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Key Investment Arguments In Favour of Shalimar Paints Ltd. :
INR 397.37 cr.
being the Value of Tangible Fixed & Net Current Assets of the Company
v/s current MarketCap of the Company at INR 185 cr.
INR 287.58 cr.
being the Value of Tangible Fixed Assets of the Company
v/s current MarketCap of the Company at INR 185 cr.
INR 177.58 cr.
being the Value of Freehold Land Assets of the Company
v/s current MarketCap of the Company at INR 185 cr.
INR 259.37 cr.
being the Liquidation Value ( Orderly ) of the Company as at 31st March 2013
v/s current MarketCap of the Company at INR 185 cr.
[ i.e., if the company had to sell-off in entirety, then, this is the value of cash ( 259.37 cr. ) that will be in hands of shareholders of the company after selling all the assets at current market value and paying off all the debt/liabilities as at 31st March 2013 ]
111 Years' Long continuous existence imparts strong Brand Credibility
Huge Spare Freehold Land in Possession of the Company by virtue of its Long Existence with one spare land parcel ( 1 acre ) at a prime location in Gurgaon (Sector 32)
India's Fifth Largest Branded Paint Company and One of the World's Oldest Organised Paint Company
Credible Promoters in the form of Jhunjhnuwalas ( Ovolo Group, Hong Kong ) & Jindals ( Jindal Stainless, India ) with High Promoter Holding ( 62.36 % ) & nil Pledge
Change in Management with key ex- Ingersoll Rand, Blue Dart honchos inducted at Top Most Level (CEO, MD, etc.) w.e.f. March'2013
Clear Growth Visibility because of Operationalisation of maiden Paint Manufacturing Plant in South India (Tamil Nadu)
Minimum 18.49 % CAGR in Revenues visible over next 3 years to take FY16e Revenues to INR 882 cr.
All the current Manufacturing Plants of the company operating at ~90 % capacity utilisation since last few years.
Capacities getting enhanced by 56 % in FY14 – Single Largest Addition in Company's History
Post 2HFY14, company to have Manufacturing Presence across India ( East, West, North & South ) which is likely to kick-in extensive operational efficiencies
Gross Undervaluation v/s All Peers ( Asian Paints, Berger Paints, Kansai Nerolac, Akzo Nobel ) – An Anomaly, when gets corrected, could lead to substantial Rerating of the company on the bourses
( Trading at average 67.8 % Discount to All Peers )
Trading at :
0.34 x Mcap/Sales TTM,
0.58 x EV/Sales TTM,
8.13 x EV/EBITDA TTM
limiting Downsides Considerably with ample upside triggers already in place
Key Investment Arguments Against Shalimar Paints Ltd. :
External Risks in the form of Slowdown in Indian Industrial Activity as well as slowing Indian Consumer Discretionary Spends likely to take a toll on both, Industrial Paints as well as Decorative Paints Sales. Recent severe Rupee Depreciation threatens to put pressure on Paint companies' margins as 35 % of the Raw Materials are imported. Amidst these gloomy backdrop, Indian Paint Companies are today experiencing one of the worst phase in last decade.
Greenfield Project Commencement Risk in the form of company's maiden South Indian plant which is scheduled to get operational in Q2FY14. This is one of the largest greenfield capacity being set-up by the company in its history which is likely to increase its production capacities by ~56 %. Financial closure for this project was already achieved in Q3FY13 and construction work started in Q4FY13. Any delay in commencement of this facility beyond Q3FY14 could put undue pressure on company's finances.
Lumpiness in Quarterly Earnings as Q1FY14 & Q2FY14 could see dismal margin performance because of initial costs associated with greenfield manufacturing facility coming up in South India. Also, margin performance in whole FY14 could also remain subdued because of relatively higher finance and depreciation costs associated with the said South-based facility. However, if the company manages to turn out a stable EBITDA & PAT margin performance for FY14, then, it could very well be taken positively by the market participants.
Loss of Marketshare to competitors ; although, is highly unlikely, but still is a remote possibility. So far, since last decade, company has gradually lost its marketshare from 4.3 % in 2003 to current 3.1 % mainly because of lack of manufacturing presence in fastest growing paint consuming region 'South India'.
Till date, South & West India is catered by only single manufacturing plant of the company based in West India which itself is operating at ~ 90 % capacity utilisation since last many years. This results in lower marketshare for the company in both the regions viz., South & West India.
Notable here is that industry derives 60 % of its revenues from these two regions whereas company derives only 34 % of its revenues from South & West India mainly because of capacity constraints and lack of dedicated region-specific manufacturing presence.
