PI Industries - Superior Business Model

As per this http://www.piindustries.com/sites/default/files/As%20Demand%20for%20Faster_1.pdf PI works with Syngenta.

You can also find other names in there.

For its domestic input business, the company licenses and registers products it
considers to have major potential in India from Japanese players such as Kumiai, Mitsui and Nichino, and markets them on an exclusive basis. Additionally, PI works with multinationals that already have a presence in India, such as Bayer CropScience, Syngenta and BASF, and co-markets their products under the PI brand.

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Reviewed the annual report of PI Industries….anyone interested in understanding the agri inputs sector should spend a couple of hours going through the MD&A in 2014 and 2015 PI Annual report

Agri Inputs

  • Rice leadership is increasing for PI Industries. Nominee Gold expected to show continued growth for many years, and Osheen is well accepted to manage Brown Plant Hopper (BPH) in rice crop
  • Two new agri input products – KEEFUN, an insecticide for vegetable segment initially launched on cabbage and okra (innovated in Japan, exclusive in-licensing agreement) and BUNKER, broad spectrum herbicide;
  • KEEFUN will be extended to other crops and strengthen PI position in cotton and horticulture
  • New pack of Biovita (specialty nutrition product) was launched, which was well received
  • Key brands include NOMINEE GOLD, OSHEEN, KEEFUN, BIOVITA, KITAZIN, FORATOX, FOSMITE and ROKET
  • Signed agreements to evaluate 10 new agri inputs for Indian markets
  • Cautiously optimistic on agri inputs – dependant on monsoon pattern, performance of past product launches

Custom Synthesis

  • 2 new molecules commercialized for CS exports (3 new molecules in FY14)
  • Expect to commercialize 2 new molecules in FY16
  • 8 new molecules progressed to the next stage of R&D
  • R&D for Process improvements of 10 existing products undertaken to reduce cost
  • Very bullish on CS potential and has a steady business with a large order book size

Other Key Points

  • 170 crore investment in fixed assets, and R&D in FY15 (compared to 65 crore in FY14); Expected to invest 300 crores + in next 2 years on capex
  • Jambusar SEZ facility is being enhanced with 2 new plants (CWIP shows 120 crore, compared to 35 crore in FY14), expected to get commissioned in H2 FY16 (Custom synthesis business)
  • R&D facilities are being expanded - 2 story building is being constructed in Udaipur, which houses the current R&D facility
  • Receivables increased significantly to 380 crore, vs 255 crore in FY14, resulting in Operating Cash flow coming down to 180 crore in FY15 from 216 crore in FY14; Doubtful receivables ~7 crore, which have been provisioned
  • Due to the scheme of amalgamation of Parteek Finance with PI Industries, there has been no change in the paid up share capital and promoter holding remains the same as before the merger
  • Internal auditor has been replaced to Grant Thornton from Protiviti
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@Mahesh Can you please share past annual reports of PI Industries ?

@karu_lamborghi_

ARs of PI Ind from FY09 till FY15 are already available on company’s website http://www.piindustries.com/ investor section.

ARs before FY09 can be downloaded from www.researchbytes.com (RB) as it will create unnecessary load on VP server if I upload them here…in case of Syngene and Clinigene I did that because its past ARs are not available on respective company’s website as well as RB…

Rgds.

ok. Thanks anyways :smile:

@Dhinakaran

For any company, a balance sheet shall show total assets being equal to total liabilities. That’s why it is called a balance sheet.

If total assets are not exactly equal to total liabilities, you have an imbalanced sheet.

dinakaran,

As far as I recall PI Inds ROE have been in the range of 30%. Where did you get those figures? If they are from any sites like moneycontrol u need to verify again.

Best way of calculating these ratios is thru figures provided in Annual Reports or Statement of accounts provided in annual and six monthly results.

Any one attended AGM meeting today ? Any Updates ?

Plus one to above post - Looking for AGM updates held today. Kindly provide. Thanks.

It looks like the PI Industries story is NOT discovered [fully] by market participants YET.

  1. As CSM revenues contribute 60% to PI revenues and are not dependent on domestic rainfall, the deficit rainfall impact on PI is not as much as it would likely seem. More over, PI has sufficient brand pull and farmer connect that its domestic agri business is less impacted when compared to its peers - Key differentiator when compared to its peers.

