Atam Valves Ltd (AVL)

Founded in 1985, AVL is a leading manufacturer of industrial and plumbing valves and fittings.

Market Cap: ₹ 230 Cr. (June 9, 2023)
Promoter Holding: 43%
Pledged Percentage:0%

The company went public on the BSE SME platform in October 2020 and migrated to the BSE and NSE main board in May 2023.

Product portfolio consists of 500 SKUs


  • Serves over 300+ clients
  • Top 15 clients - 80% revenue
  • Top 10 clients - 40-50% revenue

Manufacturing Infrastructure

  • AVL has 3 specialized foundry shops for Nonferrous, Stainless Steel and Carbon & Alloy Steels, each with multiple molding techniques
  • Capacity of 96,000 pieces per month across all product categories

Exports & Dealer Network

  • Exports is currently 3% with presence in South Africa, USA, UK and Indonesia
  • pan-India dealer network of 750 dealers


  • 10Yr CAGR: Sales - 14%, OP - 21%, PAT - 43%
  • 5Yr CAGR: Sales - 23%, OP - 34%, PAT - 73%
  • FY23 saw significant improvement in revenue, profits and margins. However, sustainability is in doubt after a deep dive into the numbers.
  • FY23 YoY growth: Sales - 141%, Inventory - 37% and receivables - 250%.
  • CFO has become negative while sales, receivables & inventory have increased significantly.
  • Cumulative 10Yr CFO is also less than cumulative 10Yr PAT.
  • Deteriorating CFO/EBITDA in the past 3 years, indicate the company is not able to translate its profits into cash profits.
  • There’s indications of providing extended credit period and aggressive inventory management to inflate sales.

Management Commentary

  • The big jump in sales is due to introduction of new products, increasing sales network and large orders from existing customers
  • Currently enjoys 5-6% market share in the organized market
  • Current capacity is INR 65-70 cr. (FY23 Sales is INR 49 Cr.)
  • 25% topline growth is expected from existing business
  • Sustainable margins are 15-16%
  • Q4 is the best quarter for the company

Valves Industry Outlook

Boilers Industry Outlook

End-user Industries


  • To invest INR 30 Cr. and launch bathroom faucets and allied items project in either 1st or 2nd quarter of FY24
  • Expecting INR 25 cr. sales in current year, 15-20% EBITDA levels and 80-90 debtor days. At full capacity can generate INR 100 cr.

Future Plans

  • To achieve INR 1,000 cr revenues by 2030
  • Increase the dealer network from 750 to 1,000
  • Increase export sales from 3% to 25%
  • Intends to increase its presence in the United Arab Emirates, Saudi Arabia, Tanzania, Kenya, Russia.

Source: Investor Presentation, FY23 Con-call transcript
Disclosure: Not Invested


Key Risks/Concerns

  • FY23 sales were 50Cr. Management has a really ambitious plan of reaching 1000 Cr in 7 years. At full capacity the company can make 65-70 Cr. Therefore, the management would have to put up significant capex in the coming years to meet its target of 1000 cr. topline.
  • The bathroom faucets and allied items business segment is expected to make 100 cr. at full capacity. Management’s ability to scale up this segment is a key variable to watch going forward.
  • Receivables have become 3.5 times the previous year. Post a short recovery receivable days and receivables as a % of sales have increased.
  • CFO has become negative while sales, receivables & inventory have increased significantly.
  • Cumulative 10Yr CFO is also less than cumulative 10Yr PAT.
  • Deteriorating CFO/EBITDA in the past 3 years, indicate the company is not able to translate its profits into cash profits.

Management group does not seem impressive

Can you please elaborate what made you make this comment? Any examples or observations could be helpful

I have invested in August, 2023 and hope that management delivery what they have planned.

Concall notes - Q4 FY ’23

1. Company Overview

  • Atam Valves Limited: A leading manufacturer of industrial and plumbing valves.
  • Wide range of products including gate, globe, check, ball, butterfly valves, steam traps, boiler mounting, and accessories.
  • Key industries served: oil and gas, refineries, petrochemicals, chemicals, pharmaceuticals, marine, mining, water and wastewater, textile, sugar, and HVAC.

