Ambika Cotton Mills

Some of my understandings of the company are –

The company DOES NOT largely time the cotton market and likes to keep all its cash parked in its RM.

However, they seem to have made a major exception in March 2022 when the cotton Prices peaked and they held much lower cotton than in march 2021 + The cotton prices were higher in 2022, so volume terms could be even lower. This is also reflected in the massive cash that they have built up on their Balance sheet. This seems to have played out very well with the subsequent crash in the cotton price for the next 9 months

For the first time in the AGM, it was hinted that the company may consider some Inorganic growth. While I still consider it extremely unlikely for a ‘THANDA” company like Ambika, it seems interesting.

I don’t see the company doing any major inorganic or organic growth anytime soon.

The daughters & son-in-law may be involved in the business but they do not seem to have a very strong executive position (eg – Deputy Managing Director). While the promoter taking a lower salary was loved by a lot of people on valuepickr earlier (also covered in Prof Bakshi’s note). The Daughters NOT taking a salary is now concerning considering Mr. Chandran is now 70+

Another understanding is – their Assets, especially Plant and Machinery seem to be “Over-depreciated” if that is the correct word / they have been maintained very well. A large chunk of their machinery seems to be a decade old and most other is even older(Net Block is much lower than what it was a decade ago).
In one of the AGMs, it was also mentioned by Mr. PV Chandran how his 20 years old machinery was working as well as new.

I wanted to get some understanding of the aging of machinery in the Textile/Yarn spinning industry, and if there is a probability that Ambika may end up being stuck with old efficient machines in the next few years.

While many investors are worried that the company isn’t doing growth CAPEX, they may have to first focus on replacement CAPEX too.

Feedback on the above comments would be appreciated.