Cmp : Rs.38.50 (Rs.10 share ) as on 18.06.2010

Market Cap : 23 Crores

Free Float   :   7  Crores

Sales          : 178 Crores

Promoters Holding : 74.19 %

Accounting Year : Oct to Sep

 

Excerpts from Fundamental research ( Hdfc Securities web site )

 

Bambino Agro Industries Ltd (BAIL), formerly Jaya Food Industries was incorporated in Andhra Pradesh in Dec 1983 and became a public limited company in 1992. It was promoted by M Krishna Rao and his business associates. The company manufactures pasta products such as vermicilli, macaroni, etc, and has an installed capacity of 1,88,190 MT. The plant is located at Bibinagar (Nalgonda district), Andhra Pradesh, which is 30 km away from Hyderabad. The company came out with a public issue at a premium of Rs 30 in Dec.'93 to finance an expansion project to increase its capacity from 14,400 tpa to 16,740 tpa and to integrate backward by setting up a 30,000-tpa roller flour mill. The technology for pasta products was imported from Italy at the time of setting up the first plant in 1985. The technology has been fully absorbed by the company. The company's products are marketed under the brand name Bambino. The company's new expansion includes setting up a 14,400-tpa fully automated pasta line along with utilities and other services at Gurgaon, Haryana. It is also setting up another flour mill with a capacity of 100 tpd. In 1997-98, Bambino Food Industries Ltd has been amalgamated with the company as per the scheme of amalgamation. In 1998-99, it increased the installed capacity of wheat and pasta products to 1,88,190 MT.

Source : Reachout News Bureau Sep 2009

 

Hyderabad’s national pasta food brand Bambino completes 25 years glorious period of manufacturing and marketing of Vermicelli, Pasta, Instant Foods, Sweets/Namkeens both nationally and internationally. With the state of the art manufacturing facilities at Bibinagar near Hyderabad, Gurgaon near Delhi and Bhandara near Nagpur, it’s true Andhra home grown National brand with a reach from Kashmir to Kanayakumari. It exports regularly to USA, Australia, New Zealand, Singapore, Thailand, Japan, Europe, Congo, Angola, Ireland and parts of UAE. It is today has become the largest producer of Vermicelli in Asia as well as in the world. It is also in the process of registration of guiness book of world records as the largest producer of Vermicelli product in the world.

Bambino is the exclusive manufacturer of pasta with Durum wheat semolina in India. Bambione is a pioneering market leader in the sphere of pasta products. Presently it has 74 products in different variants, shapes and sizes. It’s product range include Pasta Products, Instand Foods, Soup Powers, Spice Powders, Ready to Eat Sweets and Ready to Eat Snacks.

The Bambino Agro Industries has grown almost by 100% in Sales in the last 3 years, informed Mr. P. Easwara Das, Executive Director addressing a press conference in Hyderabad today. It registered a turnover of Rs 220crore last year and expected touch Rs 260 to 270 crores this year. It is planning to double the trunover to Rs 500 crore in next five years, he informed. Bambino is the major supplier of Vermicelli to Military Canteens and Defence supplies to the tune of Rs 4 crore sales turnover.

We have an excellent R&D with a focus on quality. It procures raw material, wheat from the farmer and has its own flour mill to process the wheat and then used by the Vermicelli factory thereby ensuring that the consumer gets 100% international quality product.
The company offlate has been focusing and promoting more of health care products like Macaroni and Pasta. As they are made of durum wheat, which has nil cholesterol and just 1% fat content. Thus it offers tremendous energy to children because of the protein content. Elders get relief from cholesterol and excess fat informed Mr. Easwara Das.

As part of its penetration into rural markets, it introduced first time an economical pack, just at Rs 5/- consumers can buy Vermicelli which can make 4 cups of Kheer and 2 Cups of Upma. This helps rural consumers who can afford to buy their favourite Vermicelli. On the other side, it helps the company to reach the poorest of the poor consumers.

The company’s nutritionists evaluate and suggest food as per the nutritional value which will enable each segment of the household to lead a health life.

Speaking about the future plans Mr. Easwara Das informed that the company in its internal survey found that nearly 22% of software employees of 20 to 22 years old of a particular company are diabetic. Most of present corporate youth around 30 pus years have varying and untimiley food habits. In order to cater to this segment the most nutritious food Bambino is looking into diversifying into functional foods. It is planning to launch some major products in this category by 2010. Presently the clinical trials are underway. It is also plans to tie up with reputed Universities including one local University and Institutes in ensuring its futuristic growth plans become successful.

The company has recently organised a Festive Dhamaka in South market, which has got an excellent response. To forge continuous positive relationships with the trade it plans to honour select trading community as per their performance in the Festive Dhamaka scheme with bikes. About 34 Hero Honda Bikes will be presented to important dealers tomorrow in a separate function to be held in city.

