Focus Lighting & Fixtures Limited (SME)

[varun037]

Focus Lighting & Fixtures limited is an SME company traded on NSE emerge platform. They sell focus lights under brands PLUS & TRIX. Trix brand is Chinese imported products and PLUS brand is manufactured by associate firm Shantilal & Bros.

Their financial performance is awesome.

(Data in Rs Lakhs)

Profit Growth rates at 60% plus on any time frame, sales growth of 40%, ROEs of 30%+ consistently.
Such a company trades at a PE ratio of 10.5.

Technical Collaboration: Strategic collaboration with Bartenbach AG for cutting-edge innovations and technical development.

Exports: Started export operations in the Middle East and Italy with an office in Dubai

Clients: AND, Tata, Raymond, Shoppers Stop, Inifinty Retail, Reliance, Addons etc
Source:Focus Lighting And Fixtures Pvt. Ltd - Manufacturer from Goregaon East, Mumbai, India | About Us

They have about Rs 4.34 cr capital work in progress for the upcoming factory at Ahmedabad. The facility which spans 40,000 sqft will house Design & Development, Experience Center, State-of-the-art Testing Laboratory and Production and Assembly.

Negatives:

Loads of transactions with Related Parties:
Salary of Mr. Jigar Bharat Ghelani (Father in law of promoter MD, Country Sales Manager) is higher than that of Managing Director (Rs 54.00 Lakh) and Executive Director (Rs 42 Lakh) at Rs 58.50 lakh. Also, consider that they pay their CFO Rs 19.50 lakh. Their other country sales managers are Santosh Prasad, Amit Raj & Jitesh Doshi but their salaries are not mentioned.

Arion Online Pvt Ltd: Loan Rs 22 lakh, Sale to them Rs 25.68 lakh. Not even a single rupee of sale amount recovered from them.

Shantilal & Brothers: It is their manufacturing unit. Not the part of the company. Almost 80% of the material is sourced from them. Even for exports around 80-90% is sourced from them. Nature of their contract with them is not known. I feel this is kind of financial engineering. Profits can be easily shifted to the manufacturing division. Also, without checking the financials of this entity, one can not say if the profits shown in the listed company are genuine or not.

The company has started exporting to the Middle East and Italy, however, instead of wholly owned subsidiaries they again chose a model of associate entity there. Focus Lighting FZE & Plus Light Tech FZE are associate companies who do not remit any sale proceeds. There was some Rs 1.20 cr sale to these entities but only Rs 20 lakh has been recovered. Are these sales real? If these sales were real, why did not they pay back the amount to the company?

Such a kind of financial structure is a deal breaker for me. Still looking for more insights. I want to give the company benefit of the doubt as they are now building a manufacturing plant. Their margin picture should become clearer then. I would also have prefered if the company were to set up an office in Dubai themselves (instead of associates) or through an unrelated third party.

Disc: Tracking. Not invested yet.

[Vivek_6954]

Promoter Amit Sheth seems a hardworking dynamic n v focussed entrp in his niche of Lighting. His linkedin profile n that of.his team members is quite impressive. He owns nearly 75% stake in thw co n scuttelbutt about him n the co is quite positive in mumbai n business circles. Recently there was a seminar on Sme cos held at Bse n presentation given by Amit sheth was most impressive. He is said to have been able to acquire marquee clients like Ikea n Apple.his website pluslightech.com is quite impressive with v good clientele.

That said sme seems a v competitive sector n is suffering from.revulsion for sme cos at present. Good pointers in abv post on some concerns .

Still mktcap vs opp size is good n co if it moves to main board may get better liquidity n visibility. Ipo was v small at 5 crore rs n was v cheaply priced at 5 PE.

Can any ahmedabad based investor visit their new factory n give inputs?

[spsneo]

Correct URL for the website is - pluslighttech.com

[karna]

Valuations look very attractive considering growth. concerns raised seems valid about salaries and shantilal & should be probed further. Numbers mentioned are not very high compared to overall sales. ( 28 lacs and 1.2 cr).

Promoter looks serious and genuine about scaling up business to the next level. Very valid point by vivek. If someone from Ahmadabad could visit new factory then it will be very helpful.

Just a thought, and I may be wrong, business should not be looked as only led lighting, it’s more like providing complete lighting solutions to high end stores.

Disc: invested. Added in recent fall.

[divygupta]

https://drive.google.com/drive/folders/1P1fz7RrRAMKDNMecbRxrDchFIPFI8NnC?curator=alphaideas

Link to presentation made by Focus Light on the SMEs meet arranged by Alpha Ideas, contains profile presentation of other SME companies as well

[varun037]

True the amount involved is very less compared to overall scheme of things. But when you see sale of Rs 1.20 cr out of export sales of Rs 8.26 cr it is an important figure. Anyways, I am trying to analyse the management and associate entity things does not go well for the image of the management. Also, can anyone clarify if Shantilal & Bros is a profitable entity or not? Are their ROEs reasonable? If it is not, then the profits shown by the company are not genuine. I could not find any financials for this entity. It will be great if anyone can share this…

[ValueInvstr]

Do the above figures make sense to someone? What is meant by ‘Trading Business’ and ‘Manufacturing Business’? The revenue break-up of both the trading and manufacturing segments given above seems inconsistent with that given in the Notes to P&LA. Do they treat raw material sales as sales of manufactured goods- distinct from Trading Sales? In any case, why do they sell raw materials? Is it also not trading? Further, which business reports NPBT in excess of actual sales in a financial year, especially when there were no sales at all from manufacturing business in the previous financial years?

