Bhansali Engineering Polymers - An Import Substitution Story!

Mutual fund action in BEPL
October '17 data I could find. Bank of India AXA AMC has doubled the exposure to BEPL in four of its funds.


Please look at the source here…
I think November '17 data might be more interesting, if somebody can find out.
PS: Many fund houses contacted BEPL during last days of October '17.

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Of course it’s in our control. In fact, it’s the only variable in our country where we can decide our own buy price. Everything else is an opinion.

Anyway, i give up on this thread. Lot of confirmation bias here. Hope everyone who has entered at later stages make money. :slight_smile:

@mukeshbhatt77 For money control board, well, I am sorry if a chain of reasoning looks like MM message.

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Dear @abhi2525,

I again appreciate your thoughts and beliefs, though tend to disagree. I tend to believe that, we both are entirely different kinds of investors. @Nolan has put it very beautifully in his below posting about the two kinds of investors:

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A hungry animal will divide the world into edible and inedible, while a prey being chased will divide the same world into safe and unsafe places. We are bound to have different perspectives. I personally will like different perspectives to flourish on this thread. The problem arises when we try to impose our opinion on others.

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I am wondering about those Retail Investors who bought at 190+ and sold at 170 in panic based on a tweet and retweet.

Good luck to them. This is another thing to learn for all.

I was checking Styrene monomer price, it has come down a little bit

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I cannot resist myself in making two seemingly unrelated but somewhat connected points here.

  1. Promoter of BEPL Babulal Bhansali is a non-matriculate. He has risen despite this handicap, and I suspect that he continues to face this handicap. If he is successful in creating big wealth (that only future will tell), I will be compelled to compare him with Dheerubhai Ambani. In my eyes, he would be in the same league and nothing less.

  2. Read this news item… Exclusive: Prescient messages about Indian companies circulate in WhatsApp groups. In July this year, messages regarding first Q loss were circulating in a Whatsapp group. The company in question was Dr Reddy’s Laboratory, and the timing was just days before the result date. The loss figure mentioned proved to be surprisingly accurate. The drug major is certainly no small cap. How many of the analysts raised their voices on Twitter or elsewhere or downgraded the company? I am not aware if SEBI is investigating the matter. It might be.

Please feel free to make your own observations and derive your own conclusions.

For BEPL investors, I think, we should drop mails to investors’s cell and request Promoter to have quaterly calls.

Instead of fighting among ourselves, if we 100 of us drop a mail to them , I am sure management may be interested

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Promoter buying continues even now…
Jayesh Bhansali bought 240000 shares worth more than 4 crores on Thursday and Friday.

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It is very interesting - but what could be his source of funds to make such
large purchases. Further what could be his motivation for continued large
purchases ?

In case, you see AGM notes, plan is to increase stake to 75%.

Now I already sent a mail to investor cell, requesting for quarterly call. Please send similar mails before your next posting.

This year- till date promoter bought 30 crs worth share and avg price for him is Rs 40 till date

Is BEPL too much heated up?
Let us look at the PG ratio…
Projected capacity increase by management from FY 18 to FY 22—from 80 to 337 KTPA
Thus rate of capacity increase ~ 43% per annum
Current EPS 3.62
Current Price 174.3
Current PG ratio = 174.3/43*3.62 = 1.2
By March 18 EPS could be 6 or more so (if the price remains the same) the PG ratio would fall to a value much below 1, while 2 is considered acceptable.
Of course there can be other ways to evaluate the price of this scrip, and these methods may show that BEPL is overvalued. I request the members to come up with their calculations, so that everybody will be benefited by a contra view.

Has the management guided 337KTPA by FY22 and how confident are they? That’s more than 4 times capacity expansion in 4 years

I just asked whether management guided regarding capacity expansion as I do not own this stock and therefore I am not tracking. This seems to be a cyclical business that is being run for a number of years. Without a massive capital investment, I think the capacity expanding by four times seems impossible. Also going by the OPM, the company seems to be already in the peak of its cycle. As a result, price has already run up 10 times over the past year. So this stock is at peak valuation in peak cycle. On this basis, even if the capacity expands by 4 times there is still a huge downside risk than an upside risk especially at this valuation. This is just what I see.

