Agree with you that their ads are well focussed and aimed at brand building.However only time will tell whether I am right to be concerned about their ability to expand into new geographies with different sub-cultures.Also,don’t you think the current PE and EV/Ebitda suggest Mr.Market is highly optimistic about management’s execution capability?
I too agreed with you on Oct 15th itself when I wrote the above quoted text! May be I should have explained myself better, what I meant was by these ads etc., they already have a track record of building regional brands Crane, Durga.
Currently, the brands are visible in below places:
Crane - Telugu states of AP/Telangana, Karnataka, Tamilnadu.
Durga - Telugu states of AP/Telangana, Orissa.
They have a Crane betel nut company distribution/network, which they can leverage in Karnataka for Durga ghee. But this in no way mean that they can crack the Karnataka ghee market, this remains to be seen as you have rightly said.
Also, since this is a small cap, first priority would be revenue generation even in small way and then the priority would be market share capture through extensive marketing once company attains a certain scale and gets a pulse of the local market. This is how I would run a company.
EDIT: Please do due diligence, small cap stories have multiple moving parts and may look rewarding but come with their own set of risks. Invest based on strength of your conviction.
thank you @richdreamz …u r right cow milk ghee will be used more for puja & not much for consumption … has anyone got any updates on Orissa as to how the brand is performing there ?.. as a % of sales what will be sales coming from AP/Telangana and Orissa… since they r putting a factory in Orissa they must be optimistic about the demand in that state too…Karnataka launch should also be around the corner…
Chaitu hold this stock from initial levels…i appreciate your strong conviction chaitu…i read your comment in this thread where you wrote about promoter of the company…can you detail on that…also what are your views on the stock…do you still hold it?..what is the expected growth and other recent developments…
There is a downward pressure on milk price as per this article.
Do players like VICL need to reduce sell price anyways ?
Orissa forms about 30% of the sales currently.
Reason behind Orissa plant as per the latest AR (if I remember correctly) are below:
- Save on transportation costs.
- Save on taxes (not sure how?).
- Cater to West Bengal.
The following data points may help
- Ghee is a commodity business and having forward integration (Durga brand helps) but with 1500 ton (60 cr topline) it is still a very small business in the Ghee space.
- Ghee is typically a by product when the Milk is processed to make SMP (Skimmed Milk Powder). Alternatively Ghee can also be manufactured from Butter or Cream (but the cost and the quality would vary). Best quality is when made from Cream, then Butter and lastly from Milk but the costing also goes up in the same order. Quality is determined from flavour.
- SMP was majorly exported out of Indian but the export market has crashed - international SMP prices are down from 300/Kg to Rs 180.Kg over the last year. The milk prices (denoted by SMP) are among the highest worldwide in India.
- Typical margins in the diary business are 3-4% on the net side and more if value added products like (Cheese, butter etc are produced)
My sense is that
Ghee being a very large market - Durga is a local brand it would be very tough to scale it up to different geography. Anyways the business is not a great business. The margin expansion during the last 1 years may have happened due to lower milk prices (37/liter vs 43/44/liter) and no related change in the Ghee price.
To scale up with value added products like paneer, butter, cheese etc is very difficult because
- The market size for these products is very small compared to Ghee
- High SG&A cost to build a brand around these on a very small base
Disc : Not invested
another Fake Ghee Scam busted by Vijayawada Police… Fake Ghee Products in the name of SREE DURGA, MAA DURGA…
watch this video…
Your questions are reaching my mail box but not appearing in the VP message board.
I exited from this scrip.
Thanks chaitu…I will be shortly mailing you my queries…
@Chaitu_1614 @abhishek90 If there are issues concerning the integrity of the promoter,the rest of us too would be interested in knowing.Since this is a small cap company,not much is known about the promoter.
Kindly highlight the corporate governance issues identified.
I am not aware of any corp governance issue…but I remember chaitu saying somewhere to beware about the promoter integrity…chaitu started the thread and his conviction got right…stock moved up…i think we should try to know the reasons why he has exited…
GMR Infra - Grandhi Mallikarjuna Rao and VIRAT promoter are related to each other … promoter’s quality… Mr.Chaitu mentioned his name specifically… He can post the info rather than beating the bush…
Request chaitu to help us by providing your views…
If it is GMR Infra, please exit. Chaitu cannot say everthing in public forum. Nor do I since I know this GMR Group very well.
Been trying to understand about the promoter Kantha Rao from internet. I’m unable to find any negative information about them. Every news looks positive. It would be really helpful if someone can share the concern. Being just related to GMR need not be a real concern.
I too searched a lot in the net for the inter relation of Granthi Mallikarjuna Rao (GMR) with Grandhi Subba Rao (Virat Crane) but didn’t find anything correlated. In Andhra Pradesh in ‘KOMATI caste’ the Surnames will be common to most of the members. What i suspect is they have similar kind of surnames due to the Caste? Or something hidden? I got this dilemma as Chaitu raised a point on name…
I was just going through the Viratcra’s Notes to Financial statement in 2014-15 AR. What is this Chits Recievable & Chit Loss Suspense of Rs 53.31 lakhs in other Non current assets,Chit Dividend of 22.79 lakhs in other income & loss on Chits of Rs 54.33 lakhs in Finance cost. If u could through sm light on this. I found it suspicious.
As I have been invested in Virat Crane for more than a year, I finally visited Guntur & met with the mgt. Mr. Kantha Rao, the MD owns about 71% of the Co. in his individual capacity. The main business of the group so far has been Beetelnut, which is fully owned by Mr. Rao in his proprietorship. The MD has big plans for his dairy business. We know that the Co. is practically debt free, with regular organic growth being comfortably taken care off from internal accruals. The Mgt. is on the look out for a foreign tie up with a group that can bring the latest technology for value added products. Meanwhile, the efforts are on to scale up the business.
As mentioned on this thread earlier, the Sept qtr was adversely affected due to certain one time events, the Mgt. was optimistic about the business going forward. While it was understandably reluctant to share numbers, I came back with the feeling that the current Q3 is likely to be the best ever qtr., with Q4 quite likely to surpass it. As mentioned earlier in the thread, with the recent closure of a number of ghee manufacturers in the area, there is a vacuum in the market, n the Mgt. is working over time to make the most of it!
This story is still at an early stage. There are a lot of legacy issues in the balance sheet with intangibles & advances that may or may not be recovered. I expect the balance sheet to be cleaned up over the next few years as sales n profits grow. I found it interesting that the Co. on a fixed asset base of about 2.4 crores hopes to do a turn over of about 70 crs with a PAT of 7-9 Crs! Such is the power of the “Durga” brand. It’s special aroma I gathered was due to the fact that the Co. was not using boilers but making it’s ghee in the traditional way using large “Kadhai’s”. The proof of the pudding lies in it’s eating! I carried some ghee back with me. The “Gajar Ka Halwa” never tasted better!!