Balaji vs Alkyl:
Balaji is a bigger business (in terms of sales) compared to Alkyl. Margins are largely in same range. Yet the valuations given are starkly different.
There is certain degree of overlap in products sold and then there are certain products which only 1 of them manufacture in India. But thats part of the business.
1 difference that I notice is CFO / EBIDTA a.k.a. cash conversation. Alkyl is more efficient in managing working capital. But this cannot be the sole reason for such a huge difference in valuation.
Another reason why Balaji is valued low can be due to overhang of subsidiary listing. But they are not selling stake. PE wants an exit, which is also normal in any PE funded entity.
Capital allocation can be questioned (reference: Hotel) but thats past. That hotel is very miniscule part of overall business and its profit generating too.
There is a dumping of DMF from Saudi. But thats just 1 product. Even Alkyl manufacture this product.
Both the companies have reasonable amount of upcoming capex / growth drivers. (in case anyone think that market discount future growth and one company might be having better prospects then another).
Both have decent free float, although Balaji has higher free float. But Alkyl doesn’t seem to be case of float cornering.
I would request forum members to highlight if I have missed any point.
Disc: I am invested in BAL.
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