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Another negative that I am seeing in screener is promoters pledging 55% of their shares. Such things are generally big negatives that I watch out for.

I will add to your logic. The book value of the stock is near 10. So price to book value ratio is very high. Let us continue to look at other parameters.
PS: @nil_71 and @madhavikkutti Susindar has raised a valid point about promoter’s holding remaining pledged. May we have your observations on this issue.

I cannot see any signs of capacity expansion. If any, incremental profits are going towards repayment of loans (Reducing every year from FY09 to nil now). The fixed assets keep reducing year after year for the last 10 years with not even a small sign of incremental investment in the business. Other assets keep increasing but I do not know what that is. If any, the assets are getting older and less effective. Nothing impressive about ROE, sales growth and profit growth over the last ten years of less than 15%. What i see is just a cyclical average stock in the peak of its cycle and overheated by the current bull run. Of course, I reserve my right to be wrong.

I think BEPL is not a play for investors who wants to see results tomorrow. It will take time provided Promoters’ walk the talk.

I will be more happy to get information on financials of 80 to 137 KPA expansion and then the execution part. 200KPA is a long way off.

Dear @Agarwala,

Although there is a general perception that the promoter pledging of the stocks is negative, I feel that, there can be cases when it would be considered to be as positive also. If the promoter is pledging stock to raise capital to purchase additional stake in his/ her profit making business, it can be considered as hugely positive.

In case of BEPL, I think, there are strong reasons to believe that the stocks pledged many years back have not been released as yet for positive reasons. Let me explain my thought process below. As I am not the most experienced person in the stock market, I could be wrong in the following logic, hence request anyone to correct me, if you find a flaw.

Currently, there are 5,00,00,000 stocks which are pledged by BEPL promoters. These stocks were pledged many years back (I do not know the exact date). BSE Shareholding pattern has started including the Promoter Pledging information starting from the Mar-2009 Quarter, hence let us take that Quarter as a reference point and make our judgement based on that.

As of Mar-2009, promoter and promoter groups owned 44.82% of the stocks of the company and 67.24% of the above stocks (5,00,00,000) were pledged. 2009 was the year when the company had made a loss of Rs. 11.42 crores. BEPL’s share price during the Mar-09 Quarter was around Rs. 9, hence let us assume that the market capitalization was around Rs. 149 crores. Out of the above, the value of pledged stocks would come to be around Rs. 45 crores. Let us make an estimate that, the above pledge helped the promoters to obtain a long-term loan value of around 36 crores (80% of the total pledged stock value).

Subsequent to Mar-2009, company had never made any losses and made a cumulative profit of Rs. 146.54 crores till the Sep-17 Quarter. Hence, it could have easily fully paid back the above loan of around Rs 36 crores, considering that, the only major expense the company had since Mar-09 (as per my best guess) was the Rs. 40 crores used for capacity expansion at Abu Road from 51 KTPA to 80 KTPA.

However, the above loan did not get settled till date. Why? Because the promoter wanted to buy additional stocks of the profit-making company and for doing the above, they needed money. Instead of settling the loan, they used the surplus money for purchasing the stock of the company. As a result, the promoter holding now increased to 54.25%, as against the 44.82% in Mar-09. In fact, the current promoter holding could have been even more than 56%, had some of the promoters were not reclassified as public shareholders during the Sep-17 Quarter.

Now, assume that, you were the promoter of the company. Would you have done anything different? Let me tell you, what I am doing. I have a housing loan which I could have settled fully very easily. However, instead of settling the above, I invested the surplus money in stocks like BEPL. Reason is that, I am expecting much higher return from BEPL investment, as compared to the around 9% yearly interest that I am paying on my housing loan currently.

BEPL promoter is not the only one who is doing this. Please read the following article for another example. KPIT stock price appreciated around 40% since the promoter had purchased additional stocks this way since Mar-17:

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