FiberWeb India - Bouncer (growth) or yorker (trap)?


(Sravan) #24

for demand, supply and risks, we can refer to the research paper by Orbis, which I have shared in the first post

main customers are Wal-mart and Johnson & Jhonson

and regarding the promoter share holding,

repeating the same post above, Abhisek Agarwal, Sulochana Devi and Gayatri Pipes are not promoters, they were issued preferential shares and are not promoters. selling of the shares is done by these investors.
again why they sold? please refer above post http://forum.valuepickr.com/t/fiberweb-india-turnaround-growth-story/12458/9


(bullrun1988) #25

I think UAE subsidiary made for the customers in USA who needs low quality product but should be with brand name FIBERWEB. As MD saying that customer in USA asking specially for fiberweb product and that export product is with high quality but some customer are ready to accept with low one but strictly with brand name FIBERWEB. Thats why they doing trading from UAE. I accept that they have given less info about the value added product they going to produce.


(buywise) #26

The product exported from UAE is not under the brand name FIBREWEB. As the management has clearly outlined this in concall - that they are not using the name FIBREWEB just to maintain the reputation of the quality of the co. It is being supplied by the name of subsidery


(Prasad India) #28

Friends,
Companies’ profits not supported with Cash Flow from operations and having negative reserves give a different picture. What I learned is that there are good examples such as Shilpi, Moschip etc.
If anybody is interested in a company without checking CFO it is in your own interest because its your money.


(phreak) #29

The interest income as well doesn’t correlate well with cash and cash equivalents in the books.

Cash and cash equivalents = Rs.21,51,47,839 (Rs.21.51 Crores).
Interest income = Rs.4,39,056 (Rs.4.39 lakhs)

That translates to a interest rate of 0.20%. Looks to be another red flag.


(Sravan) #30

I think they are not putting money in fixed deposit… :slight_smile:
just kidding…
why don’t you send query to company?
I’ve sent query about value added products…


(Shivram) #31

Some extracts from the Management Discussion and Analysis of 2015-16 annual report (in italics).
In summary, there is absolute lack of clarity in thought and in data. Lots of words which mean the same thing keep getting repeated.

As you are aware, your Company has been providing innovative and application focused products to
enhance value of its customers globally__The Company markets several value added products, which are
steadily gaining strength in the overseas market through a net work of dealers and customers. We
continue to develop new and innovative products for various applications.

Nobody seems to be aware based on the thread above. No info on what is the innovation, what is the application and what is the value. The 2 sentences are really the same content rehashed in different words!!

The Company sees several opportunities for profitable growth in the areas of value added products, and
a growing demand both in the international and domestic markets. Strong quality product development
and marketing efforts have enabled the Company to stay ahead.

Again no information on what is the value addition. Stay ahead of whom? Absolutely no data to prove the claims on quality product development and growing demand.

In view of the anticipated growth in the demand for the products of the company in the years to come
opportunities for the company to improve its performance is bright. The Company has also decided
to improve its manufacturing efficiency by incorporating various balancing equipments and also by
placing emphasis on efficient and professional management of the available resources of the company.
However, the changing International developments affecting the production and distribution of the
essential petrochemical products and raw materials are likely to have it s effect in our activities.

Again lots of words with no data.

The plant and machinery of the Company are of the state of the art technology. The products of the
company are of best quality and have been accepted by well-known end-users in many advanced
countries like U.S.A, U.K. etc.

Why is the Plant and Machinery state of the art, why are the products of best quality, who are the end users who have accepted it?

In veiw of very good order book position the Board will be considering expansion and /or diversification
plan.

If order book is good why would anyone diversify? In the worst case, diversification could make sense only if the company has enough and more cash (that again I know is debatable). Again why expansion, no information on what is current capacity, what is utilised capacity, how much demand is expected to go up and how much expansion is planned and how it will be funded. It is very funny indeed that the company wants to diversify instead of executing on its “good order book”.

The Risk Management Committee
_reviews and monitors the identified risks and mitigation plans at regular interval. Some of the risks _
identified and analysed by the Management are as under:
The Audit Committee and the Board are apprised of the significant risks and mitigation efforts made by
the Management in its quarterly meetings.

If you are searching for the “risks as under”, keep searching. Maybe they wanted to google the risks and add it sometime later but forgot! Or may be, they want to indicate that the risks are really the audit committee, the board and the management !!:slight_smile:

Your Company’s main business is “Polymer Processing” and all other activities of the company revolve
around this main business.