Hence, with operationalisation of South Indian manufacturing plant of the company from Q2FY14, its marketshare in both the regions ( South & West ) is likely to enhance significantly as from Q4FY14 onwards, once the new plant gets stabilised, South region will get catered to by the dedicated manufacturing plant based there, whereas, production of West India based plant which is so far getting diverted to address South Indian market will get freed up to cater to home market thereby making the company stronger in the strongest sales regions of the industry viz., South & West India.
Relatively Weak Profit Margins. Company operates at one of the lowest EBITDA margins amongst all the peers. To cite -- average FY13 EBITDA Margins of all the four peers is 11.78 % v/s Company's FY13 EBITDA Margin of 7.17 % ( margin partially impacted by the fire accident at one of company's plant in Q4FY13 ).
The main reasons for this is company's relatively lower scale of operation, lack of manufacturing presence across all sales regions of India, particulary South India as also higher contribution from low margin Industrial Paints segment. With operationalisation of South Indian plant in Q2FY14, majority of these issues should get addressed, but, it will take atleast two more years for margins to show any significant improvement. However, the 67.78 % discount at which company is trading at v/s all its peers, more than captures such relatively weak operational parameters and the discount deserves to narrow down to atleast 50 % even after taking into consideration all the negative facts.
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Another important thing to note here is that manufacturing plants ( alongwith R&D Labs ) at each of the three locations mentioned, stand at just 35 % of the land currently in possession of the company thereby leaving ample scope for future capacity augmentation at each of the plants with minimal cost involved :
Howrah
Nashik
Sikandrabad
Land in Possession of the Company
1,45,000 sq.mtr.
49,800 sq.mtr.
41,242 sq.mtr.
Land Currently in Use by the Company
40,600 sq.mtr.
22,900 sq.mtr.
16,080 sq.mtr.
% of
Spare Land Available
for
Capacity Augmentation
72 %
54 %
61 %
(8) Third and most important thing which provides ample future growth visibility for the company is setting up of a greenfield paint manufacturing plant at Chinnapuliyur Village, Gummidipoondi in Tamilnadu which is expected to begin commercial run from Q2FY14. This is company's first manufacturing facility in South India and will enable it to have presence across India with its other 3 manufacturing facilities being already operational in East, West and North India respectively. Let's first have a look at the manufacturing capacities of various products in this plant before discussing any further :
Product
Capacity
Industrial Paints
1200 KL per month
Solvent Based Decorative Paints
950 KL per month
Water Based Emulsion Paints
550 KL per month
Distemper Paint
300 KL per month
Total
3000 KL per month
Four things need to be noted here :
(a) This will be the single largest capacity addition in the history of the company over last two decades as even in 2003, when Sikandrabad plant was acquired by the company, the capacity addition was only to the tune of 20 % whereas with the operationalisation of this greenfield plant, the company's production capacity will get enhanced by ~56 %.
(b) At peak capacity utilisation, which is expected to be reached within 3 years of operation, the plant can generate revenues of ~335 cr. which will ensure sustained revenue growth momentum for the company for next 3 years.
(c) The plant will enable the company to cater to fastest growing Paints Market viz., 'South' in more efficient way and free-up the capacities of Nashik Plant to cater exclusively to Western market. Till now, Southern market is served from Nashik plant by the company.
(d) This will enable significant savings in transportation costs which will enable EBITDA margin improvement from FY15 onwards.
(9) To understand importance of setting up of this manufacturing presence in South India better, let's have an overview of regionwise sales-breakup of Industrial Paints segment as well as Decorative Paints segment of the company and pitch it against the regionwise sales-breakup of the industry. Also, post that, we will study the production capacity of each of the company's manufacturing plant regionwise as also the breakup of dedicated industrial paints production in each plant to assess correctly the implications of operationalisation of South region manufacturing plant on financials of the company :
Regionwise Production Capacity at each Manufacturing Plant of the company and break-up of
Industrial Paints & Decorative Paints Production in each plant :
East Region
(Howrah)
West Region
(Nashik)
North Region
(Sikandrabad)
Annual Production Capacity
21,200 MT
23,000 MT
19,000 MT
~Minimum Annual Revenue Generation Potential at Peak Capacity
210 cr.
225 cr.
185 cr.
