Orient Bell Limited

Hi all

There have recently been some changes in the balance sheet of this company. Also post the merger with Bell ceramics, it seems to be in interesting position at the moment. I have made a small write up on the same

Orient Bell manufactures Ceramic tiles. It has the second largest in-house capacity of 24 msm. It bought Bell ceramics a couple of years ago. This acquisition increased the company’s debt dramatically.

• Market cap = 160cr.
• Average operating cash flow (4 years) = 50cr
• Promoter holding = 74%
• Working capital number has reduced 95cr. to 77cr in 4 years
• Debt has reduced from 182cr. to 139cr. in 4 years

Positives
1. Moving up the value chain – The company is planning to open ‘Orient Bell’ stores and become a branded player.
2. The acquisition has dramatically increased its distribution network. As of now it has 4500 dealers, 120 specialized stores and 25 depots
3. Profits have been subdued as the company is investing heavily in re-branding, store opening and re paying its debt
4. OBL plans to selectively outsource manufacturing and increase its focus on advertising. This will be done for the high value digital and vitrified tiles
5. Company has applied for 4 patents
6. Trend from unorganized to organized (Moved from 60% unorganized to 50% unorganized in last 3 years)
7. Crisil has marginally improved its debt ratings to BBB+ stable. IN fact OBL plans to repay its majority long term debt in 2 years
8. In the last quarter sales volume has increased by 11%, which shows a fundamental demand

Negatives
1. Demand affected by construction activities
2. Competition from imports = But China consumes most of what it produces domestically. Also OBL is heavily investing in point of sale advertising, strong sales force and new designs

Disclosure: I hold