Uniply - Bet on new mgmt. bringing scale, brand & operating efficiency + GST

Stock Opportunities Untested - but worth a good look
71

Very interesting that while the stock is running up, limited inputs here on this thread.
Few drivers that come to mind:

  1. GST based transition from unorg to organized sector
  2. New management, and their focus on bringing in efficiency on various fronts- WC, funding, fx etc
  3. Consumption led growth, and housing boom in affordable segment

Appreciate if anyone has comments on current state of this company.

72

I normally don’t actively write or record my hypothesis and/or rationale behind my investments despite it being a good habit to do so. I keep it on my cell or mails while discussing it with couple of fellow investor friends in short and then end up losing it quite often. Thought to start doing so and then thought, for Uniply, let me start capturing these thoughts on this forum itself to begin with for now.

Just penning down few thoughts on Uniply in very brief. These are not on the basis of numbers or ratios (as Keshav himself says that profits would be accrued in nature in the initial stages as he grows the organization and integrates the acquisitions), but just few things beyond numbers that I like to see in a business and come to my mind while looking at Uniply and are all known factors already. Not to say that these will play out in my favor in long term, etc., and it can definitely go wrong.

Accidental Entrepreneur – We know of few great entrepreneurs who created businesses and came into existence accidentally; Be it McDonalds, Facebook, SoftBank or the likes of Alibaba. There would also be many such accidental entrepreneurs who have failed though :slightly_smiling_face: I personally get interested in such accidental entrepreneurs.

  • Keshav Kantamneni also stumbled upon Uniply accidentally while his firm was appointed as investment banker by erstwhile Uniply owners to look out for buyers for Uniply.

Business model feeding into itself – This reduces dependence upon external stakeholders, brings efficiency internally and increases margins.

  • Keshav started creating a business model that feeds into itself. Bought Uniply’s plywood business. Acquired Euro DĂ©cor, UV Boards to increase capacity. Bought design firm Vector projects that would ultimately need plywood, etc., as raw material. Bought ArtMatrix, the furniture designer and manufacturer that will make furniture for Vector and consume raw materials manufactured by other group companies (now that plywood business has been transferred to UV Boards as subsidiary).

Understanding of Finance and Business – Warren Buffett also I think says this to be a good combination. People with such combination may turn out to be good Capital Allocators.

  • Keshav seems to be one such person, as maybe seen in his acquisition of Uniply itself and structuring his acquisition of UV boards.

Experimenting with new businesses, mostly related ones (either directly or indirectly) and even unrelated ones if one sees opportunity, Jeff Bezos way – Keep venturing into new businesses, nurture the ones which do well and cut your losses where it doesn’t work out.

  • Keshav again seems to be one such person as demonstrated by points stated in “Business model feeding into itself” and other examples like venturing into affordable housing space as door suppliers etc., or using ArtMatrix’s design capabilities to design and manufacture customized furniture and sell it through e-commerce channels. These points can also come under “Business model feeding into itself” point.
  • There is also news (by Times of India) of Uniply buying 1.25 million sqft tech SEZ in Chennai, but don’t know how true is this as this hasn’t been reported to the exchanges as yet by Uniply.

Like those strategy war games where you make an area stronger and then move to other area to make it stronger - Focus on most important thing, nurture it and then move onto the next most important thing . Be it in terms of focus within a business line or focus on the most important business line out few business lines.

  • Keshav again seems to be demonstrating this by first focusing on the ‘Distribution’ channel after acquiring the plywood business, then focusing on Vector Projects business as a business line as that is a better margin business and also ensures internal demand for plywood business due to the size of orders it can bring in.
  • He also demonstrates this by focusing on B2B first with targeted customer interaction and then B2C as a focus later as it would be easy for him to build scale via B2B as compared to B2C which is more competitive.

There are Best of Generals and Best of Commanders – I think there are best of Number 1s and best of Number 2s. For e.g. Radha Kishan Damani maybe Best of Number 1 and Navil Noronha maybe best of Number 2. Best of Number 2 are better executioners I guess.

  • Keshav, I obviously assume to be in the best of Number 1 category but what he does is to focus on an important business line, nurture it somewhat and then place the best of Number 2 to take it from there. I am not saying that people that he’s placing in-charge are best of Number 2s, but I like this way of thinking and maybe best of the entrepreneurs do this so that they can move on to focus on the next most important thing or to focus on the larger objective.

Angel investor or VC thinking – I think sometimes we need to look at secondary market public stock investment ideas from the hat of an Angel investor or VC where normally you don’t have much on plate to go by apart from plans and projections, etc., (in some cases maybe not even that). Many times bet here is on the jockey. Poor jockeys with good business ideas too don’t get funding whereas opposite can happen too that very good jockey with poor or average business idea gets funding.

  • I think Uniply needs to be looked at from a lens of an Angel investor or VC.

Will try to add to this thread as more thoughts evolve on Uniply.

