Bhansali Engineering Polymers - An Import Substitution Story!


(kevinmehta) #41

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)


(sagararya) #42

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?


(Vinay Arya) #43
  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.

(vinamra chaware) #44

While calculating Promoter’s HOLDING I used to calculated Promoter"s holding along with related Party’s.
So we can understand is there any insider buying selling at expense of common shareholders

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(Bheeshma Sanghani) #45

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/3f3064d5-5554-4170-aaa8-a108f36c4c73.pdf

The shareholder of company viz. MKJ group of companies of Kolkata led by Mr Mahendra Kumar Jalan, had filed a case against the Company and its Directors in Company Law Board (CLB), Mumbai Bench, Mumbai in the month of September-2011, alleging oppression and mismanagement in the affairs of the company under section 397 and 398 of Companies Act, 1956, but were badly defeated pursuant to Order of the Company Law Board dated 24.09.2013 (Copy attached) and thereafter they filed an appeal in High Court, Mumbai under section 10F of Companies Act, 1956 against the aforesaid Order of CLB which was withdrawn by them suo moto. The Hon’ble High Court passed an Order (Copy attached) imposing a cost of Rs. 2.00 lakh on them finding that the case was devoid of merit and was frivolous, unsubstantiated and they abused the process of law for their vested interest and ulterior motives as also clearly stated in the said CLB Order(the detailed covering letter is attached).


(kevinmehta) #46

Here is the updated shareholding pattern till 21st March. All the “Non promoter” related entities have substantially sold off their holding. My guess is they will sell off entire holding in next few days. Promoter has bought a part of its, about 2.5% in Mar’17 quarter and promoter holding is now at 55%.

The historical analysis clearly brings out these “Non promoter” related entities bought shares, filed a frivolous case, brought share price down and increased shareholding. The High court has proved them guilty and now they are moving out.

Hopefully, the company will now be cleaned of mischievous shareholders and relentless selling may stop. The share price will now react more on fundamentals. BEPL - Shareholding.xlsx (14.1 KB)

Disclosure: Invested but insignificant portion of portfolio


(Bheeshma Sanghani) #47

Dear @RajeevJ

Not that it matters in the broader scheme of things, but i think there is an error in your computation of Interest charges for 2015. In your sheet it is 8.97cr but in the AR it is


(Nikhil Moryani) #48

Hi All,

BEPL looks interesting and I have taken up a tracking position in the co.

Just have a few questions, will be grateful if I can get answers.

How much is the CAPEX for proposed 120K MTPA capacity expansion?

By when is the capacity of 80K MTPA expected to be utilised fully? What will be the operating margins at the peak utilisation?

How does ABS from Bhansali compare on pricing w.r.t. imported ABS on CIF basis? The co. mentions need to match lower cost structures of international manufacturers due to higher efficiency and economies of scale.

How is competition in India? Any Indian competitor planning to expand capacity? This move could delay utilisation of expanded capacities.

ABS is a commodity as a product. The saving grace is that there are only a few manufacturers (Styro, DSM, Bhansali) in India plus not many exporters (Samsung, LG, Toray, Chi Mei and a few more) who fulfil short-supply. The industry structure helps maintain the prices. (Please correct me if I’m wrong.)

What stops new players in India to put up capacities? Do engineering polymers involve complex chemistry? Is there a minimum threshold to the level of capacity one has to put up to achieve competing cost structures? One reason could be that the end user of the processed product has to authorise the supplier of ABS resin, for e.g. Bajaj Auto has to approve ABS resin for its auto-part supplier. What could be the other reasons?

Thanks.


(Bheeshma Sanghani) #49

What a triangle breakout! explosive stuff enjoyed the move. If the prices form a flag or a pennant, we can expect more fireworks from this stock. The promoter concerns have been laid to rest finally and the stock has reacted like a rocket in a hurry to beat the escape velocity :slight_smile: Investors could have gotten in at the throwback [ area in the green triangle ] - after the breakout. Also there were a lot of nano inverted h & s patterns forming spontaneously in the body of the triangle. These were all bullish signals and serious money to be made. For a serious value investor, besides the obvious valuation exercise , some basic knowledge of price patterns can give a wonderful edge and can make your performance look really good. I am slowly learning the value of this much derided art form.


(shah21) #50

hi everyone …ineos styrosolution from the same sector also looks good…bepl has run up fast…ineos may be a turn around bet …with improved fundamentals for the sector as a whole


(Rajeev Jawahar) #51

Has anyone been able to lay their hands on the consolidated results? The Co. has posted their stand alone results twice instead of their consolidated results.


(Rajeev Jawahar) #52

The Co. came out with a great set of numbers for the March qtr. The markets probably had an inkling given that the stock doubled in the run up to the results. However, for some reason, it wants to keep its consolidated numbers under wraps which is strange. Hope there are no rude shocks in store! Though it approved the consolidated results, it has not put them out. Even the results published in various news papers are the stand alone results. We will have to wait for some more time to know how the joint venture with Nippon is playing out, but at least for now its share holders can feel happy that the story seems to be playing out well!