~Production - Decorative Paints (FY13)
70 %
60 %
90 %
~Production – Industrial Paints (FY13)
30 %
40 %
10 %
Sales Region Catered
Mostly East India
West & South India
Mostly North India
Six Things need to be noted from above :
(a) As can be seen from the regionwise sales breakup of Industrial paints of the company, it very well matches up with the industry trend. This is because, company has focussed heavily on Industrial Paints segment over last many years and so diverted the limited capacities available towards serving Industrial customers as they are being directly catered to by the company and often result into long term association.
(b) However, if one observes regionwise sales break-up of Decorative Paints of the company, it is in sharp contrast to the industry trend wherein :
industry derives majority of its sales from Western & Southern Region
( 60 % )
whereas
company derives majority of its revenues from Northern & Eastern Region
( 66 % ).
This is because :
Company serves Western & Southern market from its Single Plant based at Nashik in West India which results in lower sales in both the regions ( as capacities are limited in Nashik Plant )
Company dedicates only 60 % of the available capacities at Nashik Plant towards production of Decorative Paints while dedicating remaining capacities to serve rising Industrial Paints demand in both the regions (West & South) as it can't afford to loose Industrial customers which are long term sticky customers offering a good stability to revenues of the company.
(c) This deviation from normal industry trend puts the company in a sweet spot as it is already strong in otherwise perceived to be weak regions of East & North India and Southern region is proving to be the fastest growing region for most of the organised players since last few years ;
so, with the dedicated manufacturing facility in South India from 2HFY14, company will be able to cater exclusively to rising demand there in a more effective way with the Western plant capacity getting diverted to serve the home market thereby making the company stronger in the strongest sales regions of the industry viz., South & West.
(d) Decorative Paints is traditionally a low-volume-high-margin business, so, with the expected ~210 cr. p.a. revenue potential from Decorative Paints capacity of Southern plant and freeing up of ~90 cr. Decorative Paints revenue potential of Western Plant capacity which is otherwise diverted to serve Southern Market, the company will experience significant growth in Revenues over next 3 years coupled with improvement in EBITDA margins.
(e) Southern plant will have 40 % capacity dedicated to Industrial Paints, so, it will have similar production ratio as Nashik plant at 60:40 between Decorative & Industrial, and, with the said 40 % dedicated capacity, Shalimar will emerge as a stronger player in Industrial segment too which will enable it to maintain current sales ratio of 67:33 between Decorative & Industrial.
Conservative Capacity Utilisation schedule for Southern Plant of the company can be arrived as :
Fiscal Year
Capacity Utilisation
~Revenue Contribution
South India Plant (Tamilnadu)
Location - Chinnapuliyur Village, Gummidipoondi Village, District - Tiruvallur
Production Capacity = 36,000 MT p.a.
Dedicated Decorative Paints Capacity = 60 %
Dedicated Industrial Paints Capacity = 40 %
~Minimum Annual Revenue Generating Potential at Peak Capacity = ` 335 cr.
FY14
12 %
` 38 cr.
FY15
35 %
` 115 cr.
FY16
65 %
` 210 cr.
FY17
90 %
` 290 cr.
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Fourth and most important thing which no prudent fund manager can ignore with respect to Shalimar Paints Ltd. is the Replacement Value of Tangible Fixed Assets in possession of the company.
When we invest in a company, we are actually investing into its business. Hence, it is most proper for us to look for any investment as if we are the suitor or acquirer of that business and assess as to what value we can extract from such acquisition. Such an approach enables us to arrive at correct valuations for any company and also limits our downsides considerably as we are knowing the value of the hard assets in possession of the company and therefore if the company had to sell-off in entirety tomorrow, this is the minimum value we will get.
While calculating the Minimum Replacement Value of Tangible Fixed Assets of Shalimar Paints Ltd., we have made two considerations :
First, we have calculated the bare minimum value of Freehold Land Assets in possession of the company by considering the lowest 5 Years' average price per square meter at each of the exact location where company's respective land asset is located. Alongside, we have also stated the current market value of respective land asset by considering the price per square meter at respective location as at 25th June 2013.
Second, we have considered the Minimum Cost that is required to be incurred for setting up the said quantum and nature of production capacities that company has as on date plus that is likely to be commissioned in Q2FY14.
Location
Freehold Area in Possession of the Company
Last 5 Years' Average Rate Per Square Meter of the Location
Bare Minimum Value of Land in Possession of the Company
[ Area x 5 Yrs. Avg. Rate ]
~Current Market Rate Per Square Meter of the Location as at
25th June 2013
Market Value of Land in Possession of the Company as at 25th June 2013
[ Area x Current Market Rate ]
West Bengal
[ Goaberia, PO. Danesh Shaikh Lane, Howrah, West Bengal ]
1,45,000 sq.mtr.
