Bhansali Engineering Polymers - An Import Substitution Story!

Serious concern, no question about it. I was unaware of it when I had initiated the thread, or would have certainly added it as a concern. That’s the advantage of putting it on Valuepickr! The case in question pertains to 2011, & I wonder what was the outcome in the case as the minority share holders who went to court , the MKG group continue to have a holding in the Co. after all these years!

These are changing times. Most Promoters are looking for market cap, so I guess it pays to be honest! For me personally, the most important thing is how the story unfolds. Only if it unfolds to my liking do I plan to add. Waiting to see the Dec qtr results & the effects of demonetization on them.

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@RajeevJ
Rajeev Sir, Between October 2016 and Jan 2017, MKJ and related companies have brought stake down from 23.58% to 10.74%, what do you infer abt this info?

Oct 2016 filing: http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/2AAD91BE_F20F_494A_95ED_0BD1F45C8684_142309.pdf

Jan 2017 filing: http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/0874027A_8A4D_4BC2_9D56_924BCD758836_125308.pdf

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Hi Amil,

That is the point that I was trying to make. The MKJ group that went to court held on to the shares for the next five years. Their selling could be due to any reason. That said, the fact that they went to court means that one needs to be cautious when it comes to corporate governance. Hopefully, the promoters would have learnt their lesson, but like I said before, growth in the next few quarters would determine where the share goes from here!!

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Promoter buying reported to BSE on 09-Feb-17.

Came across this during a routine search exercise that I do once in a while for insider trades, hence updating the relevant thread for info of those interested in this scrip. Discl : Not invested.

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Promoter is continuously raising stake since one year, why would he park his own money if didn’t expect the share price will go up substantial ?
Also promoter stake is already above 50% before raising stake.

Interested in stock and tracking closely.

At this point what is the economic moat of this company ? Can we describe its pros and cons in points to make it simple.

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Promoter bought again. Reported on 10th Feb.

http://www.bseindia.com/stock-share-price/stockreach_insidertrade_new.aspx?scripcode=500052&expandable=2

Disclosure: Invested

The company has got a favorable verdict from the Company Law Board (CLB), Mumbai Bench, Mumbai against the case filed by certain group of shareholders in September 2011. However an appeal pertaining to the same is pending for disposal before the High Court, Mumbai.

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http://www.moneycontrol.com/stocks/reports/bhansali-eng-disclosures-under-reg-292sebi-sast-regulations-2011-6327341.html

Any Idea about this? Amount of shares bought by management = Amount of shared sold by this big investor.

Is this company MKJ enterprises anywhere related to promoters ??

Thanks
I am tracking this company very closely.

The total capacity of BEPL is going to almost triple from 48000 TPA to 137000 TPA. The revenue for 2017 is expected to be 1500 cr, also almost triple from the current revenues.

Out of 137000 TPA, 130000 TPA is ABS Resin. The final capacity after expansion is

The total cost of this expansion is 200 crores.

As mentioned earlier in this thread, the demand seems to be growing and the company cant keep up with this demand necessitating the expansion. At 200 crores, the company will definitely need to take up additional debt or issue equity.

This is certainly a good bet. There are ifs and buts about the promoter credentials, so thats a concern. Another concern for me is the capex of 200 crores which will be required to transition to the enhanced capacity. The company currently doesn’t seem to have the necessary internal funds needed so its a risky maneuver to go in for an expansion. This can be good or bad. The management seems to be pretty sure of the demand panning out and hence they have decided to take up the risk ( which is a good thing ). If the management has estimated incorrectly then its going to end up in bad shape. However, i guess the company knows what its doing.

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2016 AR:

They do not intend to add further capacity at Abu plant which is now at 80 KTPA. They have not raised any long term debt for this expansion from 51 KTPA to 80 KTPA for which they have spent approx. Rs.35 Cr.

Further 120 KTPA is expected to be at some port based location to save on transportation. The cost details for this expansion is not mentioned but it will definitely be significant and needs to be analysed as to how it will be funded when it’s announced.

