Vikas Ecotech - Chemical Company

(Dhiraj Dave) #162


Appreciate your effort to get viewpoints on the management on the issued I highlighted. Find enclosed my view on the various points:

  1. Tax Payment: When the company acknowledge delayed in tax payment, I have nothing to say.

  2. Salary: My point was the company highlight its in annual report first 15 page for great innovative strenghtt I believe in such business, employees are critical part as same also contribute the research. Since median salary is Rs 240,000/- nearly 50% of employee would be getting salary higher than that. On one side we talk about innovative business model, on another side, we find median salary of Rs 240,000 (Rs 20,000/- per month). I consider that typically research people and also other managerial staff would definitely shall be getting more salary.
    Second point, even taking your details on working, When Ashutosh Gupta get salary of Rs 16,00,000/- average salary of around Rs 1,33,333 per month. I assume the company has 10 person in managerial capacity. So at average salary of Rs 240,000 per annum, i.e Rs 20,000 per month; we would get Monthly managerial salary of Rs 200,000/- of which only Ashutosh Gupta would get around 133,333/- leaving total salary of Rs 66,666/- to be shared among balance 9 manager, giving average salary of 7,400/-. I am not sure but that is lower than minimum wage payable in India. As per enclosed web link, minimum wage payabler per day in Gujarat is around Rs 300 per day, giving monthly salary of at least Rs 9,000/-.
    With such low salary, Just wandering how can attract and retain skilled manpower and that is my concern.

  3. I accept my error. Vikas Globalone is old name. However, frequent change in name is generally not a positive sign.

  4. The company has no free cashflow to pay employee provdent fund and ESI premium on time. Genunine issue of cashflow and we are talking of great business propsects which does not match in my opinion,

  5. I doubt that one can voluntarily decide contribution to EPF. However, not sure about same.

  6. No observation

  7. In Prior period item, the company has booked export incentive, which are substantially higher as compared with full year FY16 Export incentive income booked. Also, negative prior year (which mean credit/income to Profit and loss account) from reversal of LME & Forex difference and export incentive raise concern to me. It appears to me that company is squeezing every possible item in P&L to increase profit and that coupled with lower/delayed cash tax payment and delayed payment of statutory dues raised concern about genuiness cash profit vis a reported profit.

  8. You are correct on figure, but then why such high employee turnover that the company can reverse the gratuity? Do you find it completely normal?

  9. Respone avaited.

  10. I checked June 2016 presentation, while same has March 2016 and June 2016 Trading sales and EBIT, it does not have FY16 trading sales which I believe require under Indian accounting standards. You can check with some other accounting person/CA on this.

  11. No observation

Overall, road to investment would never be easy. However, I would suggest to align the information shared by managment with some other critical points about lower salary, non-payment of statutory dues, No excercise of ESOP as available in annual report with the strategic view of research driven company with innovative products. I find difficult to reconcile the two and hence thought to share my concern with the forum. Having said that, there are all possibility that theconcerns raised by me are more of noise then the real voice of the company. Wish you all the best for future,

Discl: I have no holding in the company.

(Abhishek shah) #164

Hi Dhiraj Bhai,

Thanks for the quick response.

2). On salary issue - It is Ashutosh Kumar who drives the entire R&D. Now when we talk about R&D here, it is not like the extensive R&D that is conducted in any other sector.

–> MTM is a purchased technology. MTM is the backbone for the turnaround of this company. The main product involved no R&D work by company’s employees.
–> You have to discount some part of the amazing story that has been told by the mgmt. The way they have described about R&D in their processes and what I saw during my visit did not match completely. I did my ground level checks to confirm if MTM is genuine. I concluded that mgmt is suffering from a bias rather than doing explicit fraud.
–> Company claims to have been doing R&D in TPR/TPE compounds. Now that involves developing a chemical formula which can produce plastic granules from which the product can be ultimately made. for eg - the grip in a pen. They might try to bring more softness to the grip. They try to provide niche solutions to their clients. Most of the market is unorganized. There are lot of players that deal in plastic granules. But clients need serious players that can provide some niche or tailor made solutions to them. So, its not something like creating a new drug!! It requires a basic R&D which I believe Ashutosh Kumar and his team can take care of. From your Iphone cover to a shirt (man made fiber); the basic raw materials are TPR and TPEs.

3).Company has not changed its name frequently. Its name was Vikas Globalone for 8 years and they changed their name last year after getting into MTM (which is eco friendly). Earlier its name was Vikas Leasing because the promoter’s dad was into leasing business. I dont find anything fishy in the name change.

