Most of the MNC companies never required capital and the equity dilution was in response to legislative requirement .
Thanks for thinking in the same direction. My mentioning is more on quality of investors on books and not regarding capital requirements of MNCs. I understand that cash cows don’t need capital and legislation play a large role in deciding public shareholding in such companies. Infact, just to remind, same legislative framework swayed change in promoter stakes in HUL and Colgate long time back.
As to equity dilution, I meant ‘promoter stake’ dilution. Dilution is not necessarily an end product of exchange of economic interest between the company and prospective shareholders (or capital raising activity by the company as suggested here). Transfer of shares from promoter entity(s) to institutional players or retail investors can also lead to dilution of promoter holding.
However, when parent company and affiliates are only registered promoters on company books, dilution rarely happens.
Good Luck.
yes of course it is dilution but that too for is requirement of funds by any company whether through ipo or through private placement to insitutional shareholders, while most of mnc dont require funding due to their high roce generation and hence dont resort to dilution of whatever type whether through ipo or through private placement to institutional investors. As an example , Nestle is growing much aggressive to its peers but still is growing on internal generated capital due to high ROCE
No. There is a difference. Company and stakeholders equity transactions have separate treatment. If a promoter entity needs funds, they are free to sell their shares to a third party. This would not have any impact on shareholder’s equity or equity capital base. Just for illustration, there is a difference between “XYZ company raises capital” and “XYZ shareholder raises capital”.
Agreed on MNC capital requirement, although I never touched the capital requirement subject. All the best!
HDFC Securities initiated coverage on Astral Poly
2 Likes
4 Likes
Its probably just investors offloading some of the new liquidity caused by bonus shares getting credited to accounts. After the results and prior to going ex-bonus, the price had rallied sharply upwards too. Feel that is getting corrected. It is still a relatively expensive stock compared to other plastic pipe players. Its a long term holding portfolio play in my eyes, and so some near-term price corrections should not be worrisome.
After bonus record date, ideally stock should have come down by 25%, that’ where it is currently … (52week hight 1988)*.75 = 1491
Disc: Invested
Do you mean the ex bonus price adjustment? The 52 week high of 1980 odd is just that. It was 2,400+ prior to going ex-bonus.
oh I see, you are correct.
Looks like it is done to accommodate charting need!
Bonus share are allocated at zero cost (purchase price), and original share’ purchase cost remains same (unlike in split). So if I have to sell my shares acquired before 31Jan 2018, I can not rely on chart to know price on 31stJan 2018, that has no significance in calculating my capital gain. I need to see Bhav copy of the day.
2 Likes
Q4 results are out and look promising to me. Experts please share your comments.
Microsoft Word - SEINTIMATION (nseindia.com)
Disc : Invested.
2 Likes
New Product segment entry announced - Faucet & Sanitaryware, 15K cr mkt size , EX Cera CEO to head the business, Adjecncies which can leverage existinb distribution channel eco system
11 Likes
Results look great on QoQ or Half Yearly basis but if you compare with the Q4 last year (before covid second wave) top line 1154 cr (Q2 FY22) vs 1128 cr (Q4 FY21) and OPM margin are 18% now vs 23%.
Great management but valuation doesn’t give any room for error.
If anyone attended today’s concall post result request you to post summary of it.
1 Like
Some Notes from Concall:
Key highlights of the quarter
Inspite of 20% volume growth, company was able to reduce its receivable days and control its working capital cycle. Inventory was high because of inflationary trend in the pricing of polymer and we are expecting further price rise in Q3 hence we have kept intentionally a high level of inventory which we are confident that it will reduce substantially by the year end. Therefore by the year end we are expecting the polymer price will start dropping. Demand scenario is excellent in both pipe and adhesive segment. Plastic storage tank pricing up momentum month on month - will pickup further once our south operation will start from December.
Polymer price in upward trend in October also. PVC price has gone up by 20 Rs in the month of October and we have passed on this to the market in October itself. Similarly in CPVC 12% price rise in the month of October in CPVC which will improve our gross profit margin substantially in Q3. We have lost some gross profit margin in Q2 mainly because the pass thru took place in the CPVC with a lag. No inventory gain in Q2.
On sanitaryware and faucet business - we are working the same in detail and will be ready with plan by next concall. We will let you know.
Thought process behind Sanitary & faucet business
We have a strong dealer network which is very active almost 2 lac active dealer network and huge network of distribution. With our adhesive and pipe we have crossed 12000 distribution points and the same is getting added up all the time. So this was the right product mix for Astral to get into. First is Strong Brand equity with the users - second to come out of the wall - we are behind the wall, now we will be in front. This business was thought around, worked around. For more than a year and half I made my homework on this, done surveys of the market but still we will not be rushing into anything. we would be making the product right mix, right pricing, right quality and then place it with the market.
On Capex higher than the guidance
This year, we have spent almost 40-50 Cr Rs for purchase of Land. Telangana land was there, then we have purchased a land in Hosur, we have purchased land in Rajasthan, and we have purchased a land in Ahmedabad. Except land in Telangana, all the land which we have purchased were adjacent land to our existing plants. That was perfectly ideal for us to aid the landbank because the kind of growth which we are seeing in the market and the opportunity which we can see clearly - the way unorganized players are affected and the way brand Astral is getting stronger and stronger day by day - that has given us the boost to acquire the adjacent land first and then the additional land of Telangana. Because of that the Capex has increased. I am very happy to say that we are also thinking to put up a state of art R&D facility. So far whatever capex Astral was doing, whatever amount spending was merged with the current capex and the expenditure were charged to the P&L for this R&D related activity but now we are going to put up a separate R&D facility. But with this additional capex, we are definitely going to give you additional revenue, additional growth and additional new products also.
Valve opportunity
Valve has 2 opportunity: One is Industrial is huge opportunity. In Industry valves are mostly imported. Nobody makes PVC and CPVC industrial valves in India to the quality which industry needs. Today also we sell Valves which are imported from USA. Water treatment industry is growing fast which needs many numbers of these valves. Second, when you go to the plumbing segment absolutely it is growing. So, there is a huge demand of valves and above 2 inches, people use mostly metal valves. We can replace to plastic valves in plumbing in higher sizes. The best thing in the valves is the margins are very good and it is a tough product to make.
Sustainability of high margins
Sustainability will be arrived when the stability comes in the polymer price. These kind of margin - market is giving opportunity to us - our economy of scale is giving us advantage but once the polymer price stable and freely available, that stage will be the right time to arrive what is the right number. but at this stage, it will be high only because still supply constraints are going on and polymer prices are not coming down because of that these kind of high margin will be maintained.
Note: I Skipped many questions some of which I did not understand and some felt not so important - Sorry.
16 Likes
- There is a seasonality in Astral results - Q4, March results are always their best quarter in the financial year.
- Off course their is margin pressure, as explained in the above post by the management, this is across the industries and all companies r facing the heat only few can able to pass immediately or with a lag, check Pidilite and Berger paints results.
5 Likes
1 Like
Any further update on this!
Rgds
RR
I attended Q3fy22 concall.
A question was asked on income tax raid. Management replied that no negative communication received post raid by authority. Management believes they have done nothing wrong and if any thing is initiated by authority they are confident enough to prove innocence.
They also mentioned having not lost a single day’s sale due to raids.
I hv not checked posted audio or transcript. But above is what I recollect from concall.
2 Likes