  2. Looking into future, the contribution of CSM is going to go up which should further delineate PI business from monsoon vagaries though complete non-dependency is NOT possible.

  3. Further confirmation on CSM revenues visibility should lead to PE re-rating of PI (compared to PE at the current price of 600)

  4. The current Rupee depreciation should provide a bit fillip to its bottom line though I do not want to depend on such forex benefits as they are not sustainable in nature.

The current market price is surely a very good opportunity for accumulation and since I did not allocate fully, I’m buying into PI at this price by re-allocating capital from my existing portfolio (disclosure).

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This is historic for India and also for PI http://www.firstpost.com/india/krishna-meets-godavari-andhra-govt-completes-historic-inter-linking-of-rivers-2436088.html

Could you explain why for PI Ind? Seems AGM has not gone down well with investor community.

Hi Sumi, any idea on the proceedings of the AGM? As per the notice to BSE today - disclosure of voting results in pdf, I saw in the pdf that promoters did not attend the AGM?

Just an observation, how trivial it may be - If the investors are unhappy with AGM, the selling would have happened as soon as the markets open in first 30 mins with huge volumes and stay there for whole day… but today’ volumes were intermittent. Some one was selling in lots of 5k - 10k at regular intervals. Looks like some one exited in a gradual manner instead of selling in a single shot. Ignore my rant!!!

True, looks very strange and suspicious that promoters skipped AGM if it truly happened. I have no idea and only those attended could explain. Selling was very planned and executed without causing too much price damage.

I need to take back my observation on the promoters attending the AGM - even last year’s PDF also says same, so looks like that’s not the case and indeed promoters would have attended.

Last year 72 shareholders attended and this year 90 shareholders - just putting it here as I have go through both the PDFs.

Nothing material information here.

Whoever has attended the meeting should provide some updates :smile:

Some technicals: 600 is turning out to be a very formidable support. The stock touched 600 for 7 times in the last 7 months and bounced back to touch 700-720 band each time. Attaching the pic form chartlink.

PI Inds provides a lot of information in its concalls and there’s even an interview of Mr Mayank Singhal post q1 results at foll link. http://www.moneycontrol.com/news/results-boardroom/targetingtopline-growth18-20fy16-pi-industries_1391177.html

Now coming to the business itself, CSM business order book is close to 600 million USD which translates to around 4000 crores. In FY 15, more than 50% revenues came from CSM and management aims to take this as high as possible.

Some details I could make out from concall is that management aims to have blended growth of 18-20% in topline and over a period of time improve margins. Two plants are going to be commissioned in fy 16 at Jambusar SEZ one in end sep and other in end dec. Both of them should help propel the growth trajectory of CSM business. If one looks at past track record of CSM business over past few years, its on a roll.

On agrochem side, company aims to keep launching new products at regular intervals. Their flagship brands like Osheen, Biovita, and some others are doing quite well.

For those interested concall provides a lot of details to get a better idea about company’s prospects. I dont think the AGM updates would be much different from those provided in q1 concalls. But prior to any major event like the US FED meet, many a times some fund managers or HNI investors do plan to go light into the event in the anticipation of any volatility and selling pressure. that could be a cause of yesterday’s selling. But as mentioned in the previous post, much of supply was absorbed above 600 kind of levels.

I think companies like PI Inds need to be viewed as a multi year story rather than bothering too much about day to day movements and news flows. A few days back the company’s market cap was higher by almost 10-15% as compared to now. That doesnt alter the company’s fundamentals.

If I am invested the question I ask myself is DO I WANT TO SELL MY HOLDING NOW? Now if its a multi year story for me I am not going to sell out now. Temporary price movements should be taken in one’s stride and are only notional profit/loss.

Those who want to buy or add more would find such opportunities as a god sent gift.

Those sitting on the sidelines would keep debating ad nauseum. :grinning:

disc: Invested.

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@hitesh2710 - no one can put in words the story of a stock or the gist of a long term conviction BETTER than you.

SUPERBLY composed message. Take a bow.

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sir i m also an investor with a long term view, but its taking all of us on a rollar coaster ride, will definately call u on it

sir as most of its csm business comes from japan, recent downgrade will affect going forward?

Very well put Hitesh. PI is a multi year story. And to an extent not totally dependent upon monsoon.