` 5920 per sq.mtr.
` 85.84 cr.
` 7480 per sq.mtr.
` 108.46 cr.
Maharashtra
[ Gonde Dumala, Igatpuri, Nashik, Maharashtra ]
49,800 sq.mtr.
` 3210 per sq.mtr.
` 15.98 cr.
` 4840 per sq.mtr.
` 24.12 cr.
Uttar Pradesh
[ Sikandrabad Industrial Area, Sikandrabad,
Dist. Bulandsahar,
Uttar Pradesh ]
41,242 sq.mtr.
` 2780 per sq.mtr.
` 11.46 cr.
` 3830 per sq.mtr.
` 15.81 cr.
Tamil Nadu
[ Chinnapuliyur Village, Gummidipoondi,
District Tiruvallur,
Tamil Nadu ]
32,800 sq.mtr.
At Book Value (i.e. Purchase Price) since Land purchased by the company in 2009
` 2.02 cr.
` 730 per sq.mtr.
` 2.39 cr.
Gurgaon
[ Plot No. 75, Sector 32, Gurgaon ]
4050 sq.mtr.
` 36,900 per sq.mtr.
` 14.94 cr.
` 66,170 per sq.mtr.
` 26.80 cr.
Total
` 130.24 cr.
` 177.58 cr.
Manufacturing Plant Location
Production Capacity at the Plant
Minimum Cost Required to be Incurred for Building Respective Capacities
West Bengal
[ Goaberia, P.O. Danesh Shaikh Lane, Howrah,
West Bengal ]
21,200 MT p.a.
` 23 cr.
Maharashtra
[ Gonde Dumala, Igatpuri, Nashik, Maharashtra ]
23,000 MT p.a.
` 26 cr.
Uttar Pradesh
[ Sikandrabad Industrial Area, Sikandrabad,
Dist. Bulandsahar, Uttar Pradesh ]
19,000 MT p.a.
` 19 cr.
Tamil Nadu
[ Chinnapuliyur Village, Gummidipoondi,
District Tiruvallur, Tamil Nadu ]
36,000 MT p.a.
` 42 cr.
Total
` 110 cr.
Bare Minimum
Replacement Value
of Company's Tangible Fixed Assets
= 240.24 cr.
Replacement Value
at Current Market Rate
of Company's Tangible Fixed Assets
= 287.58 cr.
Bare Minimum Value of Land in Possession of the Company
Minimum Cost Required for Setting Up the Production Capacities
130.24 cr.
110 cr.
Market Value of Land in Possession of the Company
Minimum Cost Required for Setting Up the Production Capacities
177.58 cr.
110 cr.
Eight things need to be noted from above :
(a) Company is in possession of large :
~36 acres ( 145 thousand sq.mtr. to be precise ) land at Howrah since 1902,
~12 acres ( 49.8 thousand sq.mtr. to be precise ) land at Nashik since 1992,
~10 acres ( 41.24 thousand sq.mtr. to be precise ) land at Sikandrabad since 2003,
~8 acres land near Chennai (Gummidipoondi) since 2009.
All these locations are used to set-up manufacturing facilities & R&D Labs (Nashik & Howrah) of the company.
(b) In addition, company has in its possession, at a prime location in Gurgaon (Sector 32), a ~1 acre plot ( 4050 sq.mtr. to be precise ) which is a freehold plot allotted to the company in 2008-09 by Haryana Urban Development Authority (HUDA). This plot sits in the books of company's 100 % owned subsidiary “Shalimar Adhunik Nirman Ltd'.
The location of this plot (Sector 32) is today one of the most sought after property locations of Gurgaon and we have only considered in our calculations, the basic land value and not its development potential. In case the company decides to develop this plot in future, it could easily fetch the company minimum 55 cr. based on current market trends in the vicinity.
(c) The revaluation of Fixed Assets was done the last time in the year 1995 by the company when only Howrah and Nashik lands were under company's possession.
(d) We have not included the Value of Raw Materials, Finished Goods, etc. which are part of Inventories of the company ; average value of which at any given date is always greater than 60 cr. ( at lower of cost or net realisable value ).
To draw a comparison, Consortium of Banks which have granted the company Credit Facilities as at FY12, as part of their hypothecation agreement, have valued entire stock of raw materials, finished goods, stocks in process, consumable stores and spare parts, bills receivable and book debts and all other moveables of the Company’s factories, premises and godowns situated at Howrah, Nashik and Sikandrabad (U.P.) and various places located throughout the country at 247.76 cr.. This valuation does not include the valuations of Freehold Land at each of the manufacturing location as also the Plant & Machineries at all the manufacturing locations.
