the stock was at ₹200/-! 

11.) Heavy Promoter Buying :
Archives
 Jun-2013Mar-2013Dec-2012Sep-2012Jun-2012
Promoter and Promoter Group21.82 %21.13 %20.38 %19.49 %19.41 %
Indian20.76 %20.03 %19.27 %18.43 %18.35 %
Foreign1.06 %1.10 %1.11 %1.06 %1.06 %
Public78.18 %78.87 %79.62 %80.51 %80.59 %
Institutions7.20 %4.47 %4.48 %4.47 %4.47 %
FII2.78 %0.09 %0.09 %0.09 %0.09 %
DII4.42 %4.38 %4.39 %4.38 %4.38 %
Non Institutions70.98 %74.40 %75.14 %76.04 %76.12 %
Bodies Corporate26.09 %26.07 %24.35 %26.05 %25.76 %
Custodians----------
Total8,18,25,2258,18,25,2258,18,25,2258,18,25,2258,18,25,225



11.) ​FII's banned from buying stakes in defence firms - Negative



Govt seeks ways to implement ban on FIIs in defence sector
Finance ministry has written to defence ministry, industry department, capital markets regulator for suggestions
First Published: Mon, Oct 07 2013. 12 32 AM IST
The cabinet in August raised the foreign investment limit in the defence sector above 26% without an upper limit, but barred FIIs from investing in stocks of such listed companies. Photo: Priyanka Parashar/Mint
The cabinet in August raised the foreign investment limit in the defence sector above 26% without an upper limit, but barred FIIs from investing in stocks of such listed companies. Photo: Priyanka Parashar/Mint

Updated: Mon, Oct 07 2013. 01 10 AM IST

New Delhi: The finance ministry is scrambling to find workable ways to implement a ban on portfolio investments in the country’s defence sector, and has written to the defence ministry, the industry department and the capital markets regulator for suggestions.
The cabinet in August raised the foreign investment limit in the defence sector above 26% without an upper limit, but barred foreign institutional investors (FIIs) from investing in stocks of such listed companies, making it the only sector where foreign direct investment is allowed while FIIs are not welcome.
The move to ban FIIs in the defence sector would mean that either the best Indian engineering companies cannot enter the sector or FIIs cannot invest in such companies if they are into defence manufacturing, a government official said, requesting anonymity.
The ban on portfolio investments in the defence sector would mean stocks of such listed companies will have limited trading, according to Dhiraj Mathur, an executive director at PricewaterhouseCoopers, an audit and consulting firm. “This also goes against the objective of indigenization since you are restricting such companies from raising money from the market,” Mathur said. “This is not a well-considered decision.”
The government should only worry that defence production companies are not controlled by foreign investors, said a former official at markets regulator Securities and Exchange Board of India. He, too, declined to be named.
“Since FIIs do not have any interest in controlling or managing such companies, portfolio investments in defence sector should not be a matter of concern,” he said, adding that the government may give sufficient time to existing FIIs to exit the stocks of the listed defence production companies.
“In a way, you are forcing such companies to set up a subsidiary just to attract FIIs,” said the government official cited earlier. “It is so out of touch with practical reality that it seems ridiculous.”
Earlier, 26% foreign investment was allowed in defence production companies, including from FIIs. The policy was changed on the insistence of the defence ministry, Mint reported on 9 September.
The defence ministry was long opposed to the foreign investment cap being raised, but agreed to allow this on condition that any foreign investment proposal above 26% should be sent for approval to the cabinet committee on security, where defence minister A.K. Antony holds the key in matters of national security.
“Now we have to find a way to implement it (the new policy),” the official said.
At the end of June, FIIs had a 35.82% stake in Mahindra and Mahindra Ltd, 16.06% in Larsen and Toubro Ltd, 13.96% in Punj Lloyd Ltd, and 2.2% in Pipavav Defence and Offshore Engineering Ltd, all listed companies that have defence-related businesses, BSE data shows.
So far, the defence production sector in India has got a nominal FDI due to the earlier 26% foreign investment limit as well as limited contracts awarded by the government, said Nidhi Goyal, director,Deloitte India, a consultancy. “Now, restricting FIIs will further discourage investment into the sector not just by existing Indian listed players, but also by foreign companies,” she said.
The notification of the change in policy last month says any proposal for FDI up to 26% in the defence sector will require approval from the Foreign Investment Promotion Board, and those above that limit will need the cabinet committee’s nod. The notification also states that “investment by FIIs through the portfolio investment is not permitted” in defence production companies.
The guidelines notified last month also require that applications seeking permission for FDI beyond 26% in defence production companies will need to be additionally examined by the department of defence production to validate whether the proposal would bring in state-of-the-art technology.
Applications for FDI up to 26% need to follow the existing procedure with proposals involving inflows in excess of Rs.1,200 crore being approved by the cabinet committee on economic affairs. However, if the proposal involves FDI beyond 26% and inflows more than Rs.1,200 crore, it will not need to be placed before this committee if the ministerial panel on security gives its nod.

