Mayur Uniquoters ~ Market Leader in Indian Synthetic Leather Market

Just compare it with Steel Strips Wheel who though being an auto ancillary made it big in export market. Can Mayur also better SSW?

The difficulty with understanding Mayur business is only one. Establishing th size and scale of the Opportunity before it. How do we know that it will keep growing at 30% plus rates, for how long? how do we establish that is the big question before me. Otherwise it is a fantastic company, difficult to cite another company of same quality!

Compare with Steel Strips is not apples to apples. Steel Strips has grown about 26% CAGR in Sales for last 5 years. But the quality of that growth is very poor. EPS CAGR is marginal, and margins and profitability has shrunk badly. RoCE is just 9%.

Please throw more questions. I have started on the process of collating questions for Mayur Uniquoters in preparation for a long due company visit.

Still Steel strip wheel has multiplied 5 times in last 1 year.Hopefully the nos are clean but the promoter rk garg does not enjoys a great reputation

I also got the secondhand feedback on the comapny from its CA M/s Kalani n co a mostt reputed old firm of Rajasthan.They have give a positive view of the company. As a GOI official had inquired on my behalf the positive feedback is welcome.

spoke to CFO of Mayur Uni today.He said that Artificial leather manufacturing has been banned in USA due to pollution hence the reason for large scale import in USA of their products from them n other competitors.The expanded capacity will come online by sep 11.Focus mainly on exports now due to better margins but footwear is a big earner for them

Can someone confirm if Mayur Leather (also listed) belongs to the same promoters… specifically the brother?

Hi Aditya,

I think yes, Mayur Leather is of same group. (Though not 100% sure)

Regards,

Ayush

No Mayur leather is being managed by the step brother of Mr SK poddar.

SK Poddar is only concentrating on Mayur Uniquoters with his son Manav Poddar.Any idea abt the capabilities n fire in belly attitude of Manav??

as per Nagabrahma (who was the one who visited the company last year)

Mr. S.K. Poddar started as a trader in artificial leather from Calcutta. Subsequently he established three companies and they were managed by his brother and brother-in-law.

They were not managed properly. Hence S.K. Poddar sold off the two companies and kept only Mayur Uniquoters. Subsequently he sold off even his trading business and since 2000, he has been concentrating only on MUL. Mr Manav Poddar (SK Poddar’s son) was specifically brought in in 2000 to look at the irregularities and streamline the business of Mayur Uniquoter, and we have seen the results.

10 Questions for Mayur Uniquoters â PU/PVC synthetic leather business

1.Mayur Uniquoters has made rapid progress over last 5 years. Sales have grown at a CAGR of almost 40% to touch 270 Cr while EPS has grown at an amazing 75% CAGR. Congratulations!

Kindly share with us this journey and the key factors responsible for such an impressive growth performance. What have been the main drivers of this growth?

2.If the growth trajectory has been amazing, the quality of the growth achieved in what must be a difficult industry, has made everyone sit up and take notice.**There has been a major shift in the quality of earnings over the last 2-3 years.**Working capital/Sales at 14-15% is almost halved from earlier levels. OPM (16%) and NPM (10%) have jumped up by 5-6% in the last 2 years and seem to have stabilized at these levels.

This is not just economics of scale at work. Mayur Uniquoters has clearly shifted gears and is operating at a different level today. Kindly share the key changes that have happened over the last 2-3 years in the company. What changes have you effected in your business model to bring about this focus on improvement in operational efficiencies?

3.Product Segments and contributions

Kindly give us an idea of the revenue contribution & margins from major product segments. Which segments are expected to drive growth in next 2-3 years, where is the companyâs focus and why?

Is there any replacement market for the auto seat covers segment?

4.Customer segment

Kindly share with us the quality of business and the level of business with your major customers. How much do your top 3 customers contribute to revenues? Is there any single customer contributing more than 10% of Sales?

5.Export Segment Performance. You were already supplying to GM & Chrysler. BMW, Mercedes and Ford had put you on the approved vendor list.

Kindly share with us your successes and plans on the exports front. What does it mean to have BMW as a customer? How has the exports segment scaled up in the last 1 or 2 years? Do you enjoy superior margins there?

6.The PU/PVC Synthetic leather market. The size of the opportunity before Mayur Uniquoters.

What is the size of the current market being addressed? Where do you see the company 5 years from today? What are the major challenges to reach there?

7.PU/PVC synthetic leather market would seem to be a low-barrier-to-entry market. But your dominant performance seems to be telling a different story.

What is the level of competition you face today both domestically and in exports. Who are these players? Would you continue to enjoy a sustainable competitive edge, and why?

8.Capital Expenditure. Gross block additions in last 5 years is ~25 Cr, bulk of it some 10 Cr added in FY11 possibly for the backward integration project. Capital work in progress was some 3cr. In the same time Sales have increased by ~200 cr.

No wonder Fixed Asset Turnover has doubled form 4x to ~8x in last 5 years. Again maximum improvements have come in last 2 years.

Please share the companyâs philosophy, processes, and how you have gone about implementing such extraordinary productivity and efficiency improvements.