Discl: I waited for quite some time (price wise) before taking a dip in Uniply in first half of 2016. Forms 14% of my current PF. Transacted in last 2 months and intend to scale it upto 20% of my PF eventually. Views maybe biased due to vested interest in Uniply. This is not a recommendation to buy or sell. I am not a SEBI registered research analyst. Please do your own due diligence. I might buy or sell at any time without prior intimation on this forum.

8 Likes
73

Just wondering the reason why 118 people/entities be given preferential shares


Too many things in too short a time

74

Too much of dilution. Wondering what he will do with 590Cr of new capital raised.

Disc: Not invested

75

Most likely the funds will be used to set up a factory for ready made / custom made furniture for domestic and international markets


76

Where did you get this from? Have they stated it?

On exchanges though they have clearly stated that pref issue is for an acquisition. By this looks like they would announce an acquisition in next couple of months once they get the Pref allotment funds.

Would have preferred if no stock split was announced.

Cheers.

Discl: Invested.

77

Good to see reputed fund like Malabar India Fund picking up stake from Keshav.

Discl: Same as last one

79

Not sure Mr Bhanshali or Mr Damani, exited. They might still be invested. Maybe that due to dilution you can’t see their names anymore now as their holding would have fallen below 1% and may even not be in top 10.

For Malabar buying you can check the BSE bulk deals data of 19th April.

81

Thanks. Yes it appears Keshav did sell a block at 411. While the optimist in me is happy that SN bought the stake, the pessimist in me is worried why Keshav would sell his stake if the prospects of company are good ??

82

Well this was not on the question of pledge and valuations, but when anchor asked him about his stake in the company being low and his reply was that share price has run up fast and he cannot afford to buy more right now :slight_smile:

Yep, true. I can only assume that for all the good quality investors that have come onboard, presence of Keshav being there to run Uniply and own a sizable stake in the company would be a non-negotiable condition and they wouldn’t have invested if this wasn’t the case. Also, post the warrants conversion Keshav’s stake would go up as well from current levels.

1 Like
83

Precisely my point. Keshav being the captain of the ship says valuations have gone too far for him to afford to increase his stake and on other side he is still diluting his stake at price which he thinks is premium, gives me a sense of discomfort. SN end of they day is not committing his personal money but clients money. What is comforting though is having followed SN and his interesting philosophy, he don’t get in to a company for 2-3 years, rather sees it as a partnership for multiyears if his initial thesis is on track. Also in his recent interview he did clarify that he typically like to go with the leader of the category but they are ok to partner with nos 2 or 3 if the management has that hunger to excel and be at top.
My intial buy was at 194 levels and last I bought was where it corrected from 300+ levels to around 250. Didn’t have the courage to buy after that because I could not value the company with limited information available in public domain. Now that SN have bought ( knowing sure after doing diligence on valuations) I am considering to add more.

1 Like
85

To be honest I feel one cannot apply any conventional methods of valuation to Uniply and hence can’t value it. There are lots of ifs & buts, optionality and qualitative factors involved that can’t have any number put on them.

One can say that when it falls from 400 to 300 then relatively speaking at 300 it is better valued, but one still can’t say that on absolute basis and if one does try then mostly one would always find it to be still expensive, due to above reasons.

Just my 2 cents.

86

Malabar Value Fund and Malabar India Fund Ltd have bought another 4% equity from Keshav.

Malabar’s holding has gone up to 10% in Uniply Industries now (on pre-dilution equity base) but on the other side Keshav’s holding has gone down by same.:slightly_smiling_face: However he has 96.28 lacs convertible warrants the option of which when exercised will increase his stake to around 40% even after accounting for this selling to Malabar.

1 Like
87

Thanks for your inputs. That’s a great news. all this while I was skeptical about the counter ( short term not long ) believing it’s expensive, clearly there is more to it than what we see Vs what SN is looking at. This gives comfor about valuations. Was never in doubt abou the long term potential.

1 Like
88

Currently the playwood business contributes 20-30% of the revenue and remaining comes from newt avenue of interior design, affordable housing and sewage planning etc. This is no more a plywood business play. In fact I don’t know of any other comparable business in the listed arena. Lack of media coverage, interviews and insights in to what’s happening in the company test patience at times and doesn’t help in developing conviction in the business.

1 Like
90

Can anybody put some light into UV boards (now UDL-uniply decor limited) which is acquired by Uniply management. They are planing to shift all the plywood business under UDL

discl: invested in Uniply from 25/- levels and UV boards from 16/- lvls

91

KK again sold 15 lacs shares in open market yesterday. Not sure what is that we are missing

92

That was inter management transfer - KK sold and Foundation Outsourcing India Pvt Ltd a promoter group company bought


93

Thanks for clarifying. Also another gentleman Arvind Khattar bought in bulk deal a day prior.

94

Yes He bought 8L shares