2. Company Structure

  • Company’s facilities span 63,000 square feet.
  • Three foundry shops for different materials.
  • 35-year-old entity with three generations working towards becoming a leader in the industry.
  • 500 SKUs, 300 clients, and 500 employees.
  • Strong pan-India dealer network with plans to expand to 1,000 dealers.
  • Key clients mentioned.

3. International Presence

  • Current international presence in South Africa, USA, UK, and Indonesia.
  • Expansion plans in the United Arab Emirates, Saudi Arabia, Tanzania, Kenya, and Russia.

4. Revenue Breakdown

  • Revenue contribution from different business verticals: Boilers (30%), Domestic (40%), Hydro projects (10%), Other products (20%).

5. Expansion Announcement

  • Introduction of a new business vertical: bathroom faucets and allied items.
  • Planned investment of INR 30 crores in the first or second quarter of FY 2023-24.
  • Expectation of a positive impact on overall revenue and growth.

6. Financial Performance

  • Q4 FY23: Revenues of INR 19.82 crores (193% increase), EBITDA of INR 4.50 crores (369% increase), PAT of INR 3.30 crores (432% increase).
  • FY23: Revenues of INR 49.25 crores (141% increase), EBITDA of INR 11.16 crores (246% increase), PAT of INR 7.67 crores (460% increase).

7. Bathroom Fittings Launch

  • Planned launch of bathroom fittings range in the first and fourth quarters of FY 2023-24.

8. Margins and Bill Receivable Trends

  • Sustainable margins due to network expansion and product range growth.
  • Constant increase in bill receivables YoY, typically 90 to 120 days for payments.
  • Plans to introduce cash and turnover discounts to encourage early payments and reduce bill receivable days.

9. Top Customers and Business Concentration

  • Top 10 customers collectively contribute 40%-50% of total revenue.
  • Faucet business managed as a separate entity with dedicated network and sales teams, mitigating the risk of concentration in the core valve business.

10. Turnover and Seasonality

  • Anticipation of INR 25 crores in revenue from the new business.
  • Last quarter traditionally the best due to customer demand fulfillment.

11. Property, Plant, and Equipment

  • Concern regarding the high ratio of property, plant, and equipment to turnover.
  • Assurance that almost everything is manufactured in-house.

12. Working Capital Cycle and Cash Flow

  • Plans to improve working capital cycle with cash discount schemes and turnover discounts.

13. Expansion Plan for Bathroom Fittings

  • INR 30 crores to be spent on the new factory with trading initially and an in-house facility ready by the end of the third quarter.
  • Source of funds: Equity.

14. Top Line Guidance and New Business Capacity Utilization

  • Anticipating 25% revenue growth year-on-year.
  • INR 30 crores capex expected to generate up to INR 100 crores at 100% capacity utilization, approximately three to four times asset utilization.

15. Margins Profile

  • Expected margin profile around 15% to 20% at the EBITDA level.

16. OEM Business

  • Initial focus on selling the own brand in the new segment, potential consideration of OEMs.

17. Expansion Plans for Existing Facility

  • Consideration of expansion plans for the existing facility.

18. Unorganized Market in Valve Business

  • Unorganized market significant, with numerous regional manufacturers.
  • Atam Valves’ market share in the organized market around 5% to 6% in India.

19. Contribution of Exhibitions

  • Participation in exhibitions contributes to showcasing products and connecting with potential customers, particularly in the boiler manufacturing industry.

20. Product Pipeline and Revenue Potential

  • Ongoing product innovation in the valve business, with a focus on new products for nuclear power projects.
  • Faucet business is expected to have a higher revenue potential at full capacity utilization compared to the valve business.

21. Future Vision

  • Aspires to become the biggest brand known all over India with a presence in major cities, aiming for a revenue target of INR 1,000 crores by 2030.

22. Strategic Move into Faucet Business

  • Decision to enter the faucet business led by the third generation.
  • Faucets are considered more mass-market and known among the masses.
  • Aim to expand the distribution network and take advantage of the prominent growth in the faucet business.

23. Equity Funding for New Business

  • Considering preferential equity funding for the new business.