Why does Polymer Processing require a double quote? Double quote is normally used when you do not exactly mean what is within the double quote or when quoting someone else! What are the other activities that revolve around Polymer processing? You either process polymer or you dont. What can anyone do around polymer processing that is innovative, adds value and is accepted in developed countries like US, UK etc?

Good luck to all who are invested (sorry speculated) in this.


(jayesh265) #32

Hi,
I would still wait, let the company perform for some time before take a final call.
There are so many negative things pointed out on this company.

I compare Fiberweb with Shilpi Cable on this parameter and found this:

The aforesaid data has been taken from www.screener.in

Means it is not comparable with Shilpi cable on the basis of Cash Flow.

  1. I think the Cash and Cash Equivalents are “as on 31st March, 2017” and might not be there through out the year. Hence calculation of interest can’t be done.

  2. Many times the cash is used for so many other activities that earning interest on this is not always possible (anyway cash can’t generate interest until it is invested :slightly_smiling_face:)

  3. We should not forget that the company’s networth was negative and the same has been turned positive only during 2016-17.

  1. Should we expect perfection from a company which was declared “Sick” and has come out of BIFR just one year ago?

  2. However I agree that many doubts are quite genuine and definitely require caution.

Now there are some positives as well:

  1. LIC is a shareholder here.

  2. Mr. Praveen Sheth is also holding 29.8 lakh shares (no selling by him) Can’t say how much control Ms Soniya has as a director in M/s Gayatri Pipes.

  3. Promoters still hold more than 52 % shares which is not a bad figure.

  4. During the Q-4, concall, Mr. Praveen Sheth correctly said who is their main competitor:

now look at this:

I found both of these facts correct going through this:

BCH.pdf (2.2 MB)

I think it’s a quarterly magazine published by a third party company Business Co-ordination House Pvt. Ltd and exclusively related to technical textiles.

Thats why I would still wait and watch.

I think a little bit of scuttlebutt can end the speculation here. If someone from Daman can actually verify the activities going on in their premises there, whether the company actually exist and is working etc.

Thanks…


(phreak) #33

Pravin Sheth himself seems to have been a director at Gayatri Pipes. Also, interesting thing is that the email address for Gayatri Pipes is [email protected].

http://companiesmate.com/1099663/gayatri_pipes_fittings_private_limited/

This seems to be a company founded by Pravin Sheth himself although he pretends like he doesn’t know who the promoters of his own company are when the question of share sale by Promoter group company Gayatri Pipes is concerned.

This is a classic example of how to answer a question without actually answering it. “Who are the competitors?” is a direct question to which the answer is “World is a competitor”.


8k Miles Software Ltd, Cloud Computing
(Sravan) #34

and this link shows that he’s inactive in Gayathri Pipes
https://site2corp.com/in/gayatri-pipes-and-fittings-private-limited


(Prasad India) #35

Dear jayesh,
I agree with what you are saying. But I have taken only last 4 years of CFO.
Added to this the reserves were negative till previous year. Could be due to trading losses.
Normally I look for a strong cash flow which actually supports the belief in a company.
But I had my fears, hence a caution is recommended. As you rightly pointed out a scuttlebutt would sediment the doubts.
Regards,
prasad


(Prasad India) #36

I would advise you to see page 64 of recent AR or balance sheet. The trade receivables have increased and payable have decreased.
disc: on the radar but no positions.


(jayesh265) #37

Dear Prasad,

I just wanted to say that we need to investigate it a little more and things will be crystal clear.

In case the company is genuine, the opportunity appears very good.

I’m also watching it closely just like you . However, it will not be possible for me to visit Daman and do a ground level cross check.

I request valuepickr seniors @Donald, @ayushmit and @hitesh2710 to look into the matter and guide a novice like me as to how to proceed in this matter. I’m sure it will be a great learning experience.

Regards,

Jayesh


(bramha) #38

And the sell of by Gayatri Pipes & Fitting is continuing. Between 13-15 Sep, Gayatri has sold another 135000 shares.
PS: Soniya Sheth is Director in Gayatri Pipes & Fittings.


