With the textile industry down the gutter and the inactivity of this thread, decided to give this a look and looks like the past conversations have been heavily biased by the stock price and the member’s orientation(contra vs momentum). Here are my two cents:
I started tracking this when they amended their object clause to include business of machines related to cast polypropylene films, PVC pipes/films etc and then my interest was further piqued when they disclosed that they have 4cr of assets allocated towards the Plastics division in 4Q24 results with no revenue or profits from it just yet.
This is incorrect. It’s 3.9 million and 1.7 million rupees respectively which 39L,17L.
If at all any concerns should’ve arisen, it would’ve been the exhibition expenses(which was 1.08cr in FY20). However, the company singles out exhibitions as a key pillar of their marketing strategy and hence differentiation. In 2019, they had attended four different expos from China to Germany. This expense has been in line with the number, type, duration and location of expos over the last few years. eg. It is 33L in FY23.
In picocaps like these, promoters are extremely high leverage people with involvement in operations at a much deeper level and hence their remuneration shouldn’t be compared with those of relatively mature, larger, institutionalised cos.
eg. employee distribution in 2019
And I’m considering a portion of the rent that’s being paid to Mrs. Desai as a part of remuneration.
If you’ve worked a knowledge job, you’d understand Price’s square root law and that if you want more output, you shouldn’t hire more. You should pay your best people more.
This was given to a certain Mrs.Gandhi for acquisition of Land for expansion. The item was no longer on the balance sheet post acquisition.
I would like to see a promoter who is focused, ambitious,well-incentivised and competent rather than robotically applying “red flag filters” like having an Audi. (PS: They have a Ford Ecosport too)
Mr. Dharmesh Desai does not have any meaningful businesses outside this. Also, I LOVE that the only other directorship the promoter holds shows his passion for the game which other valuepickr members have described.
Mrs. Desai doesn’t seem to have massive conflicts of interest either.
The promoter has undoubtedly involved in activities that aren’t ideal, like:
- talking up the stock price in ARs
- not ideal remuneration levels
- could be more transparent with remuneration instead of taking extra money via rent
- Having expensive cars on the BS
- Buying stocks suddenly at/near the top on the balance sheet (FWIW, they didn’t buy shitcos, sold out in time and probably even made some money lol)
I see the promoter as being a little immature/ “not public market trained” instead of as red flags.
For some others who posed the question, “where are the machines that make the machines?”, I’m not an expert but I’d say that IP-led manufacturing would be different from low value mfg.
I compared the gross and net carrying values of plant and machinery relative to sales for textile machinery peers like Lakshmi Auto Loom Works, LMW(both are mentioned as peers in the prospectus), Stovec industries- an MNC, and Rajoo engineers – another machine manufacturer(Meera could be a future peer if they make CPP extrusion machines in that new plastic division) and the numbers were similar across the board.
They’ve specified their entire list of machines and other assets somewhere too. I’m not able to find it right now. People really skeptical can use this list to research further.
Lack of industry knowledge hasn’t allowed me to fully understand their capabilities and source of differentiation independently.
European players like Galan from Spain seemed to have better specs for their machines but that would be irrelevant if Meera wants to be the Zoho of this industry.
So, based on management’s detailing of new products developed etc, they seem to have developed significant capabilities. The employee count has risen to 150 in FY23.
I tried to use the HScode for their products(8445) to see if they have maintained a consistent marketshare in exports but that doesn’t seem wise either since in an industry like this, orders would be volatile and highly susceptible to the end customer’s financial position, especially if these machines are customised(since units sold per year is very low).
Their customers seem to have a good mix of repeat ones and with good reputation.
eg. SRF had been a repeat customer. First it placed order of 1.91cr in May 21 and then a massive 5.7cr order in Jun 23(both for ring twisters)
TL;DR:
Overall, I see a focused, passionate, ambitious, well-incentivised and probably moderately competent promoter in a company which has built significant capabilities over the years but have nothing to show for it in terms of stock price over the last 6 years, probably due to the vagaries of the end user industry. The management seems to want to address this too by entering into the plastic machinery industry, which made me interested in the first place. Expectations for this stock seem to be very low due to lack of stock price driven investor enthusiasm and misplaced cynicism. Hence, this could be the subject of a massive delta in expectations even for moderately good execution.
Welcome pushback. If you find this deluded, I will not be selling what I’m smoking right now.
Disclosure: Invested, transactions in the last 30 days
| Subscribe To Our Free Newsletter |
