Finally, I attended my first every AGM, Astral’s AGM. I took a leave from office today to attend it. Have heard a lot about Berkshire’s AGM where Munger and Buffett address the meeting. Reached the venue at 11:03 am (was late by 3 minutes) and the AGM had just started. Will give the summary of the AGM and will try to cover whatever I could recollect and note down during the AGM:
First of all, the AGM was in pretty small hall which was jam packed. The AGM started with the Chairman addressing the meeting and highlighting the performance of the company. The main point during his speech was the Hosur facility in Tamil Nadu is almost completed and will commence operations in coming few day. This plant will have a capacity of 15,000 MT. With this facility, company has 4 facilities in total (2 in West, 1 in North and 1 in South). The company is also looking to set up a facility in the Eastern part of the country. The other point that I noted was that out of 6 board meetings held in FY13, 4 were in Ahmedabad and 2 were in US with Mr. Sandeep Engineer (MD and promoter) attending the ones in US along with Mr. Kyle Thomson (nominee director of Speciality LLC).
Then there was a small question answer session where investors posed question to the management. Most of the question were not that relevant with investors asking for dinner to be arranged during next AGM and investors not getting hard copy of the Annual Report. One relevant question that I was there was the expenditure on Dabang 2 promotion. The company spent around Rs.6.5 - 7 crore for the whole promotion (including the advertisements, banners, posters etc). The management said that branding will play a very important part for the company going forward. The company has employed Oglivy & Mather as its branding partner.O&M has successfully managed the branding of companies like Fevicol & Asian Paints (was pretty much impressed with it). The management also told the investors that it will try to be very transparent with them as there were few questions on inter-group/company transactions (it was a miniscule amount and management answered it properly).
Then the main part of AGM came with Mr. Sandeep Engineer addressing the gathering. He started with the announcement of Blaze Master getting approval from BIS. The product will be launched commercially in next 3 - 4 months and there were very good enquiry for it. The Dholka plant commenced its operations last year and had some teething problems initially which have gradually been solved. Last year Astral ventured into Column pipes and has received very good response for it. The demand is much more than what the company can supply currently and they are planning to double or even triple the capacity for manufacturing column pipes. The company has also launched manufacturing of Aluminium CPVC which is first of the kind in the world. The company has orders from US for it. This is primarily used in oil & gas applications (may be oil & gas exploration is what my guess is). The company is also looking to tie up with other international plumbing manufacturers for launching a full range of plumbic products (it is looking to tie up with the largest plastic plumbic manufacturer of the world [its a Dutch company], am not able to recollect its name).
Mr. Engineer then stated that three challenges the company is currently facing:
)- Currency Fluctuation
)- Slowing economy
)- Slowdown in real estate
Mr. Engineer stressed that branding will play a very important role for the company and the company has been able to achieve growth in 13 years which not many companies are able to achieve even in 25 years. This year the company will incur capex of Rs.75 - 80 crore primarily towards adding capacities at Santej and Dholka plants in Gujarat. The company’s subsidiary, Advanced Adhesives Limited is doing pretty well and had launched PVC cement in 2012-13. It will manufacture CPVC cement in current year. The topline for the company grew to Rs.15.7 crore in FY13 from Rs.3.19 crore in FY12. The profit increased to Rs.2.44 crore in FY13 from a loss of Rs.21.71 lakh in FY12. The company’s plant is fulling getting utilised and the management is planning to add other products apart from CPVC and PVC adhesives. The Kenyan JV is also doing well and the management is planning to double its capacity from existing 3000 MTPA. The company has 2000 + workforce.
I also spoke to the CFO post the meeting and asked him about the Blaze Master market size to which he responded that its a 1000 crore market. He also told that Ashirwad is almost as big as Astral while Ajay Pipes is a pretty small player. I wanted him to ask about Forex issues but he was in a hurry. The one thing I really liked about the promoters and management was their transparency and down to earth nature. The MD told the shareholders that they can approach his secretary for any issue and he will personally look into it. The management was also planning to arrange a plant visit for the shareholders.
P.S.: Am not as experienced as other senior but I hope I have covered most of the points which were discussed in the AGM.