I did attend the AGM on 20th of September. I did have a discussion with MD. I was extremely impressed with his down to earth and candid approach.
Key highlights of my discussion with Mr. Abhishek Patel:
- No complex products being made by the company
- They have a niche in a commoditized business
- PP/HDP is the main raw material used
- There are only few organized players
- Huge awareness need to be created about technical textiles
- Response to the customer needs are very important
- Trying to move up the value chain and produce high margin products
- Bags are low margin high volume product
- Agri will have slow growth, about 5% every year as awareness need to be spread
- Product mix: Shednet -50% Packaging – 50%
- They have BIS certification from Shadenet
- Wall putty needs a special packaging
Company’s focus for future:
- Marketing is the main thrust area for the company currently.
- High margin products are the focus. Efficiency has improved significantly compared to the past.
- At present Gujarat is the main market.
- New dealers are being appointed
- They are expanding in East India for further growth.
High Interest loans:
- Current loan is at a high interest rate. Working on bringing it down by 3-4% by this year end.
- All capex done. No expansion plan as of now
- Capacity utilization is only 65%. Don’t need capex for next 18-24 months for the current growth.
- Will lease out land for further expansion when needed.
- Two major competitors are Tuff ropes/Tuflex.
- Fishnet from Garware is very good
- 3 members R&D team currently which will be increased to 6
- One agriculture scientist will be added
- Mostly Textile Engineer/Chemical Engineer hired for R&D job.
- One patent is in progress. The idea is to ensure the organized players away from producing the patented products.
- Chinese machinery is the cheapest and German machine is the costliest (5 times). German machine is un-viable in India.
- China has huge capacity in technical textiles. Each of their six factories is almost equivalent to the entire production in India.
- No direct conflict with Rishi(others) group although they share the same office
- Open for foreign collaboration
DeMo and GST impact:
- Demonetization has impacted the company in a big way. Most of the purchases used to happen in cash by farmers.
- GST also had big impact on the company. It is still going to be few quarters before things get back to normal.
- Post GST their products have tough competition in export market especially the gulf countries
Disc: Invested. No trading in last one month. I might have missed or misinterpreted some of the points. Please take them as just a broader discussion point.