Arrow Greentech (Old name: Arrow Coated Products) - Anybody tracking

In June Sarojini Tandon was holding 1.25 %
Sep qte quant holding was holding 1.55 %
again now in dec and mar
sarojini tandon is holding 1.25 %

We need to see the top ten shareholders then only we will come to know.

Any reason for this buying and selling in short time period??

Not sure why it has been done.

My guess is both the entities i.e is Quant capital and Saroniji tandon are holding shares. But as per the BSE regulations only more than 1 Percent is disclosed. They are trading between themselves as liquidity is less.

http://www.bseindia.com/corporates/ann.aspx?scrip=516064%20&dur=A

http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/901B0554_B30C_488F_8C9C_1B5327739CF5_135741.pdf

Can we get a out of court settlement…will be getting some benefits for sure.

Management Meet Update by Nirmal Bang

AGL operates in a niche segment
of cast water soluble films and is one of the leading manufacturers in the world with
its manufacturing facility located in Ankleshwar, Gujarat, with the current capacity at
120tn. The plant runs at ~110% of its capacity. Water soluble films are used in various
industries such as agrochemicals, embroidery, healthcare and hygiene and security
products. The company started manufacturing water soluble films in 2000 and has 30
patents registered in its name for different variants of water soluble films. AGL
generates revenues from three segments – sale of products, technical consultancy
fees and royalty income on patents. In FY15, product sales contributed ~10%
(Rs.51.3mn) to total revenues, while technical consultancy and royalty income from
patents accounted for ~40% (Rs.193mn) and ~50% (Rs.244.5mn), respectively. AGL
witnessed a turnaround from FY13 when the company started monetising its patents.
Of the 30 different patents, 3 have been monetised so far while the company is in
talks with prospective clients to monetise a few more patents in FY17. AGL is on
track to expand its current capacity from 120tn to 500tn by September 2016.

http://www.nirmalbang.com/Upload/Arrow%20Greentech-Management%20Meet%20Update-23%20June%202016.pdf

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Seems an interesting company in a niche segment of business, but i could not understand about the scalability of the busines model.

are they doing business or encashing on their patent revenue?

having 70% ebitda margins will sustain for how long and how are they planning to scale up because most of the patents are with them since 2009 and 2011 and yet they have materialised only on 3 of them as per latest investor presentation which i have read

also no major investors have entered the script if really has the potential to grow multifold maybe it can grow at decent 10-15% level but not beyond that

Patent revenue - 75%

Arrow Coated Product has already been a 100 bagger in last 4 years or so but true there are more headrooms for growth for sure.

You are correct.
only future growth can drive earnings and PE multiple expansion…should be in one watch list for sure

Announcement of Grant of Method of Manufacturing Embedded Water Soluble Film Carrier In Australia

http://www.bseindia.com/xml-data/corpfiling/AttachLive/F2B80FE3_03F5_4C10_A5D1_91C892E222D3_171517.pdf

Dear All,

Did anybody from this forum attend the AGM for Arrow Greentech today?
If yes, I would really appreciate if you can share a brief note on the same.

Thank you.
Sincerely,
Django

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It is all about patents here. They last year said they are positive on monetizing one more patent in 2017. If this happens, stock would be re-rated. If not, it would languish around 450-550 levels. They are adding capacity in a big manner but that will not contribute in a significant way to the topline (as manufacturing is only a small portion of overall revenue).

any news here stock surging all of a sudden?

High Revenue from patent indicates few things for me,

Patents is a global thing, it means you don’t really have a geography advantage which most of manufacturing companies in India do. Growth will be proportional to global growth not something following a tailwind of migration Indian manufacturing.

Doing just research of top companies earning from patent I found :

IBM = 7,355 patents comprising ~1% of total revenue
Samsung = 5,072 patents comprising 10-15% of total revenue
Canon = 4,134 patents comprising 2-5% of total revenue
Qualcomm = 2,900 patents comprising 40-50% of total revenue
Google = 2,835 patents comprising ~1% of total revenue

Among all these company Qualcomm being heavily dependent on patent struggled the most.

Secondly patents are prone to disruption, can be risky asset:

https://www.forbes.com/sites/chuckjones/2016/01/19/if-patents-are-so-valuable-why-does-ibms-intellectual-property-revenue-continue-to-decline/#17019b741433

Having 75% from patents means, if their manufacturing business grows at say 20-25% and patent grows at 5-10% still company efectively grows at 10-15%

Disc: Hold ~1% of porfolio. Looking to reduce holding further. May consider looking back after few years if manufaturing revenue indeed out numbers patent revenue

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They monetize patents by forming JVs and tie-ups. At present, almost 75% of their bottomline is being contributed by patents monetization (directly flows into bottomline). Market is betting on them monetizing one more patent, which they spoke about last year.

They have increased their manufacturing capacity big time this year, but as you said, it forms very small part of their overall revenue. So, this is not going to have a significant impact on the revenue.

Anybody noticing this stock ?

The latest press release from the mgmt says how the future growth likely to be. Patent monetising will go good. Meanwhile company now concentrates on the manufacturing capacities to build sustainable growth. We all know company can’t survive just with patents. Manufacturing end products with the use of patents is making arrow a attractive buy for long term.

Also technically it’s at the tip of the breakout after a long year consolidation. The recent capacity expansion will start Kicking in this year and price is already showing signs of it. !!

I just wanted to check if anyone has ever seen their factory - all their products are traded and made in taiwan. And i am surprised they do not have a FSSAI registration number at all. Two years back, they said they were making mouth melting strips - when I asked the CS and management, why it was a traded product produced in taiwan from a 3rd party, they took out the product from the website and removed all traces of it after a few weeks. Infact, in their AR, there is no mention of the factory’s address - even the CS acknowledged she has not seen it or seen photos of it.

No one picks up phones in their factory and the number listed on internet is wrong. If 25 % comes from products (including a product that as per companys’ claim was manufactured in India but its label says made in taiwan) and 75 % comes from royalties on patents, who are these customers who are paying for patents - there is not a single customer name listed, nor awards won. And for a company having such a roster of patents, I could not find any Ph.D. or anyone earning high enough to be mentioned as a KMP in the report. From what I gather, these are products that are very difficult to make and would need a lot of R & D - a lab equipment of Rs. 10 lakhs seems too low to me. Even a dental clinic would have more FA equipment.

Does anyone have any clarifications on the above ?

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Dear Varadrajanr,

There is mention of factory address in FY16 AR:

Further, their CS may sit in Mumbai and the plant is said to be in Ankleshwar, Gujarat.
So there is a chance she might have never seen the plant.

Also, I have now started to think there is something fishy about this company.

The taxes paid are also very low:

Numbers are taken from ValueResearchOnline.com

We need to ask explanations from management regarding:

  1. Who are the customers of their products: Watersol & Klenz?
  2. Why R&D lab equipment is so low?
  3. Why Tax % is low?

Regards,
Amit