Sree Kailas Logistics (Sreesakthi Paper Mills) - A play on logistics


(Anil.Bajpai8819) #1

Sreesakthi Paper Mills (BSE: 532701) was originally started as a paper company in early 90s in Kerala. The company was profitable and was performing well till the year 2014 which is evident from the fact that they were dividend paying till 2014. After 2014 the paper business went into losses due to cycle reversal. Also Kerala government imposed strict regulations on pollution control and asked them install effluent treatment facility at their paper plant. Management by their own admission (as per AR 2016) felt it will not be profitable business to continue and decided to close down the paper business.

About the Management:
The company is owned by S. Rajkumar who has vast experience in logistics business. The management currently owns an operational logistics park in Oragadam, Chennai. Everstone which is the largest Indian Private Equity investor, took a majority stake in this part for about 200cr.

The below website has more details about their logistics business:
http://sreekailas.com/Logistics.php

Sree Kailas Logistics:
Based on AR published for the year 2017, the company plans to set-up a logistics facility in place of the current facility in kerala. The company also intends to change the name of the company to Sree Kailash Logistics.
Latest AR: https://www.bseindia.com/bseplus/AnnualReport/532701/5327010317.pdf

The company currently has some debt in the books from the erstwhile paper business which will be retired from the following- So after this company will become debt-free.

  • Proceeds from sale of Palakkad Land – Sale completed, company has disclosed to exchange
  • Proceeds from sale of current plant and machinery – Sale completed. company has disclosed to exchange
  • Convert remaining loan to warrants/equity – Currently voting resolution going on based on announcements.
    For the new business, the company plans to use the land in Edayar to set-up warehouse and cold-storage facility.
    “Your company has undertaken the implementation of Dry Chill Cold Storage (Logistics Business) and planning to establish 2 lakhs sq. ft Warehousing space during the current financial Year. Your company has also initiated discussions with select MNCs for renting the warehousing space.” – From AR Page 19
    Hydropower: Also based on AR the company has 47% stake in 3 hydro power plants (11 mw) which are yet to commence operation.

Risks

  • The new business is not operational as of now. Execution risk must be factored in for a start-up company.
  • Will they be able to get new clients and make it operational.
    Compared to peers like Snowman logistics in logistics business which trade at about few hundred crore market cap, this company at a market cap of 17cr looks interesting if the promoter is able to repeat execution of what he had done in Chennai.

Comments invited. I don’t own any shares of this company as I am still studying it. It looks very risky as it is a smallcap company.


(stocksdeepak) #2

Sree Kailash logistics didnt appear in bse. Is this listed?


(Satish Kommuri) #3

I think Current company name is Sree Sakthi Paper Mills Ltd.Which is listed in BSE.
https://www.bseindia.com/stock-share-price/sree-sakthi-paper-mills-ltd/sreesakhti/532701/

It is planning to rename Sree Kailash Logistics


(LearningToFly) #4

The volume looks very low. A lot depends on how the management is because this is altogether a new business for them.


(Anil.Bajpai8819) #5

Management ability seems very good considering he has built one logistics park in Chennai. Risk is due to illiquidity as it is micro cap stock.


(Anil.Bajpai8819) #6

Now promoter increases 5% stake by issuing equity shares at 11rs/share. today’s published details…

Meanwhile stock has moved to some surveillance category. S+ surveillance.


(Anil.Bajpai8819) #7

The stock has come out of this surveillance category and my broker is allowing me to buy. Cmp of 8 and promoter buying at 11 means he sees more value? How to deal with such micro cap stocks?