Haryan Leather Chemicals

Haryan Leather Chemicals Ltd.



1.) Revenue Breakup :

Leather Chemicals - 95%
Non Leather (Textile chem.) - 5% (no focus, might exit)


2.) REACH Compliant.

3.) According to promoter, no pollution problem / risk.

4.) Export presence in 20 countries.

5.) Promoter believes that Indian leather exports can triple in 5 years & natural leather is not a die-ing / declining industry.Usage in Furnishing & Autos.


Press Trust of India  |  New Delhi  July 2, 2013 Last Updated at 18:35 IST

Leather exports may touch $14 bn mark by 2017; double jobs

Our strategy includes doubling our existing 1% share in the American market and exploring new markets like Russia, Japan and Latin America, says CLE Executive Director R Ramesh Kumar
India's leather exports are expected to touch the $14 billion level by 2017 and may double jobs in the sector to 5 million by that period, Council for Leather Exports (CLE) said today.
At present, the sector employs 2.5 million people mainly in leather hubs, including Agra, Kanpur, Kolkata, Chennai, Mumbai, Bangalore and Puducherry.

There has been a sluggish demand in the US and European markets, he added."We expect leather exports to touch $14 billion by the end of the 12th Five-Year Plan (2017). In the last fiscal, leather exports grew 3% to $5 billion," CLE Executive Director R Ramesh Kumar said.
He was talking to reporters on the sidelines of a function organised by Italy-based Riva del Garda which organises leather items fair named 'Expo Riva Schuh India'.
The US and Europe together account for over 65% of the country's total leather exports.
Asked about the roadmap to increase leather exports, Kumar said, "Our strategy includes doubling our existing 1% share in the American market and exploring new markets like Russia, Japan and Latin America."
This will also help in employing more people in the sector. "We expect that jobs would be doubled to 5 million in the sector by 2017," he added.
Of the total people employed, 70% of them are women.
"By providing more jobs to people, the standard of living of people would increase as most of them are under- privileged," Kumar said.




6.) Competitors :

BASF - pioneer of leather chemicals & largest chemical co. in the world. Is the big daddy of the chem. industry. German technology unparalleled in the world. Has the most comprehensive range of leather chemicals. 

But Indian operations (leather chem. division) lacks focus.


Balmer Laurie - Again a conglomerate with limited focus on leather chem. but huge range & capabilities. Present more in the initial stages ofleather chem. where HLC is not present. Only few common competing products.

Others - Lanxess, Stahl (Dutch).




7.) HLC's products are priced at par to the competitors. Not a price warrior. Competes on the basis of product quality. 

8.) Strengths :

i.) Focus on leather chem. 

ii.) Customization - Co. tweaks its products as per weather conditions. For example, Chennai is hot as compared to say Jalandhar. MNC competitors supply the same chem. to all whereas HLC customizes as per client needs.    

iii.) Tech. collaboration with ICAP SIRA, Italy & tie up with VISMON, Spain.