(e) For conservative assessment, we have also not included here the Replacement Value of Intangible Assets of the company, especially the 111 year old brand 'Shalimar', the extensive pan-India Sales & Distribution Network, R&D potential, etc.. Just to make a note, a brand with an existing strong ground network which has the potential to generate average 715 cr. revenue over next 3 years is seldom valued below three digits.
(f) For arriving at 'Last 5 Years' Average Rate Per Sq. Mtr.' in our calculation, we have relied on the past 5 years deal records provided by the respective professional real estate consultant dealing in respective area. We have picked the lowest rate deal done each year and then arrived at average calculation.
(g) In case of Tamil Nadu ( Chinnapuliyur Village ) where the company purchased the land only in 2009, we, as a prudent conservative policy, have decided to consider the company's purchase price as 'Last 5 Years' Average Rate Per Sq. Mtr.' and have ignored the appreciation in land value over last four years.
(h) For the current market rate per sq.mtr., we have picked the rate of last best deal done on or before 25th June 2013 in the location concerned. Except Tamil Nadu ( Chinnapuliyur Village ) where last deal data was available only of five months before, we were able to garner the most up-to-date data till date.
(i) For calculation of 'Minimum Cost' required for building production capacities already existent with the company, we have considered the bare minimum cost that any entity would need to incur to set-up such large paint manufacturing capacities.
Now, since we have already arrived at minimum Replacement Value as also Replacement Value at current market rate, it is the right time to pitch those values against current Market Capitalisation commanded by the company on the bourses as also its current as well as expected Enterprise Value :
( fig. In ` cr. )
FY13
FY14e
FY15e
FY16e
Market Capitalisation
( as at 12th July 2013 )
184.65
184.65
184.65
184.65
Enterprise Value
( considering the debt as on books )
257.59
292.59
307.59
317.59
Pure Enterprise Value
( considering the debt as on books + off-balance sheet debts )
309.65
344.65
359.65
369.65
Minimum Replacement Value of Tangible Fixed Assets
240.24
Replacement Value of Tangible Fixed Assets at Current Market Rate
287.58
Six Things needs to be noted from above :
(a) Market Capitalisation is counted based on the Market Price of the company's share as at 12th July 2013 ( INR 97.6 ).
(b) We have considered in our calculation, two 'Enterprise Values' – one which is widely considered across financial community by including only debt standing on books (balance sheet) of the company.
(c) Second EV which is termed as 'Pure Enterprise Value' -- in addition to including debt on books, also takes into consideration debt which is standing out of the books ( off-balance-sheet debt ) of the company like LCs, guarantees, etc.. This 'Pure EV' is more the true reflection of the enterprise value of the company rather than only 'EV' as we can't arrive at the real valuation of any company in isolation of its off-balance-sheet debts.
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Another aspect, apart from 'Tangible Fixed Assets Replacement Value' theory ( discussed above ) which suggests gross undervaluation of Shalimar Paints Ltd., is its relative undervaluation vis-a-vis its peers.