24. Reasons for Sales Growth

  • Sales growth attributed to the expansion of the sales network, increased salespeople.
  • Introduction of new products, including stainless steel pipe fittings and high-pressure valves.
  • Enhanced business relationships with existing clients contributed to sales growth.

Q2 FY ’24 Concall notes

  • Infrastructure and Team:
    • Multi-capability manufacturing infrastructure.
    • Dedicated team of 500 professionals.
  • Clientele:
    • Serving industries including oil and gas, refining, petrochemicals, marine, mining, and more.
    • Over 300 clients, with top 15 contributing 80% of sales.
  • Market Presence:
    • Actively planning expansion into the production of large-size valves.
    • Presence in India, South Africa, USA, UK, and Indonesia (3% international presence).
    • Expanding to the United Arab Emirates, Saudi Arabia, Tanzania, Kenya, Russia, and Canada.
  • Global Market Trends:
    • Industrial valves market projected to reach $99.8 billion by 2028.
    • Opportunities for growth driven by healthcare, pharmaceutical industries, smart cities, and connected networks.
  • Strategic Initiatives:
    • Extensive distribution network across India.
    • Pursuing opportunities in the US market through strategic partnerships.
    • Forward integration into bathware items under the brand Daley.
  • Financial Highlights Q2 FY24:
    • Total revenue: INR12.76 crores.
    • EBITDA: INR2.36 crores (EBITDA margin 18.70%).
    • Profit after tax: INR1.30 crores (PAT margin 10.34%).
  • Financial Highlights H1 FY24:
    • Total revenue: INR23.17 crores.
    • EBITDA: INR3.89 crores (EBITDA margin 16.80%).
    • Profit after tax: INR2.16 crores (PAT margin 9.32%).
  • Outlook and Future Plans:
    • Optimistic outlook based on strong Q2 performance and strategic initiatives.
    • Consistent growth and financial stability for continued success.

Revenue Target for FY 2030:

  • Target: Achieving INR 1,000 crores by FY 2030.
  • Caution against assuming a consistent 50% CAGR year-on-year.
  • Acknowledgment of challenges due to new product launches and market expansions.

FY24 Revenue Guidance:

  • Revenue target for FY24: At least INR 80 crores.

Working Capital and Receivables:

  • Strategy: Developing new products and entering new markets.
  • Reason for higher receivables: Offering credit to gain market acceptance.
  • Working capital days: Expected to decrease by the end of the year.
  • Positive market response.

Utilizing Indian Distribution Network for Global Expansion:

  • Canada Market Entry:
    • Engaging with a prominent client in Canada.
    • Awaiting API certification for their brand.
    • Potential to penetrate the Canadian market and cater to petroleum industries.
  • Product Portfolio Enhancement:
    • Planning a new plant for manufacturing larger valves.
    • Aim to broaden the product range and cater to diverse industry needs.

Geographical and Sector-Wise Revenue Breakdown:

  • Geographical Focus:
    • Strong presence in Gujarat with own warehouse and direct sales.
    • Robust distribution network in Karnataka.
    • Significant market share in Haryana, especially among boiler manufacturers.
  • Sectoral Contribution:
    • Existing range and upcoming plant cater to diverse sectors.
    • Emphasis on targeting industries like petroleum with the new product range.

Future Market Strategy:

  • Focused expansion in Canada as a strategic move.
  • Leveraging existing success in Gujarat, Karnataka, and Haryana to propel growth.
  • Continued efforts to diversify and strengthen the product portfolio for sector-wise growth.

Expansion and Commencement Delays:

  • Reason for Delay:
    • Delay in starting the bathroom faucet plant.
    • Shift from Q2 to Q4 of FY24.
  • Decision and Strategy:
    • Focus on expanding existing product range first.
    • Concentration on the Canadian market opportunity.
    • Opting for an asset-light approach for bathroom faucets.

Capex and Expansion Plans:

  • Capex Confirmation:
    • Capex required for the new factory for bigger valves.
    • Working capital needed for importing bathroom faucets.
    • Expansion shift from bathroom faucets to larger valves.

Margins and Sustainable EBITDA:

  • Margin Pressure Explanation:
    • Margin reduction due to market penetration and increased marketing expenditure.
  • Sustainable Margin:
    • Anticipated sustainable EBITDA margin: At least 12% to 13%.
    • Expectation of improvement in EBITDA.