9.) Market Share (India) ~ 4-5%

10.) Addressable market in India ~ ₹550Cr. & growing very fast (refer to pt. no. 5)

11.) Leather treatment cycle :

Raw Leather ->-> Wet Blue -> Finished Leather

HLC is not present in the first 70% of the treatment process which consists of mostly commodity chemicals.

Co. makes leather chem. for only the last 30% of the process (from Wet Blue to Finished Leather)

Hence, HLC is in the "fashion" chem. part of leather processing which imparts gloss, color, texture, feel to the leather.

 
12.) New Foray into "Plastic Additives".

Co. is setting up a brownfield plant for manufacturing import substituting "Plastic Additives". 

Only manufacturer of such "Plastic Additives" in India.

The said "Plastic Additives" will be used in "Outdoor plastics" like Finesta windows, etc. to impart strength & other properties. 

Capex = ₹3.5Cr.

The good thing is that the said plant can be used interchangeably for manufacturing leather chems. and / or "Plastic Additives".

As the co. is already working at 93% capacity utilization in FY13, & with a growing leather chem. market, risk of failure is quite slim.



13.) Co. is presently supply constrained. 

14.) To make investments in automation as Unskilled labor unavailable!  Also looking at outsourcing.

 15.) Export margin > Domestic margin.

16.) No. of engineers - 10

17.) Real Estate :

Jind, Haryana : 2 plants - 3.5 acres (mother plant) + 0.5 acres (EOU)

Corporate Office : Gurgaon - 28,000 sq. ft. bought for ₹6.25Cr. in FY10.

Former registered office : Bhikaji Cama Place - 1500 sq. ft. (Co. has shifted to the new Gurgaon office in FY11 but is still holding this office) 

New Flat in Gurgaon : Advance of ₹76 lakhs (as on 31/03/13) - Promoter says this is for guest house but I suspect its for personal use as when I asked the CFO before the AGM, he ducked the question.

18.) Replacement Cost of Fixed Assets = ₹50-80Cr.

19.) Present Installed Capacity = 4910 TPA

New Capex (Plastic Additives / Leather Chem.) = 1200 TPA

Expected Incremental Revenue from new capacity by FY16 ~ ₹30Cr. (depending upon product mix.)

Commissioning - Sept. 2014


20.) Realizations / T :

FY07 = ₹64,712 / T
FY13 = ₹87,209 / T

6 year CAGR = 5.1%

Promoter says that most of the realization growth is due to increasing value addition & only some of it is due to increase in RM prices.


21.) Volume Growth : FY14E = 15%

Margins should sustain.

22.) Average R&D / Sales over last 6 years > 2%.

23.) RoE is low due to CWIP (₹3.27Cr. as on 31/03/13) & huge investment in real estate (₹6.25Cr + ₹76 lakhs) = ₹10.28Cr. or 48.3% of Networth (FY13 Networth = ₹21.28Cr.) 

Excluding CWIP & real estate, adjusted Networth = ₹11Cr. & FY13 EBITDA = ₹4Cr.


24.) Promoter Holding came down from 43.5% in FY09 to 40.85% in FY10 due to stake sale by HSIDC.

Shareholding Pattern
HARYANA LEATHER CHEMICALS LTD.
Scrip Code : 524080Quarter ending : March 2009