As stated before, Shalimar Paints Ltd. is the fifth largest paint company of India behind Asian Paints, Berger Paints, Kansai Nerolac & Akzo Nobel. Fortunately, all of the top 5 paint companies of India are publicly traded entities and therefore we are able to chart a detailed 'Peer Valuation Matrix' by taking into consideration varied valuation multiples like 'EV/Sales. EV/EBITDA, MCAP/Sales, Price/Book and Price/Earnings. Before discussing any further, let's first have a look at valuation multiples commanded by all the listed paint companies of India including Shalimar Paints :
As at 12th July 2013
EV/Sales
( FY13 )
EV/EBITDA
( FY13 )
Mcap/Sales
( FY13 )
Price/Earnings
( FY13 )
Price/Book
( FY13 )
Asian Paints
( CMP = 4824 )
4.17
26.43
4.21
41.54
13.67
Berger Paints
( CMP = 235 )
2.53
22.83
2.43
37.32
8.57
Kansai Nerolac
( CMP = 1164 )
2.19
18.61
2.18
29.01
4.89
Akzo Nobel
( CMP = 1105 )
2.33
27.58
2.36
24.73
4.86
Shalimar Paints
( CMP = 97.60 )
0.58
[ Off-BalnceSheet Debts Included ]
8.13
[ Off-BalnceSheet Debts Included ]
0.34
16.76
2.56
It will be interesting to note here the discount at which Shalimar is trading at vis-a-vis each of its peer :
Shalimar Paints'
EV/Sales
EV/EBITDA
Mcap/Sales
P/E
P/B
Discount to Asian Paints
86.09 %
69.23 %
91.92 %
59.65 %
81.27 %
Discount to Berger Paints
77.08 %
64.38 %
86.01 %
55.09 %
70.12 %
Discount to Kansai Nerolac
73.51 %
56.31 %
84.40 %
42.22 %
47.64 %
Discount to Akzo Nobel
75.10 %
70.52 %
85.59 %
32.23 %
47.32 %
Shalimar Paints'
EV/Sales
EV/EBITDA
Mcap/Sales
P/E
P/B
Average Discount to all its Peers
77.94 %
65.11 %
86.98 %
47.29 %
61.58 %
Discount to Lowest Commanded Multiple of any Peer
73.51 %
56.31 %
84.40 %
32.23 %
47.32 %
Four things need to be noted from above :
(a) While Calculating EV/Sales & EV/EBITDA of Shalimar Paints Ltd., we have considered 'Pure EV' which includes off-balance-sheet debts whereas in case of all of its peers no such consideration of off-balance-sheet debts is made.
Therefore, EV/Sales & EV/EBITDA of Shalimar Paints Ltd. is actually inflated relative to peers. Had we considered normal 'EV' of Shalimar as we have done so in case of all other peers, its EV/Sales would have been 0.48 and EV/EBITDA would have been 6.76 which further widens the deep discount at which Shalimar is trading at v/s its peers.
(b) True and Fair comparison can only be made by the multiples EV/Sales, EV/EBITDA and Price-to-Book (P/B) as P/E multiple incorporates substantial portion of 'Other Income' that all Shalimar's peers have.
(c) Also, Mcap/Sales will give false picture of Shalimar's substantial discount as almost all of the peers except Berger are cash-rich and almost debt-free and therefore it will be improper to look at the valuations of Shalimar by excluding its debt component ( on- & off- BS ) which gets very well captured by its Pure Enterprise Value (Pure EV).
(d) FY13 saw a major fire accident being suffered by Shalimar which impacted its profitability.
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Key Monitorables :
Company's AR'2013 :
Company's Annual Report'2013 will be key monitorable to check for any future direction, newly appointed management provides for the company.
Operationalisation of South India Plant :
Company has to commission its greenfield manufacturing facility in South India before the start of 2HFY14. Capacity Utilisation at the plant for FY14 as also capitalisation of initial expenses associated with it will be key monitorable aspects.
Branding Initiatives :
So far, the company has focussed only on contractor-pulling as its main penetration tool. On advertising front, company has focussed majorly on local print/radio advertising and that too on a limited extent. Now, with new dynamic management at the helm as also maiden South India plant getting operational thereby company having manufacturing presence across India, branding will be key to success and therefore will be key monitorable aspect.
Gurgaon Project Development :
Company has in its possession a freehold one acre plot at Sector 32, Gurgaon which was acquired with an aim to develop it in future. Market Value of this plot has aready reached ~26 cr. with its development potential pegged at minimum ~55 cr.. Whether the new management takes some initiatives to develop this property so as to monetize its idle Gurgaon land asset will be key monitorable.
New Operational Areas :
Any possible foray within the non-explored sub-segments of Indian Paint Industry as also allied activities will be key monitorable.
Management of Debt :
Compay's overall debt positioning (on- & off – B.S.) will be an ongoing monitorable aspect. FY14 will be very crucial for this as although South India plant will get operational in this fiscal, its cash generation will start reflecting in real sense only from FY15. FY14 will also see one of the worst phase as far as business environment is concerned and so how the company manages its debt in this crucial year will be key monitorable aspect.
EBITDA Margin :
Although EBITDA margins are expected to be under pressure in FY14 because of tough business environment, initial operationalisation costs of South India plant, severe Rupee Depreciation, company building up talent pool to transform its HR into thoroughly professional one, etc. ; but, still, how much these factors pressurise EBITDA margins will be key monitorable.
Raising of Funds via Equity :
So far, since last two decades, company has refrained from diluting its equity and has not raised any major funds via equity route. Considering the fact that company has tiny equity capital of just INR 3.79 cr., new management might prefer to raise some resources via equity route for company's aggressive future growth. Such moves, if any, will be key monitorable.
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