Receivable have grown at a CAGR of 35% during the last four years, though revenue has grown at a CAGR of 30% over the same period.

Period	Receivables(INR)	Receivables as % of sales
31st March, 2014	7,29,86,142	21%
31st March, 2015	7,33,34,412	17%
31st March, 2016	9,74,76,043	16%
31st March, 2017	13,66,44,798	19%
31st March, 2018	17,55,58,900	19%
30th Sept, 2018	23,64,40,650	45% (H1). For full year it could be 22%-25%

Cash Flow is not in line with Net Profit during FY14 – FY18.
2013-14 2014-15 2015-16 2016-17 2017-18 Total [Five years]
Cash Flow from Operations (INR) 15266502 2361525 19448432 38190803 18620219 93887481
Cash used in Capex(INR) 3606921 3327523 1226571 10248958 60867837 79277810
Free Cash Flow(INR) 11659581 -965998 18221861 27941845 -42247618 14609671
CFO Growth % -85 724 96 -51
Net Profit (INR) 7493325 10898455 29170758 40160378 58746855 146469771
NP Growth % 45 168 38 46

Too many related party transactions stink of low corporate governance practices:

Mr. Amit Vinod Sheth, MD of Focus Lighting and Fixtures Ltd, is one of the directors of Arion Online Pvt Ltd.

Shantilal & Brothers is a partnership firm and Nalini Vinod Sheth(promoter of Focus Lighting & Fixtures) is a partner of Shantilal & Brothers as per Form No. 3CEB.
Shantilal & Brothers is the biggest supplier to Focus Lighting & Fixtures Ltd with Rs. 42.55 crore worth of purchases having been made by Focus Lighting from Shantilal & Brothers during FY2018. Total Sales of Focus Lighting during FY 2018 were Rs. 92 crore.

Amit Vinod Sheth and Nalini Vinod Sheth(promoters of Focus Lighting) are the directors of Sri Jay Pharma Exim Private Limited. Sri Jay Pharma has 6% stake in Focus Lighting and Fixtures.

Focus Lighting FZE and Plus Light Tech FZE are shown as Associate Entities on one page in the AR-2017-18, while on the another page of the same AR the two entities are shown as subsidiaries of Focus Lighting & Fixtures Ltd.

AR-2017-18 page no. 39
AR-2017-18 page no. 73

Yet another inconsistency is reported on page no. 16 of AR-2017-18

Frequent Resignations of Independent Directors & the chairman of Audit Committee and Company Secretary:

[kalidasa]

Appears to be a rather carelessly prepared annual report.

• Some of the information is obsolete, e.g., “no subsidiaries” in Director’s report on page 16.
• Shoddy editing. For example, in the following part, the second sentence should have been pasted before the first.

Except as stated above there were no material changes and commitments affecting the financial position of the Company between the end of financial year and date of the report. Ms Priya Pragnesh Shah, Company Secretary and Compliance Officer had resigned with effect from 10 th August 2017 and Ms Preeti Saxena was appointed as Company Secretary and Compliance Officer with effect from 1 st February 2018.

• Four persons including 3 independent directors and 1 company secretary seem to have resigned in the FY but the word “resigned” has been unnecessarily repeated many more times.

• They classify their operations into segments of “trading” and manufacturing". It seems that in the previous financial year they used to do only trading, but in FY18 started manufacturing operations.

• The items sold seem to be classified into “LED lightings and fixtures” and “raw materials” (this is very confusing (why do they sell raw materials?); this should better be called by some other name). If one adds up net sales under “Sales: Trading” and the “Sales: Raw Materials” header, it sums to 92.22 cr, which is the total revenue.

[ValueInvstr]

@varun037

I would also have prefered if the company were to set up an office in Dubai themselves (instead of associates) or through an unrelated third party.

Is the information reported on page no. 24 and 39 of the AR - 2017-18 factually incorrect? It has been mentioned that Plus Light Tech Fze(UAE) and Focus Lighting & Fixtures PTE LTD(Singapore) are wholly owned subsidiaries of Focus Lighting & Fixtures Ltd, incorporated on 2nd August, 2017 and 28th March, 2018 respectively.

[varun037]

There is some concern regarding this as also highlighed previously.

On page 73, these are indicated as associate companies and on Page 16, there is mentioned there are no subsidiary companies. However, on page 39 they are given as subsidiaries.

IMO, the companies might have been promoted as subsidiaries but later sold to related parties. As in related party disclosures these are mentioned as associate entities. Also the language on page 16 clearly states that the company does not have any subsidiary as on 31-03-2018, where as on page 39 there is no date given… so I think they might be subsidiaries during some point of time in the year 2017-18 but not as on 31-03-2018.