The above details are from 2016 AR. The Environment report shows study period March to May, 2015 but report is dated Oct. 2016 :slight_smile:

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It’s not from AR. It’s from EIA/EMP Report.

Here is the link

http://environmentclearance.nic.in/writereaddata/FormB/EC/EIA_EMP/25102016SFJ6SGZHAnnexure-documentofEIAEMP.pdf

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Yes. The report is dated Oct 2016, because there were some EC amendments after they submitted the application on 13-05-2015.

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Also, the EC document mentions that the expansion at the existing facility will not require any further land acquisition and will be in the same premises. The 2016 AR mentions “some port based location”.

Any clarity on which exact location is this expansion?

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Nope. They have not provided any further information. They must be in the process of identifying the port / location. Any new developments are not known as there is limited communication from the company. Since the key raw material i.e. Styrene monomer is import dependent it could be either at vizac sea port or Ennore. I could be completely wrong here.

I am just concerned that the words in the Oct 2016 EC covering letter convey that they are waiting for the EC and it hasn’t been granted to them yet for the expansion at their current facility.

If we take it that the capacity expansion is going to happen at this unknown port based location (and not at their existing plant as i have assumed) then wont they need to make a fresh EC application? and also acquire land? I am hoping someone more informed than i am can throw some light on this.

If there is clarity on this then it will give investors like me more confidence

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INSIDER TRADING DETAILS

remuneration to KMP/WTD: Fy 2014-15 Fy 2015-16
Remu Paid 1.1 cr 2.2 cr
Profit Before Tax 8 cr 23cr
% of remu w.r. t to pbt 13.5% 7.7%
also Mr B M Bhansali receives 5% commission on net profit which is included above. It seems they are using companies funds to increase their shareholding.

Please find attached excel file with shareholding history of BEPL.

Promoter (including Jagruti resins stake of 5%) had held about 55% as on Mar’15. Note: As per BSE shareholding Jagruti was not considered as part of Promoter group. MKJ enterprises (along with other related entities) had about 23%.

From Mar’16, MKJ enterprises (along with related entities) have been on selling spree and their holding is now down to just 9%. It is unlikely that they are related to promoter since they were the ones who had filed case on promoter accusing of mismanagement. The case that they have lost in NLT but pending at High Court as per earlier discussion.

Jagruti’s stake has either gone down to zero or less than 1% since its no more reflected in BSE shareholding data as on Dec’16. So technically promoter holding is actually down from Mar’15 levels if we assume Jagruti resins as part of promoter group.

However, post the 3Q result, the promoter is on buying spree and lapping up shares from open market almost on a weekly basis. Promoter has bought almost 1% stake from the market. The promoter shareholding as on today adjusting for insider trades is around 53.7%

Disclosure: Invested
The recent buying spree from promoter has got me excited. Besides having JV with Japanese company does lend some credibility. Japanese companies do lot of due diligence before entering into JV. The financials of JV will be visible only in Annual Report. Till that time it remains a black box.

Counter Views invited.

Book1.xlsx (14.0 KB)

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Interesting story. Can someone help me in answering the questions below?

  1. Where is ABS imported from and what is the pricing vis a vis domestic manufacturers?
  2. How do the products compare with Styrolution? Is there any differentiation?
  3. Why cant anyone else set up a plant to manufacture ABS? Why is there a lack of supply even though the demand seems to be increasing continuously?
  4. Will capacity expansion by 2019 make it the largest player in India?
  5. [quote=“bheeshma, post:31, topic:8933”]
    The revenue for 2017 is expected to be 1500 cr, also almost triple from the current revenues.
    [/quote]

On what basis have they projected such revenue? They have done around 430 cr in three quarters. What am I missing?
6. Have the margins increased as a result of increase in realizations or due to profits on inventory?

  1. About 80% of ABS import is from South Korea.
  2. No differentiation with respect to products with Styrolution
  3. There is a setup time of 2-3 years for this capacity to come up. This is as per the styrolution call transcript.
  4. Not sure.
  5. This number looks off.
  6. Not sure, needs few more quarters of monitoring to say.
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