The harsh portfolio!

Not exited, reduced position size to fund other opportunities.

I am thinking as a mean reversion bet. Other yarn/spinning cos have reported decent nos in recent quarters because of lower raw material prices and better finished material prices. While share prices of other yarn cos picked up, same was not the case with Ambika. Plus, Ambika’s dividend yield is quite decent. In their recent AGM, they mentioned about outsourcing most yarn manufacturing and improving their free cashflows. I feel its a lower risk bet.

AGI Infra
I have recently been working on AGI Infra and have been very impressed with their growth, while maintaining high margins and low debt (see their growth charts below). Its not very common for real estate companies to fund their growth via internal accruals. I am sharing some of my work on AGI as we dont have a dedicated VP thread.

History: Incorporated in 2005 as G. I. Builders Private Limited, jointly promoted by Mr. Sukhdev Singh Khinda and Mrs. Salwinderjit Kaur, providing “premium housing at fair prices”. The name was changed to AGI Infra Limited in 2011

AR24 notes

Financials

• Sales grew by 22%, PAT by 8%, and networth by 30%
• Revenue recognized on delivery of flat
• Advances (Amount received against booking of flats/shops/plots): 685.46 cr. (vs 512.14 cr. in FY23)
• Inventories: 660.42 cr. (vs 522.59 cr. in FY23)
• Employee expenses: 34.6 cr. (vs 26.62 cr. in FY23) – 1.2 cr. director remuneration
• Finance cost: 7.28 cr. (vs 4.37 cr. in FY23)
• Depreciation: 11.64 cr. (vs 5.86 cr. in FY23)
• Capex: 33.88 cr. (vs 38.73 cr. in FY23) – 21 cr. plant + 10.85 cr. (vehicles)
• Investment properties – seems to have bought land or invested in multiple cities (Chandigarh, Ludhiana, New Chandigarh)
  

Completed projects (4,327 units, unsold: 249 units)

Under construction projects (4,333 units, unsold: 968, unlaunched: 2,022)

Miscellaneous

• Audit fee: 6.1 lakhs (vs 5.6 lakhs in FY23)
• Expanding to other cities in Punjab: Ludhiana, Mohali, New Chandigarh
• Operates an outsourcing model by appointing architects/contractors for scalability and quality construction
• Managerial remuneration: 1.2 cr. (same as FY23)
• CFO is paid very little (3.84 lakhs)
• Median salary increase: 9%, avg. increase: 17% for employees. No employee drew 1 cr.+ salary
• Employees: 283
• Invested heavily to shift to MIVAN construction and most of their buildings are being built with this technology having all concrete structure
• Shareholding: 2,814
• Related parties: AGI Hospitalities Private Limited, M/s Aay Jay Builders, Svendus Capital Limited, AGI Infra Foundation, AGI Educational Society, Avendus Corporate Inc.
• Purchased property worth 5.25 cr. from AGI Hospitalities Private Limited

AGM notes
Miscellaneous

• Have seen 15-20% volume and 10-12% price increase in last few years
• Targeting 20%+ sales growth in FY25, in full expansion mode in Punjab
• 3-4 years for construction cycle. They have enough inventory in existing projects which enables them to maintain consistent sales
• Launched 3000 flats (more of higher value) to be delivered in 3-5 years
• 9 projects ongoing – targeting to finish in next 3 years
• Jalandhar Heights III will be delivered in 3 months, towers were constructed only in 15 months
• 1084 flats – AGI Smart home – construction ongoing
• 2 – 5 bedrooms (starting from affordable segment)
• In-house construction
• Introduced MIVAN construction methodology to raise new towers (uses aluminum foamwork) – improve construction quality and reduce construction time by half
• Also going for precast technology
• Build buildings for Seismic zone 5 (although their location is zone 4). They incur 15% higher costs and charge a little premium for this
• Marginal increase in debt (124 cr.) due to their expansion in Punjab. However, debt is very low (<3 lakh debt per unit)
• Prefer own land, only 1 JV

Upcoming: 7 projects

• Extension of Smart Home II – 325 homes
• Group housing project Mohali – premium location (Sector 69)
• Group housing in New Chandigarh
• Utopia in New Chandigarh – hoping to start construction in 3 months
• GT road Jalandhar – land is being acquired – mega project
• Group housing GT road Jalandhar – mid segment flats – will go for approval shortly
• Ludhiana – mega size project – land is being acquired