Ambika Cotton Mills

Cons:

• 1. Their machinery as per gross block vs net block is almost 75% depreciated…They have to replace the same gradually which shall cost good amount of money ( may be 200 crores odd over a period of time…time period varies as per condition of machine)

• 2.Their inability to grow by setting up factories in states outside Tamilnadu where more benefits are given for setting up textile mills…If they can crack this, it shall be great…but mngt seems comfortable only in tamil nadu…

• 3. High inventory – If huge negative fluctuation comes in price of cotton , chance of inventory write offs.

• 4.Huge cash balance – unable to communicate properly to share holders whats the deployment plan

• 5. Succession – Ofcourse , no idea if next generation is so capable…Textiles is a very difficult business as lots of decisions need to be taken ( cotton buying at quality and reasonable price , proper maintenance of machinery , proper machinery configuration in case of expansion – I have seen people not planning properly and suffer hugely, proper workers relations- huge manpower is required and aligning them is a huge task owing to huge competition for skilled labour , pricing , capital allocation) . If succession is not planned properly , 10% profit margins may vanish in a jiffy as textiles is a very very difficult business…