(phreak) #39

Promoters fined for not disclosing. Just another red flag in a long series on this counter. http://wap.business-standard.com/article-amp/pti-stories/sebi-slaps-rs-31-lakh-fine-on-3-entities-for-disclosure-lapses-117091900993_1.html


(Sravan) #40

what is the period of these lapses for which it is fined. in the link it shows 2013 to 2014. if we take count of red flags, once could never ever invest in pharma sector, there are all colored flags in pharma left and right :slight_smile: and those flags affect business in pharma


(Sravan) #41

Here is new Report from Bank of Baroda with BUY call with target price of Rs.470 (45% up) published today

http://www.bseindia.com/xml-data/corpfiling/AttachLive/afa24d93-c260-4f8b-acb3-994287591e3b.pdf
can also download below
afa24d93-c260-4f8b-acb3-994287591e3b.pdf (475.0 KB)


(phreak) #42

Have certainly never seen a company notify the exchange about a research report on itself. This is a first.


(Left this forum) #45

This stock came up last year in my screener due to 2 reasons 1. High momentum 2. Accelerated growth. As I started to get into details some reminder of past circling around me, let me put down the details here. You take a call accordingly:

Point No 1: Web of company structure and peculiar telephone numbers

I don’t understand why company is running a flash website. You won’t see any Indian faces on website. Lots of bombastic statement with capital letter used.

It provided two numbers to contact +91-22-24044876, +91-22-24082689. There are two numbers for Daman as well.

Look out for Mumbai telephone directory- Fiberweb India, Block No 2, Ground Floor, Kiran Plot No 128, Bhaudaji Road, Matunga-400019. Second number belongs to Pravin Seth (CEO/Chairman of company) having same address. I found it bit unusual for a company to provide CEO number directly, still it can happen for a small company or may be telephone number is taken in big boss name.

Now the twist Promoter list includes Sheth family and few Agarwals. Also one Gayatri Pipes and Fittings is promoter. But do note few years before other than Sheth’s rest were classified as public category holding substantial shares.

This company Gayatri Pipes and Fittings also share the same address as chairman address. The chairman (inactive now?), still transactions had gone through at the time of holding place of profit) and his wife holds directorship position.

There is another listed company named Kunststoffe Industries share the same address and same telephone number. Obviously belong to same promoter. Of course nothing wrong to have multiple companies sharing same telephone number and address. But to me it was unusual. I wanted to find out more. By the way in this company also Gayatri Pipe is a major shareholder, this time tagged as public including Soniya Sheth.

Point No 2: Grand revival, largesse and magical turnaround

As I mentioned earlier company used to have a negative networth and reported to BIFR and came out of it couple of years back and then roared to profits. There is more to meet the eye. Gayatri Pipe a Private Limited company which apparently have a common address and common director with company and have a 25 lacs paid up capital. This company had provided a term loan (without any interest!) of 100 Cr plus secured by immovable properties of 54 Cr book value only. And with a stroke of midnight Gayatri Pipe decided to waive off the loan, here becomes Networth positive and company is out of BIFR. Interest was never calculated on these loans, it could have run to 50-60 Crs alone in 5/6 years.

Apparently where was this 100 plus cr spent, here is the answer may be:

Go back to 2010-11 Annual Report. This is the year Gayatri Pipe gave 113.87 Cr secured loan. And ironically 73.52 Cr loan with Foreign bank becomes zero. Possibly Gayatri Pipe funded to settle this loan. Get cheap foreign loan and then do what?

I was more inquisitive to know as how did the turnaround happened? By improving the operations? By financial restructuring?

The company have an operational profit baring 3 years. It’s actually 2 years the losses were troublesome i.e. 2007 and 2011. Let’s grind back to 2011 to understand the story behind 82 Cr expenses.

In the year 2011 there has been an extraordinary expenses of 39.52 Cr. A schedule 2A created to state this, Exceptional items debit 103.61 Cr, exceptional items credit 64.09 Cr. And this is what company has to say in Director’s report.

Quote.**The regular activities of the Company during this period resulted in a profit of Rs.68.72 lacs as against profit of Rs.40.14 lacs last year. However considering extraordinary items the loss for the period amounted to Rs.38.84 crores. This is from 2011 AR.**Unquote.

I zeroed on PLBS to dig more. Increase secured loans by 105 Cr and decrease in unsecured loan by 75 Cr. A company with 40 Cr accumulated fixed asset and a turn over of less than 50 Cr all along, what it was doing with this whopping money? As I mentioned earlier largely loan to BHF Bank repaid. Again what was the loan from foreign bank used for? Fixed assets has been decreasing for last 10 years, no investments, CWIP. It was beyond me to understand.

