Hi Rajeevji,
There seems to be a rift between the management and the real estate developer, RPS. They have also approached courts for the same. Management, as mentioned in their latest AR, is looking forward to resolve the disputes. Can we have an update on the same?
Also, how much revenue can we project for STL from the IT building project? This is to ascertain the net inflow when comparing O/s debt to be repaid and remaining to be distributed among shareholders. I think we need to have some clarity on these fronts. Shall we try fixing a call with the management? Let me know. Thanks

Hey Raja, my assumption of PE re-rating is mainly because the financial metrics for Virat are second to none and are superlative (though on a small base, so it remains to be seen if this can be maintained). Also, I have reported issues with the story in my earlier posts in this thread.

1. RoE and RoCE of 30% and 50% thereabouts for FY15. (there are intangible assets of 10 crore which you need to adjust while calculating equity as this came as good will from Durga Diary acquisition). That’s how I calculated.
2. Net Fixed Asset turn over of more than 25 (62.98 crore revenue/2 crore net fixed assets). Not capex intensive.
3. Dividend pay out of 40% in FY 15 and more than 50% for 2 years before that. The 50% dividend is on a much smaller base, so let’s not give that much importance to that.
4. Inventories as a %ge of revenues for FY15 is only 6.5%.
5. Negligible debt.

**

Disclaimer

My holding bias may be the reason behind my positive rant, so please do due diligence before any buy.

Anyway, I should stop here as too much positive bias may lead to members getting positively influenced whereas they should take decision starting from neutral view point and drill down based on facts.

There are many forms of faking something Let me explain,
1. There could be some, who probably make duplicate copies of Durga packaging and sell god knows what in that package there by damaging the original brand. VICL can act against them as they have genuine case.

1. However another form is, seeing the success of Durga packaged ghee, there are competitors who have launched packaged ghee with similar sounding names. Like “Devi Durga” ghee here. The adv. features one of Odia film super hit heronie from past.
   https://www.youtube.com/watch?v=xpFdKs0ncdo
   In such cases, it probably takes offer of higher incentive to channels to stock it. Which maybe relates to your second point about dealer network not stocking Durga ghee.
   For customers, maybe the durga brand recall isn’t strong enough to postpone purchase or go looking for it to other stores when it’s not available in one store.
   This form of competition is hard for Durga to do anything about except spending on A&P which we can expect to be matched by the competitor.
   Overall, it’s probably a decent business not a superlative one
   Yaar, why only compare PE’s between higher ranked players and expect/hope the smaller players to catch up. We need to put other things like comparative Returns on Equity, Asset Turnover, Working capital management, payout ratio in the perspective as well ?

Regards
Raja

Adding:

• Camlin Fine Sciences
• Vinati Organics
• Atul Limited

Hi All,

Please find the takeaways from S.H. Kelkar IPO meet,

The co. has a longstanding reputation in the fragrances and flavours business,its application can be found in every 1 of 3 products that we consume or use. The co. deals with 95% of FMCG cos. in India covering Multinational,National,Regional and even Local cos. Fragrances is mainstay business and Flavours is roughly 1/8 of the total business currently. The business is very sticky in nature,the co. is a sole supplier to Cinthol since 1952 for example. The co. has a range of 9000 odd fragrances and 40000 odd prototypes. Fragrances involve a complex manufacturing process typically requiring 40-80 ingredients and a multi-step process with laser like precision to churn out one fragrance. The co. sources 1500 ingredients in total. Diverse use of ingredients and proprietary processes complemented by unique infrastructure give the co. an edge over competition and makes products impossible to replicate. The co. is very R&D focused and always looking to add new variety of fragrances to its range and for the same,it employs 12 perfumers who design and synthesise fragrances. Perfumers are master-crafters and a real asset to the co.,there are only 1000 odd perfumers in the world. The co. has also developed molecules which help in manufacturing multiple fragrance compounds and is in the process of filing patents for the same. The co. has 4000 odd customers out of which roughly 2000 are shops and distributors with 20000 touch-points. The co. also started retailing of fragrances in small packets which generate 7% of sales currently. 70% of revenues is from made-to-order for a customer and rest is from made-to-stock wherein someone could buy 2-3 fragrances,mix it up and develop a new fragrance an sell in the market. The growth in the past few years has been 16-17% out of which 10% approx. is coming from growth in existing FMCG products for which the co. is supplier,2%-3% from new FMCG products added and rest from price realisation going up. The co. expects to grow similarly going forward or slightly better going forward. The co. spent 200 cr in CAPEX to expand facilities and modernisation in last few years and would require only maintenance CAPEX going forward for a long time. Current capacity utilisation is 40% and current capacity can help treble sales from current level. Requirement of WC won’t be proportional to increase in sales going forward as certain level of raw-material is treated as fixed in nature and it can support even higher sales maintaining the current level. Fixed Asset turns will improve as capacity is utilised going forward. Reduction in WC and improving Fixed Asset turns would give a fillip to ROCE. The management seems decent and there’s a competent guys running the show,Mr. Kedar Vaze.

Link to RHP,
http://www.capitalmarket.com/pub/dp/dp23313.pdf