I came across the stock on conversation with a real estate developer about tile companies. He was talking about the thousands of designs available now and mentioned " But Nitco’s tile designs are the best and unique. Recently they have stopped importing tiles , with manufacturing being done in India itself! "
I was expecting him to talk about kajaria or hr johnson( i hold kajaria. He said johnson is doing fine with its old established name. Kajaria has a limited presence in tn).
Its mcap is 47 crores. At rs 14.5 , its selling at 0.10 book value. Loss making in 2010, 2012 with previous quarters showing heavy losses.If operates in two areas
In as ceo for turning around the company. He resigned in 2012july . I could not find news of any new appointments.
)- in 2009 they were involved in a scam with duty evasion for imported tiles from china. Entire company operations were shut down for four months. The never seemed to have recovered from this.
)- They diworsified into real estate development in Mumbai in 2007-8 . In one ar they fairly said " there is a deluge of unsold properties in mumbai so sales slump will continue "
)- debt debt debt. They are piling it on. Their long term secure debt is at around 600 cr, short term liabilities at another 600 cr.
)- has been a wealth destroying machine for investors from 200+ levels to all time low of 14.
)- If we type in Managements name + scam in search engines quite a handful of articles pop up. Illegal land allotment, 2009 duty scam , and some non company real estate cases. Management does not inspire confidence.
)- its floor tiles and marble business started in 1950s. Marble segment is at negative growth. Tiles segment inspite of incresed sales in previius financial year is showing losses quarter after quarter.
It wrote off 30 + cr worth of imported tiles as obslete and damaged(last ar). Sounds extremely dubious or is it fair treatment?
Sales plummeted from 2011 levels.
)- its main clients are instituitional biggies. So the slowdown has struck them badly. In contrast kajaria with a retail focus has better margins and good cash flow.
)- smaller players have eaten into its market. In an interview its MD said " In this slowdown smaller players have no other option but to sell their products through us"
But.atleast here in TN smaller players like anuj , ambani have their local distribution and dealers. Even some up end house builders prefer them!!( on enquiry the dealer said they are as good as branded names!)
)- capital intensive business. Nitco is not the only company suffering losses even after substantial sales.
)- The Brand NITCO still has some value. On checking with dealers NITCO tiles has some shelf space even in tier 2 - 3 towns . In areas where kajaria is unheard of. I dont think the end user will insist on looking at company balance sheet before making a purchase. If they are able to convince people with their design, their dealership network establised over the years wont allow them to go listless. The tiles business can return to the profitable path. They have stopped or heavily reducing their chinese imports beacause of the rupee dollsr devaluation. It has entered into partnerships , jv with local companies in gujarat. Saving heavily on transport etc
)- 47 cr mcap for 600+ cr yearly sales is a bit too tough. This is only for the tiles business.
By the cdr cell. I couldnt get any details about how the plan works.
)- Real estate
The book value of its real estate is a poor way of selecting a stock. But a extreme discount warrants a look?
Its completed biz park in thane is valued at 2ooo crore( please check nitco website). And other properties in mumbai undrr various stages of development comfortobly
The above link is for a recent article in ET about a possible turnaround in mumbai real estate.
Summary
This is at best a speculative stock. Its dirt cheap , but ts been that way for a few years. Its just my opinion that its been punished badly for the losses and for its foray into real estate. Too badly to bring p/bv to 0.10 .
My questions are
1). Whats the debt restucturing plan submitted on nov 2012?
2). Whats the state of its Mumbai real estate projects? Will it bring sales revenue in 2013 and forward? As promised by management.
3). Is a turnaround in mumbai real estate happening?
( I have no knowlege of real estate market in Mumbai. I just feel its beaten down for being in real estate business in this slowdown. It may easily recover with overall improvement in economic climate.)
I feel my deduction is anecdotal at best. I kindly request senior members to look at the stock. Please correct me if my analysis has wide gaping holes in it.
Diclaimer - i dont hold this stock. I may never hold it unless a more positive outlook can be arrived at.
currently , even the healthier tile sector companies like somany , orient bell are available at decent valuations and they are correcting along with the sector leader kajaria. Both these companies have decent quality promoters with good track record.i would much rather bet on these than nitco. There is more certainity of capital appreciation from somany or orient than a favourable turn around in nitco which might not come or might take too long .
Mr Ashok k goyal a IITian appointed as the new ceo. The stock continues to go down further. Members who have knowledge about mumbai real estate market please share your thoughts. As its fortune anf revival directly depends on it.
co announced that most debts have been assigned to JM Fin and sale of
non core assets is on the cards … stock has started to move in the past
few sessions … if anyone of you actively tracks the stock - do
revert - would like to have your views on this one .
A very famous brand screwed up by diworsification by their owners. That is history. What we now look at is future.
INR 1300 crs of debt was not able to be resolved by banks under the CDR mechanism. They sell the same to JM Financial ARC. Now the ARC does a restructuring of debt with a potential equity upside. Interesting isn’t it.
Revenue of the company is around INR 800 crs with a market cap of 700 crs. ( Somany – Sales – 2000 crs, M Cap – 3000 crs, Kajaria – Sales – 2700 crs, M cap – 9000 crs)
The company had a debt of 1300 crs which has been settled as follows.
Loans Debentures 50 crs
Term Loan 500 crs
Redeemable Preference Shares (quasi debt) 150 crs
Total Debt refinanced 700 crs
Implied hair- cut for JM 600 crs
Conversion of Debt to Equity 1,01,51,908 Shares (13% equity) 15.75 crs
Equity Infusion Warrants of 61,78,833 at INR 113.29 (7.91% equity) 70 crs
Pref Allotment of 70,61,524 shares at INR 113.29 (9.04% equity) 80 crs
Post infusion equity (30%) 150 crs
Also INR 700 crs worth of assets being the land in Mumbai and Alibaug is on sale. Cash generated will be used to repay the debt back to the lenders.
Now with fresh equity and JM financial coming on board, the company can focus on core business and try and grab the opportunity which affordable housing, uptick in real estate is presenting in the next few years.
Mind you, JM Financial is in effect taking a 30% equity by infusing INR 150 crs and exchanging for a minor debt. The upside for the ARC Company is huge, simply huge if the resolution is successful.
