Company Overview:
Company was earlier named as Century 21st Portfolio Limited - used to trade in equities and commodities, had wealth management and portfolio and software development operations.
Name was changed to Arunjyoti bio ventures ltd in FY 2015.
However the company did not turn around after new KMP from 2015 to 2022.
But looks like some turn around has been brewing since 2022 July & below info indicates the same:
In July 2022 - The current promoters issued an open offer, took over majority shareholding & also change in management control.
A brief about current promoters background: Has ran distribution business of non-alcoholic beverages for MNC’s in the state of Telangana & Andhra Pradesh for past 20 years.
Immediately after takeover - Company now purchases 2 lands - one in AP ( 3acres, 53 cents) & one in Telangana ( 2 acres 17 cents) on 24th aug & sept 1st 2022.
Beverage business: March 8th 2023 - Company announces to set up two beverage plants in above two land parcels.
Followed by trial production commencement from 18th May 2023.
So in a timeframe of 1 year - New promoters took charge, purchased land & setup beverage plants with initiation of trial production.
Now, there were further amendments & lets take a look below:
- Increase in authorized share capital from 3.5 crores to 19 crores.
- Issue of rights @ 20/share. Also, promoters extended a loan to the tune of ~19 crores & conversion of the same within the objects of rights issue.
Business :
Company has two divisions now:
- Beverage production line for MNC company - also known as co-packer services for MNC’s ( Comparable listed entity could be Hindustan Foods), though for Arunjyoti it looks like the journey has just begun.
- Distribution of the same produced beverages from plant.
Capacities for beverage production:
Telangana plant has 24,000 cases per day with three lines & AP plant has 17000 cases per day with 2 lines. MNC has itself invested for a new line as they are launching a new product & do not want the co-packer to take the risk.
MNC to provide all the feedstock needed for production of beverages. Hence the raw material cost is nil as observed in Q4 FY 24. The only expense on P&L by the company is utilities, employees, warehouse, depreciation & finance.
Financials:
Fixed assets have been increased to 40 odd crores in FY24 from almost 0 in FY23. PFB:
The above screenshot is of FY24 & equity capital does not show impact of recent rights issue. Expected to show up in H1 Fy25 financials.
P&L:
Above P&L shows that there is a spike in sales from FY23, 15X after new management’s beverage plant installation & commencement of co-packer services. However they are still negative with PAT - a key item to track from Q1 FY25 if there is any operational leverage kicking in with increase in volume of co-packing.
Risks Involved:
For a Net block of 40 crores - sales look very small for FY24, we have to wait & watch on how sales improve going forward.
PBT is negative for FY24.
Questions where we need to dig further to find about the company & business:
- Nature of contract with MNC: Pricing/tenure/impact with product price variability.
- Types of non-alcoholic beverages manufactured? How flexible are the lines to switch product with minimal lead time for the client.
- Addition of multiple clients in same plants to go for a brownfield expansion.
Disclaimer: Added as a tracking position in family account.