(jagdishsatashiya) #53

Hi, Can any one following this stock give long term expectation for 1-2 years? is price going to double in one year as profit also going to double?


(Bheeshma Sanghani) #54

Hey jagdish

No one knows whats going to happen to prices. However, if you have any views on the earnings & future prospects of the company it would be a good idea to post it here.


(jagdishsatashiya) #55

Hi,
the result is outstanding…yearly profit doubled and Qtrly profit 5 times…
also there promoter share increased from 52.60 to 55.69%

http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/b131df2d-4a14-4c2b-af57-30a317eb7b7b.pdf

Missing part is expansion plan will continue or not.
senior people comment will be helpfull


(narasimharao) #56

As per the previous annual report,

They have already acquired the land in a port location ( location not disclosed ) for capacity expansion to reduce transportation cost and the movement of dangerous chemicals.

They implemented SAP for manufacturing operations and accounting which is a good sign .
Promoter is consistently buying in the open market which is also a good sign.
However , promoter pledged shares is not giving long term confidence.

From the annual report, management sounded very confident that clearly reflected in the recent quarterly results where the company posted excellent numbers.

Disclosure:: invested.


(Finrahul9) #57

"Recently the company was given a non cooperating category by India ratings. "


India Ratings Affirms Bhansali Engineering Polymers at ‘IND BB+’ & Migrates Ratings to Non-Cooperating Category
Home · Press Releases · India Ratings Affirms Bhansali Engineering Polymers at ‘IND BB+’ & Migrates Ratings to Non-Cooperating Category
08
MAY 2017
By Neermoy Shah

India Ratings and Research (Ind-Ra) has affirmed Bhansali Engineering Polymers Limited’s (BEPL) Long-Term Issuer Rating at ‘IND BB+’. The Outlook is Stable. The rating action reflects the company’s financial performance during FY16 and FY17.

The ratings have also been migrated to the non-cooperating category. The issuer did not participate in the surveillance exercise despite continuous requests and follow ups by the agency. Thus, the rating is on the basis of best available information. The rating will now appear as ‘IND BB+(ISSUER NOT COOPERATING)’ on the agency’s website. The instrument-wise rating action is given below:

Instrument Type
Date of Issuance
Coupon Rate
Maturity Date
Size of Issue (million)
Rating/Outlook
Rating Action
Fund-based working capital limits

INR600
IND BB+(ISSUER NOT COOPERATING)/Stable
Affirmed and Migrated to Non-Cooperating Category
Non-fund-based limits

INR1,500
IND A4+(ISSUER NOT COOPERATING)
Affirmed and Migrated to Non-Cooperating Category
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; Based on best available information

KEY RATING DRIVERS

The affirmation reflects an improvement in BEPL’s credit metrics. As per provisional financials for FY17, EBITDA/interest cover improved to 6.4x (FY16: 3.3x), driven by an increase in EBITDA margins to 8.9% (7%). The improved EBITDA/interest cover is above Ind-Ra’s earlier positive rating guideline of 2.5x. However, Ind-Ra is unable to determine the sustainability of the same in absence of any discussion with management regarding the company’s capex and other future plans.

BEPL did not participate in the surveillance exercise and provide information on working capital utilisation, sanction letters, future projections and management representation certifying timely debt service.

RATING SENSITIVITIES

Positive: A sustained improvement in the EBITDA margins leading to the interest coverage being sustained above 2.5x will result in a positive rating action.

Negative: Deterioration in the EBITDA margins leading to the interest coverage below 1.75x on a sustained basis will result in a negative rating action.

COMPANY PROFILE

Incorporated in 1986 in Mumbai, BEPL manufactures acrylonitrile butadiene styrene used for manufacturing plastic products such as drain-waste-vent pipe systems, musical instruments (recorders, plastic clarinets and piano movements), automotive trim components, automotive bumper bar, among others. The company’s overall operations are managed by Mr. B.M. Bhansali and Mr. Jay Bhansali.

RATING HISTORY

Instrument Type
Current Ratings
Historical Ratings
Rating Type
Amount Outstanding (million)
Rating
23 May 2016
3 September 2014
1 October 2013
Issuer rating
Long-term

IND BB+(ISSUER NOT COOPERATING)/Stable
IND BB+/Stable
IND BB/Stable
IND BB(suspended)
Fund-based working capital limits
Long-term
INR600
IND BB+(ISSUER NOT COOPERATING)/Stable
IND BB+/Stable
IND BB
IND BB(suspended)
Non-fund-based limits
Short-term
INR1,500
IND A4+(ISSUER NOT COOPERATING)
IND A4+
IND A4+
IND A4+(suspended)

COMPLEXITY LEVEL OF INSTRUMENTS


(kevinmehta) #58

After a hectic promoter buying in Feb-Mar 2017, the promoter once again bought from open market on 20th June.

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


(Finrahul9) #59

If promoter has cash , why is he buying more shares and not reducing the pledge.


(nil_71) #60

Hope it will not be another pump & dump case. Promoters buy from market-build the story and then sell & dump on retail