This looks almost like an asset-light business model? Whatâs going on? Is this sustainable ~8x fixed asset turnover for a manufacturing business?

9.Backward Integration. Knitted Fabrics unit incurring 15-18 Cr Capex

Has this been completed? Is this only for captive use for the exports segment or for generating additional sales as well? What kind of capex will be required going forward?

How much was the expense incurred in Knitted fabrics RM as a percentage of Sales? What will be the contribution towards margin expansion, if any, on account of this?

10.Raw materials â Chemicals, Knitted fabrics, other fabrics

RM constitutes some 70-75% of Sales. Kindly explain how the company manages raw material price volatility risks. Are you able to pass on price increases? How often have you resorted to price increases in FY11? What is the outlook for FY12?

I continue to be fascinated by the progress made by Mayur Uniquoters.

We may be able to meet up with the Management soon.

Please have a look at the questions listed above.

Please help us extract the most out of this Management interaction. The angle I am pursuing mainly is to scope the size of the opportunity before them, the level & quality of competition (even global) and the company’s ability to scale up to address the opportunity.

Pls add questions on the company, anything that you are not clear on and want to understand better.

Thanks

Donald

Thanks donald for the efforts.

You seem to have covered almost everything that needs to be asked.

Would their focus be more on exports or domestic markets going forward?

Thanks Hitesh. will try to find out the importance they attach to exports. there is a separate question on that.

Meanwhile here was a query posted on another forum:

Why promoter raised money during 2007 when money actually not needed.

The board of directors of Mayur Uniquoters approved the raising of fund by issue of800,000warrants converted into equal number of equity shares of Rs 10 each,at a price not less than Rs 38a warrant to the promoters and non-promoters, subject to approval in general meeting. The above decision was taken in the board meeting held on Jul. 4, 2007.

Source :http://myiris.com/newsCentre/storyShow.php?fileR=20070704173935153&dir=2007/07/04

Thanks,

Mahesh.

Was going through the AR 2011.

Interestingly the vision of the company now states “to be a preferred supplier of artificial leather to the leading automotive OEMS in the world”.

So refined the Exports question to address more specifics

5.EXPORT SEGMENT PERFORMANCE. YOU WERE ALREADY SUPPLYING TO FORD & CHRYSLER.THE COMPANY WAS IN THE PROCESS OF DEVELOPING PRODUCTS FORGM, TOYOTA, BMW, MERCEDES WHICH HAD PUT YOU ON THE APPROVED VENDOR LIST.

Kindly share with us your successes and plans on the exports front. What will it mean to have BMW as a customer? How has the exports segment scaled up in the last 1 or 2 years? Do you enjoy superior margins there?

The vision of the company now states “to be a preferred supplier of artificial leather to the leading automotive OEMS in the world”.So has the focus decisively changed towards automotive exports? What is the kind of growth that is expected from automotive exports segment?

What will be the effect on the product mix as footwear segment used to contribute some 55% of sales and was a significant counter against cyclicality of auto sector?

Mayur Uniquoters Management Q&A updated.

The 2011 AR has significant pointers to future direction of the company which looks promising. Few questions have been added/refined with the new information set.

We may be able to get these answered from Management soon.

-Donald

Hi Donald, Can you get some clarity on future expansion plans of the Company. What intent does the management have to scale up. I thought there were conflicting views on that between what I sensed and what the management told Nagabramha.

Yes Aditya.

My focus will be to understand the BIG picture:

a) Size of the opportunity (global) before them

b) Intent and ability to scale up to address this

c) Sustainability of the competitive advantage they enjoy currently

How big is the China threat who are the biggest name in synthetic leather? How have they coped with it specially in international market n how can they sustain this advantage if any?

How do they plan to scale up n what are the back up plans if hte vision does not works out?

One more thing why are the holding the AGM in God forsaken place 60 KM away from Jaipur city in their factory? Do they consider their shareholders as irritants ?Why dont they make efforts to get their company get more visibility by holding AGM in an accessible place n invite reputed FIIs n MFs? Would they plan to get the company delisted?

Hi Guys,

We visited Mayur Uniquoters on June 29 and spent over 4 hours visiting the factory and discussions with CMD Mr S K Poddar. We were also joined by Mr V K Khanna (VP Operations) and Mr Ramdas Acharya (VP Technical) over lunch and later part of the discussions.

Thanks are due to Nagabrahma who made this visit possible (He was the first to visit and report on Mayur last year when it was an Unknown!). Naga, Manish, Nitin and myself prepared extensively for this visit and were delighted with the results of our visit to Jaipur.

Its a pleasure to bring to you this Mayur Uniquoters Management Q&A

Please share your valuable feedback and carry forward the discussions.

-Donald

2 Likes

Thank you Donald! As usual very comprehensive.

So many positives stand out now. I think the possibility of the backward integration turning out to be another bus opportunity was not factored in our forum so far. And the addition of a sr person from the industry could also openup new avenues. But I hope the transition of management to professionals does not lead to shaking up the apple cart.

Rgds

Vinod