It is just an opinion, rest we need to wait till next annual report to confirm.

[ValueInvstr]

Focus Lighting & Fixtures PTE LTD(Singapore) is shown as a subsidiary on 28th March, 2018, whereas in the same report it is claimed that the company has no subsidiaries as on 31st March, 2018. What happened within three days of incorporation? Moreover, the Annual Report is supposed to report the status as on 31st March, 2018(the closing day of the financial year), and not the fragmented status which was valid for a certain period during the financial year.

When generally the basic information reported in annual reports is conflicting and misleading, it makes no sense to waste any more time and pursue the investigation further.

[Vivek_6954]

Generally we need to give more flexibility to sme cos which are learning n evolving over time. Here the main bet has to be on promoter whose neeyat shud be saaf ie intent shud be clear. These cos r small cap as they r in the inital phase of their journey. There shud not be outright fraudalent transactions like siphoning of money etc. Next sector too shud be studied thoroughly

In case of Focus lighting promoter n his team are well exp professionals. The clientele they have built up is really good one. Infact i have heard some reputed clients like BMW threw out big names like Phillips as they were failed in warranty period itself unlike Focus where due to its focus on quality failure rate was less then 1% over a period of last 9 years track record.

Focus seems a complete lighting design solution company which gives them an edge over competition selling disparate Led n fixtures. Their reputation is growing over last 9 years. First gen owner entrp with nearly 75% stake with great focus on the sector needs to be given a year or two by when it shud migrate to main board to understand its real value

Discl bought on listing at 85 n still invested.Ipo was a steal at 5 Pe n size of only 5 Crore maybe to facilitate a cheaper way of listing on main board over next 2 years or so

[Vivek_6954]

https://www.facebook.com/notes/plus-light-tech/welcoming-the-future-of-lighting-technology-with-our-new-series/588534591577651/

Welcoming the future of lighting technology with our new series

PLUS LIGHT TECH·MONDAY, DECEMBER 10, 2018

Plus Light Tech is proud to introduce its four latest light series- Perdu, Elite, Magnus and Array. The superior technology used along with the state-of-art-optics, sets the series a class apart from other professional lighting fixtures and creates an unparalleled lighting experience. This is how we strive to grow our business for the future.

As a pioneer in retail lighting in India, Plus Light Tech (under Focus Lighting) is committed to driving innovation through efficiency. Our entire range of products come with cutting-edge, tunable white luminaires, that can be controlled via a BLE mesh. With fixtures designed for exceptionally high visual comfort, our luminaires achieve a UGR of less than 19, rendering the fixtures virtually glare-free. Ultimately, we want to provide the best in human-centric lighting with our wide range of offerings that will delight our valued customers and create growth opportunities.

Elite

The Elite series of lighting fixtures is designed to achieve a sharp longitudinal cut-off. The modular nature of this design makes it extremely versatile and can be used to suffice a variety of lighting requirements.

Perdu

The Perdu series of lighting fixtures is designed to achieve a very unique and appealing lighting aesthetic by creating a nearly invisible source of light while delivering a stellar light quality.

Array and Magnus

The Array and Magnus series of lighting fixtures are designed to achieve a highly precise beam control and are available in narrow, medium and wide beam angles.

Get the right light with Plus Light Tech.

For any inquiries about our products contact 1180-999-564.

[Vivek_6954]

Project: BMW, Mumbai A brand like hashtag#BMW needs the right light to highlight the power and efficiency that it resonates. . . . .

[varun037]

I am not doubting their products. The problem is with financial engineering. What are the benefits of such associate entities?

[vm495]

Company declared their financial results for the half year ended Sep 30th.

• The board meeting had to be held on 30th Oct but postponed to 11th Nov. Did not see an explaination for this.
• Their CFO Chetan Trivedi resigned due to “personal reasons”. (not sure if this was announced earlier)
• Results are bad on first glance with reduced sales and increased expenses.
• Stock hit lower circuit and with the number of sell orders and the general volatility of microcaps it may continue so for few more days.

Anyone else tracking this?

[ankit95]

The stock price is factoring in the worst of the worst. If there is no definite evidence of malpractices, it seems like an attractive bet at this price.

[rampuria]

The issue of ability to scale up remains + retail & commercial not expected to do very well.

Disc - invested.

[Dev_S]

Q2 23 - strong numbers with highest margins and qtrly runrate

what has changed?

Besides interesting call out on railways as sector and demand driver, one key and sustainable driver seem to be Mix of manufacturing in product mix (trading has reduced substantially)

here a view from last many quarters on mix

Technical view suggest good price action with stock near ATH

AR is a good read - industry structure seem to be supported by both premiumization & solution (product + services), energy rating and savings credentials of products - clientele impressive for a microcap, more here https://pluslighttech.com/

Initial positions and studying

[sahil_vi]

Q3 numbers have been quite strong & co has put out investor presentation for first time in very long.

FOCUS_14022023155104_IntimationofInvestorPresentationforQ3.pdf (5.8 MB)

First Concall tomorrow (15 feb)

Disc: Invested, biased. Concall should be interesting.