The company has also honoured smaller retailers with suitable gifts to them. With the support of the International consumer and having already doubled the turnover with a very strong All India distribution network, company strongly believes that it is poised for a growth with futuristic products and change itself into a Health Food Company

 

 

 

I checked with my wife who likes to eat all things Italian!! To my surprise, she was aware of Bambino Vermicelli and has good opinion about it.

 

However, looking at balance sheet, I was disappointed. For networth of 25.65 cr, it carries debt of 57.79 cr making size of balance sheet at 83.44 cr. A big chunk of balance sheet is locked in inventories at 40.41 cr. For the sales of 178.28 cr, raw material expenses is high at 121.87 cr. Net profit margin is 0.2%. All figures are for the year ending Sept '09. 

 

It appears to me that company does not have pricing power. That is not good in environment of rising raw food prices which constitute raw material for company. I think one needs to wait till there is improvement on operational front and brands are established at retail levels. 

 

I called up the company for annual report and received it in a day by courier.Annual report is not very glossy and is very functional .

 

Some points that i noticed :

 

Strong brand in the foods space . 

 

Good Product : I purchased bambino vermicelli from a kirana shop near my house and had upma that night . Its nice product.Shop keeper said that its a steady moving item .1 packet of vermicelli ( i think half kg ) priced at Rs.29 and sold to me at Rs.28

 

Promoter commitment : They hold close to 75% . Further they have advanced 9.49 Crores to the company as unsecured loans with no interest payable by company.

 

Sales is 181 Crores.Material costs at 131 Crores.Manufacturing expenses at 8.50 Crores:Salaries at 9.10 Crores: Administration expenses at 3.74 Crores : Selling expenses at 16.22 Crores : Interest Cost at 7.51 Crore :Profit after tax and all adjustments ( final ) is 37.42 Lacs ( Last year it was 13.22 Crores ! )

 

Yes Debt is high at 58 odd crores which i see that they want to close out thro; below 2 means :

 

Focus area needs to be sales promotion costs and interest costs.

 

A salient point:

 

Company has taken shareholder approval to issue redeemable preference shares upto maximum 25 crores. 

 

Float is too low and even a buy order for 1000 shares takes the scrip into orbit . Promoters investing 9.49 crore as zero interest unsecured loan to company is a huge positive considering company's size and considering very high promoter holding at close to 75%.

 

Need to see if with such a strong brand why don't they or if they enjoy pricing power .As the volumes are high ( Production of 73835 metric tonnes and sales of 73127 metric tonnes ) a small price increase can make dispropotionate impact to margins .

 

Above nos are for year ended 30.09.2009.

 

Results for first half of current year ( period 01.10.2009 to 31.03.2010 ) have shown eps of 0.97 for 6 month period compared to eps of 0.65 of prior year showing a jump of 50% . Remember eps for 12 months ended 30.09.2009 was only 0.47 so this is indeed improvement.

 

Welcome more inputs,perspectives.

 

  

 

I had a preliminary call with the management and followed it up with a letter to their finance department requesting for explanations for their abysmal low margins of 0.2 % PAT and high material costs of 72% .I am awaiting a reply still .

 

I was told by management to expect dividend this year ( 10% ) . While this is possible ( not certain but possible ) I made the point that if the margins are a realistic 10% on PAT basis this company would have an eps of 23 as against just 0.46 last year . Even at a conservative 10 pe it can be a multibagger then.

 

 

 

Disappointed with company interractions - Unable to get even an assurance of a reply to my queries on low margins,high material costs.I found out that retailers are making 8% margins selling bambino product vermicelli and I assume distributor makes at least 4% - So company should have been making at least 12% instead of less than 1% ( despite interest costs ) .They have been trying to hire a cfo for some time now but seems not succesful

 

The concern stems from integrity related or governance related issues - They have 2 promoter firms which are unlisted and my unfounded suspicion is that material costs are high due to bloated purchases which any way is non taxable as agricultural income for the selling unlisted promoter firm but reduces share of profits available to minority share holder.

 

Promoter is Mr Kishan Rao who I believe was accused of fraud in an earlier venture called spectrum power where money was raised from NRIs but not used - Relevant link is below : There are also some news articles related to above arrest which can be googled .Below court judgement relates to 1994 and pronounced in 2000.

 

http://www.indiankanoon.org/doc/485346/ - http://www.indiankanoon.org/doc/485346/

 

Summary : Even if this may or may not make money for you as a shareholder this does not allow you to remain at peace as a shareholder with constant worries on management integrity .So I am not recommending buy - rather would suggest getting out if someone is already in .

Why are you posting posts relating to JHS ( now whatever that is ) in the thread of bambino ? Also I request that this thread on Bambino itself be closed as i think Bambino is not investment worthy (despite whatever may happen to its share price in future i do not really care ) from a corporate governance perspective ( since i started the thread i make this request to admins ) .