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Aries Agro - Will it profit from the Agri Boom ?

Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1662
Printed Date: 20/Apr/2025 at 1:53pm


Topic: Aries Agro - Will it profit from the Agri Boom ?
Posted By: Mr. V
Subject: Aries Agro - Will it profit from the Agri Boom ?
Date Posted: 14/Mar/2008 at 1:19pm
Originally posted by deveshkayal


Does anyone track Aries Agro, recently listed company. StanChart Premier Fund holds the stock.

I did go through the annual report and IPO prospectus.

The company is increasing its capacity by 5 times !!!.

It manufactures micro nutrients which increase crop yield. Unlike fertilisers, micro nutrients are not subjected to govt policies.

The key question is the moat, since its fairly easy to set up a manufacturing unit but the company claims that one needs to have a solid R&D because the products need to be fine tuned based on subtle variations in soil condition. The company also has a vast nationwide dealer network which can provide it with a moat against competitors

Majority of sales are from AP and Maharashtra and like all agri businesses it is subjected to monsoon mood swings.

Its planning to invest a part of the IPO proceeds in 100 mobile vans which would sell Agri and other FMCG products to farmers in villages, something like a mobile hypermarket.

FY07 revenues were about 74 cr nearly 100% growth but 30 cr of it was from product trading. Is it a case of boosting revenue figures before going for the IPO ?

There are also some ongoing litigations which might result in an outgo of about 15-20 cr.

Working capital requirements are quite high and it also has high debtor days.

Currently, its trading at about 13-15x FY08 earnings. What kind of valuations do fertiliser companies trade at ? Aries Agro should probably trade at a slight premium.

Finally and most importantly, what's the quality of the management ? The promoters are TB Mirchandani & sons. They have been in the business for 30 years.

According, to the management, FY08 Revenues expected to be 105 cr, FY09 at 150 cr and FY10 at 200 cr. This would mean an EPS of Rs 21-22 at current margins. Its kind of surprising that revenues will go up by 3x even though capacity is being increase by 5 times.



Replies:
Posted By: deveshkayal
Date Posted: 14/Mar/2008 at 10:14pm
Thanks for the detailed report. Will keep an eye on it as long as StanChart is holding the stock.

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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett

Posted By: rudra
Date Posted: 14/Mar/2008 at 10:27pm
Originally posted by deveshkayal

Thanks for the detailed report. Will keep an eye on it as long as StanChart is holding the stock.
My apologies dear devesh but does Sir Buffet sees who hold the stock and act accordingly?

Posted By: deveshkayal
Date Posted: 14/Mar/2008 at 10:35pm
http://www.theequitydesk.com/forum/forum_posts.asp?TID=73&KW=Standard+Chartered - Standard Chartered Premier Eq Fund – A quasi VC
 
 


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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett

Posted By: bassein
Date Posted: 15/Apr/2008 at 2:36pm
Please forgive this question but Aries Agro was listed as a "managed" IPO on SP Tulsian's site. Any idea what he meant? My feeling is that the post-listing price was supported for some time.


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