By the way watch for other asset number 52.76 Cr in 2017 AR. This is almost 3 times more than previous 10 year average.

Point No 3: Shareholders and rotation

35 lacs shares has been added since last 6 years, good news is promoter’s share increased more overall in comparison to retail. How? By offline allotment to Gayatri Pipe being part of settlement.

Gaytari Pipes get classified as promoter and with offload of shares by them promoter holding is coming down rapidly.

Story is changing now- 15 lacs shares distributed to public category when price range was between 320-350. Where as 25 lacs shares added by promoters within price range of 12-20.

Closely watch for next shareholding disclosures, retail pie should go up more.

Point No 4: Funds utilisation and capital allocation

Year 2015-16: 7 plus crore was generated from profit left with 5.87 cr cash flow from operations. Despite company’s interest free status it has to sell fixed asset of 13 Cr around to repay the borrowings.

Year 2014-15: this time 2.03 Cr NP resulted a 1.07 Cr Cash flow from operations. Ironically no borrowings were required to be paid.

Year 2013-14: we had a negative profit of 73 lacs with positive cash flow of 4.29 Crs. How? Dramatic shift of working capital, trade receivables and loans and advances turned upside down! The working capital super performance was pumped to capex of 5.74 Cr. A loan taken from others (?) and working capital smartness resulted again to pay borrowers worth 9 Cr.
Please note the difference between cash flow from operations and net profit. Also, the borrowings repayment schedule (give one year, second year forget).

Point No 5: Numbers and KPI

If you look at KPI (ratios) be it efficiency, growth, cash flow there has been a phenomenal rise and turnaround in last couple of years. With so many interconnected dots my attention turned to related party transactions.

Except the borrowings management states no other major related party transactions occurred.

Let’s look at 3 of interconnected accounts i.e. payables, receivables and inventory.

Receivables has gone up by 2 and half times, trade payables has gone up. Inventory remain static irrespective of operations yet cash conversion cycle reduced this year (2017) thanks to payables which doubled and inventory halved.

From five points above I stopped out then. May be books don’t tell all, but I won’t still venture out with so many questions in my mind.

What discouraged me me finally before I close the file:

Point No 6: Word formation

I am sure all of us have red number of books of management communication. The cult is perhaps ‘Investing between the lines’ by Laura Rittenhouse. Now let me put some official announcements to stock exchange, you decide how often you see them. I am sure it would put Laura’s book to dustbin!

First the website, lots of capital letter words. Why?

A. 21 Sep- how many companies have informed stock exchange regarding brokerage report?

B. 28 Aug- Company Bags Very Prestigious EXPORT ORDERS of value added products for INRs 109 Million. What product, who is customer we don’t know? Somewhere it stated ‘BUYING AGENT’ in USA. Please note.

C. 12 Jul- Please find attachment regarding Company bags Very Prestigious EXPORT ORDERS for INRs 190 Million.

D. 16 May- Chairman boasts about super revenue growth and profit (forget to mention %, it says XX) and promise the future quarter to be brighter.

E. 23 May- Open flood gates of more profitable orders for your company. Will soar to greater height.

F. 07 Nov 2016- company speaks about book value. Book value is 50 for equity share of face value 10.

G. 07 Feb 2017- speaks about increase in EPS, interestingly also PE. This is what company has to say, ‘ with 3 months to go EPS is likely to be double the last years profit. Historically our industries are already enjoying 37/40 PE ratio multiple in market.

Please note for this financial year 62 communications have been dispatched to BSE, almost a stone away from big daddy Reliance Industries 70 communications.

Lastly 2 major drivers of growth:

  1. Company speaks about 180 Cr order book, revenue reduced by almost 25-26% in June quarter 2017.

  2. A capex plan of 100 Crs. Supported by funding? I guess interest free, or else interest cost
    enough to knock out yearly profit. So far no interest expenses!

Now possibly I am not aware of what is going around in detail as I am not an insider. Yet I adore this forum, putting my points across. Lastly my wisdom says when unrestricted places pops up with multiple identification on internet better to stay away.

Disclaimer- not invested, unlikely to invest in future either unless something materially changes my workings and conclusion. Please highlight inadvertent error, will rectify.


(Manish Vachhani) #47

Guys, show some maturity and restrict discussion to fundamentals. Any personal assault or quarrel is most unwanted thing on this forum. Beware of the consequences of repeating the same. All members are requested to do their own due diligence about the stock story and should not get carried away.