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the category Promoter and Promoter Group
Sl.No.Name of the ShareholderDetails of Shares heldEncumbered shares (*)Details of warrantsDetails of convertible securitiesTotal shares (including underlying shares assuming full conversion of warrants and convertible securities) as a % of diluted share capital
No. of Shares heldAs a % of grand total (A)+(B)+(C)NoAs a percentageAs a % of
grand total
(A)+(B)+(C) of sub-clause (I)(a)
Number of warrants heldAs a % total number of warrants of the same classNumber of convertible securities heldAs a % total number of convertible securities of the same class
1Baby Ratnam Jain6000.0100.000.00
2Bronze Trading Ltd25,0000.5100.000.00
3Harish Kumar Gupta29,3000.6000.000.00
4Haryana State Industrial Development Corporation Ltd1,00,1002.0400.000.00
5ICAP Sira Chemicals & Polymers SPA7,68,47015.6600.000.00
6Kaushal Jain14,7000.3000.000.00
7Munak Holdings Ltd88,5001.8000.000.00
8Manik Jain7,3000.1500.000.00
9Munak Credit & Investments Pvt Ltd1,1000.0200.000.00
10Munak Credit & Investments Pvt Ltd15,2350.3100.000.00
11Munak Engineers Pvt Ltd16,5980.3400.000.00
12NK Jain Holdings & Fin Pvt Ltd13,9000.2800.000.00
13Narendra Kumar Jain2,82,3605.7500.000.00
14Pankaj Jain4,7000.1000.000.00
15Pankaj Jain4,53,9109.2500.000.00
16Savita Aggarwal1,38,1902.8200.000.00
17Sippy Jain1,43,2002.9200.000.00
18Vijay Kumar Garg23,6450.4800.000.00
19Vijay Kumar Garg Contractor Pvt Ltd7,5000.1500.000.00
 Total21,34,30843.4800.000.00
(*) The term encumbrance has the same meaning as assigned to it in regulation 28(3) of the SAST Regulations, 2011.

Shareholding Pattern
HARYANA LEATHER CHEMICALS LTD.
Scrip Code : 524080Quarter ending : June 2009

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the category Promoter and Promoter Group
Sl.No.Name of the ShareholderDetails of Shares heldEncumbered shares (*)Details of warrantsDetails of convertible securitiesTotal shares (including underlying shares assuming full conversion of warrants and convertible securities) as a % of diluted share capital
No. of Shares heldAs a % of grand total (A)+(B)+(C)NoAs a percentageAs a % of
grand total
(A)+(B)+(C) of sub-clause (I)(a)
Number of warrants heldAs a % total number of warrants of the same classNumber of convertible securities heldAs a % total number of convertible securities of the same class
1Baby Ratnam Jain U/G Pankaj Jain6000.0100.000.00
2Bronze Trading Ltd25,0000.5100.000.00
3ICAP Sira Chemicals & Polymers SPA7,68,47015.6600.000.00
4Kaushal Jain14,7000.3000.000.00
5Munak Holdings Ltd88,5001.8000.000.00
6Manik Jain U/G Pankaj Jain7,3000.1500.000.00
7Munak Credit & Investments Pvt Ltd1,1000.0200.000.00
8Munak Credit & Investments Pvt Ltd15,2350.3100.000.00
9Munak Engineers Pvt Ltd16,5980.3400.000.00
10NK Jain Holdings & Fin Pvt Ltd13,9000.2800.000.00
11Narendra Kumar Jain2,82,3605.7500.000.00
12Pankaj Jain4,7000.1000.000.00
13Pankaj Jain4,53,9109.2500.000.00
14Savita Aggarwal1,38,1902.8200.000.00
15Sippy Jain1,43,2002.9200.000.00
16Vijay Kumar Garg23,6450.4800.000.00
17Vijay Kumar Garg Contractor Pvt Ltd7,5000.1500.000.00
 Total20,04,90840.8500.000.00
(*) The term encumbrance has the same meaning as assigned to it in regulation 28(3) of the SAST Regulations, 2011
  
    
25.) Corporate Governance :

Promoter is a technocrat & not RoCE oriented which is evident from pt. nos. 22 & 23.

In the FY13 AGM, Mrs. Sippy Jain (wife of Promoter) was made a Whole Time Director though the employees openly concede that she's a house wife. (though now that New Cos. Act has made female representation on board mandatory, all the house wife's of promoters will be similarly  "empowered"!) 


26.) Valuation :

CMP = ₹ 17/-

MCap. = ₹8.3Cr.

EV = ₹8.3Cr.

TTM :

Sales = ₹41.3Cr.

EBITDA = ₹4Cr.

EV/ EBITDA = 2x

FY13 Op. Cash Flow = ₹3.7Cr.

EV / Op. Cash Flow = 2.24x  

Div. Yield = 3.5%



27.) Portfolio Weightage = 1%