4). There are two parts to every story - one is the business and the other is its cash flow. If the business is good, it will eventually generate cash flows. Every other company that starts a new business faces this issue. Till the time the product is genuine, I am comfortable with the tight liquidity position which the company might face for a short time. I have met the clients of this company. I have visited the trade fairs where Vikas Ecotech displayed its products and did the marketing stuff. Based on my ground level check, I am comfortable to invest in this company. But, surely I respect your views too.

5). Let me check with a qualified person.

7). Let me check with the mgmt and come back. We should definitely ask this to mgmt.

8). Completely agree with you. I have already sent a mail to the mgmt for justification on this.

10). I am not sure if this disclosure is required under Accounting standards. Even if it is required, I think the issue is not important for the purpose of my analysis. I am getting the sales break up in the IP for June 16. How would my decision get changed if they would have supplied the same information in the FY16 AR as well??

The points raised by you are genuine and need to be addressed. For some points, I have already sent a mail to the mgmt; for some points I will send now immediately. I differ on rest of the points, since my investing style differs from you. I am comfortable with dilution (in such company only), negative OCF, etc. But, I should say, your views on couple of issues helped me improve my research.

Disc - Invested.

(Dhiraj Dave) #165

Appreciate your effort and revert.

While we may agree to disagree on Vikas Eco, I am 200% with you on the point that every individual has its own investment style and there is no standard investment style. What is medicine me may be poison for someone else. My limited opinion was to highlights issues so that you and also other investor make investment after taking into account all factors.

Since I am not invested, would have limited time to work more on this case. Hence, I am not going to raise more counter point.

I wish my concern are far fetched and stretched and your conviction is correct. Wish you all the best !!!

(rvetri) #166

BoB capital markets has released a new research report after the fire accident in one of its buildings. And re-iterates a BUYVikas eco RR - BoB.pdf (620.7 KB)

(goutam) #167

Thank you :+1: very helpful …

(rvetri) #168

FICCI research labs approves Vikas Ecotech’s Tinmate product as food grade quality…:relaxed::kissing_heart:

(SSK) #169

This is good news!
Does the company also have Food Safety and Standards Authority of India (FSSAI) accreditation; as I understand FICCI is a voluntary body.
Additionally, they have also mentioned on the release that they are the only company in India manufacturing US FDA approved oragnotin PVC stabilisers. Do they mean they have USFDA certification or are they mentioning they have manufacture a product endorsed by the USFDA.

(n.arvind2k) #170

What is the reason why promoters have decreased stake in Q4 form 43.51 to 39.5%?

(bullrun1988) #171

Equity Dilution happened…Prince Pipes promoter (jayant chedda) buys minority stake in Vikas Ecotech total holding of jayant chedda is approx 8% in vikas eco…good for vikaseco

(bullrun1988) #172

Is JAYANT SHAMJI CHEDDA and JAYANTILAL S . CHHEDA are same person or they are relatives?? could anyone help me out to know this???

(rvetri) #173

Vikas Ecotech wins a prestigious order from Latin America

(Ram Arvin) #174

Vetri…Vikas ecotech has not given any financial numbers attached to this news…any idea what will be the revenue contribution from this order??

(rvetri) #175

Ram…good point…The press release does not talk about it. I guess we will have the management in TVs tomorrow where it has to be revealed.

(Satya Prakash) #176

It has allotted shares on preferential basis to non promoters. That’s why promoters stake is down. Promoters has not sold stake.
Promoters keen to bring it to 40% level.

(yudiagg) #177

Their business partner has acquired shares at premium in March17. This is a very positive development.

(Satya Prakash) #178

Are you talking about preferential shares allotment? If you are talking about this then it is not at premium. Stock was at Rs 21 but shares allotted at Rs 16.

(yudiagg) #179

Yes. I am referring to this.

(Satya Prakash) #180

Do you know Dahej plant started production or not? Work on it started in July 2016. If not started then when it is going to start production!

(yudiagg) #181

As per a news item, it should be commissioned in Q4 FY18. Financial benefit
to accrue in FY 19.

(Satya Prakash) #182

I read info regarding capex at various places. But could never understand fully. I read that expansion is going at Noida plant too. Somewhere it was mentioned that expansion at Noida plant is complete. Tough to take call on Expansion.

I think, I can buy in small quantity. and continue adding each month here in small pieces. With time everything can be clear and I can decide on adding big.