DHP India Ltd - Regulators and Fittings

(Aksh) #22

The original hypothesis has played out very well thanks to the bull run and stock is re-rated and IMO fairly valued now. Would be interesting to monitor sales growth going forward.

Disc: Exited Fully.

(distilled_feni) #23

Q4 result summary.
Net profit of DHP India declined 41.63%. Primarily due to “other income” dip.
Highest revenue and highest operating margin quarter so far.

(distilled_feni) #24

From the AR 2018

(J2EE Professional) #25

this is a standard note and last few years contains the same line.

(Raman Sharma) #26

Q1FY19 result summary.
Sales growth = 73 % (YOY)
Net profit growth = 8 %. Primarily due to “other income” dip. The other income was dipped in last quarter too. Can someone provide any info, what is the reason of this dip in other income??


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(Udai) #27

They have investments to the tune of 47cr in mutual funds and as per the new IndAS guidelines , they need to show the unrealised gains/losses from those investments as other income. So their mutual fund portfolio must have had a drawdown in the recent market fall. Its just notional and should recover its value by next quarter.

(murali) #28

My understanding is that their other income comes from scrap sale of processed metals which happens from time to time and this varies between quarters

(suranjit sarkar) #29

Few queries from my side. Anyone pls clarify.

  1. In AR 2018 they have wrongly shown 1.2 cr as debt reduced(probably mistakenly) but total indebtedness increased by 1.2 cr from 1.7 cr to approx 3 cr.
  2. They are making huge investments in MFs, additionally in tune of 8 to10 cr, but why taking WC loans from bank??
  3. I think 100% of finished products are exported. They are only selling scraps in domestic markets and some kind of liscense. Anybody please clarify if I am getting wrong.
  4. Their earlier company secretary Tarun kr Das resigned on 30.12.2017 and Internal auditor G.L. signhal and Co. also resigned. seems like a red flag to anyone?
  5. As per RPT 1.5 lkh office rent paid to Dabriwala constuctions(Promoter group),why? Is there any lease agreements with them?

(Dinesh Sairam) #30

Astute observations.

Yes, looks to be that way. But the final value of Debt shown is correct. It’s just that they put it in the wrong intermediate column.

Considering how the company’s D/E is minuscule, I wouldn’t worry too much about this. It’s harmless leveraging. Even the Book Cost of Debt (Interest Paid / Debt) seems to be quite low (7-8%), which is fine. It’s easier for companies to raise a short term loan to handle day-to-day operations instead of selling invested securities day in and day out.

What you should be worrying about is the large MF investments themselves, in the sense that they’re not bad as such. But the question of redeploying the excess money still remains. This is my biggest gripe about DHP India and something I will be closely tracking for the coming years.

Yes and no. Most of their revenues are from exports, but the ratio is around 85-15 for 2017-18, so the sale of scrap can also be considered as a regular business activity.

Looks like regular business activity to me, but I could be wrong. Here’s a profile of the new auditors (Search for Mr. Timir in specific). He’s audited FCI and SAIL before, so that might say something.

If my memory serves, Dabriwala Constructions Private Limited itself is a promoter of DHP India limited and holds >10% stake in the company. And once again, 1.5 lakhs is too immaterial to be considered for a company whose operating expenses are >40 Cr.

(suranjit sarkar) #31

Thank you for clarifying the doubts. Highly appreciated.

It is just I am feeling anxious about both CS and IA resigning although nothing is mentioned in the reports and may be a routine affair.

Yes Dabriwala Constructions Pvt Ltd holds 20% of stake in company and 1.5 lk is immterial, but what I am concerned about is they have not disclosed any terms/notes for such RPTs in the ARs.