Revenue Growth and Pending Orders:

  • H2 Revenue Growth:
    • Expectation of substantial growth in H2, typical for the industry.
    • Confidence in achieving the INR80 crores target.
  • Pending Orders:
    • Ongoing process with dealers contributing to a regular flow of orders.
    • Approximately INR60 crores in pending orders.

Dealer Network and Top Clients:

  • Dealer Network:
    • Current dealer network: 750 dealers across India.
  • Top Clients Contribution:
    • Top 15 clients contribute 80% of sales.
    • Continued strategy with an 80%-20% ratio (Top 20 client, 80% sales)

Product Launch and Marketing Strategy:

  • Bathroom Faucet Launch:
    • First shipment expected in January.
    • Initial launch in Gujarat and Karnataka.
  • Marketing Strategy:
    • Targeting contractors and builders.
    • Focusing on those already dealing with plumbing segments.
    • Premium segment faucets with an estimated 25% margin.

Return on Investment (ROI) for Capex:

  • New Unit for Bigger Valves:
    • Anticipated breakeven in three to four years.
    • Certification process completion crucial for engaging larger clients.

Navigating Challenges and Leveraging Opportunities:

  • US Market Strategy:
    • Secured a Canadian client’s brand for manufacturing and selling.
    • Utilizing their established brand recognition in the US market.
    • Leverage existing partnerships to gain entry into other markets.

North American Market Strategy:

  • Manufacturing Model:
    • Products to be manufactured in India.
    • Canadian brand to act as the sole customer for North America.
    • Marketing in North America to be done through the Canadian brand.

Risk Factors and Growth Outlook:

  • Perceived Risks:
    • No significant risks identified in the valve line.
    • General market downturns and currency fluctuations acknowledged.
  • Growth Outlook:
    • Optimistic about growth due to the introduction of innovative products.
    • Over 25 years in the industry without significant setbacks.

Product Focus for North America and Saudi Arabia:

  • Product Line for Target Markets:
    • Initially focusing on industrial valves for both North America and Saudi Arabia.

Working Capital Requirements:

  • Additional Working Capital:
    • Anticipating the need for INR30 crores for both new unit capex and importing bathroom faucets.

API Certification and Market Entry:

  • API Compliance for Market Entry:
    • Working towards API certification for compliance.
    • Expected certification completion in approximately two months.
    • Plan to start supplying to the Canadian brand in Q4.

Sales Order and Market Interest:

  • Initial Sales Order:
    • First order expected to be around $2 million.
    • Aiming to build trust and satisfaction for future collaborations

Export Margins:

  • Expectation:
    • Anticipating better margins in exports compared to the domestic market.

Timeline for Increased Export Revenue:

  • Target Year:
    • Aiming for 23% of revenue from exports in two years.
    • Projected achievement in FY '26.

Thanks…Very comprehensive notes…i heard the call and cannot recollect anything more to add.

For me…the execution is still awaited…if they pull off 60 cr in H2…that will be a kicker.

The canadian venture approval and first order …awaiting its announcement…that would be the significant development.

cf652256-a359-4dd7-ae16-a2343d1251c4.pdf (

International marine order…approx INR 42 L





Management team, if you go through the investor presentation, as of Aug 23, it looked like the family members mostly run the business, while yes, an owner-operator model is good, the management looks like it lacks the drive and probably the capacity of delivering on their lofty expectations.

Their entry into highly competitive B2C bathroom fittings segments seems like a distraction from their core competency. Seems like family decision to give next generation some experience in new area, but at the cost of minority shareholders. So exited completely post last concall




Q4 FY24 Notes

Q4 FY '24 Revenue Dip and FY '25 Outlook Summary:

  • Delays caused by MSME norms and 45-day payment system, resulting in held-back orders.
  • Optimistic outlook for Q1 FY '25 with anticipated improved performance from pending orders.
  • Impact of MSME conditions notable, affecting credit periods and leading to order hold-ups.
  • EBITDA margin dip for FY '24 attributed to increased expenditure on exhibitions and expansion efforts.
  • FY '25 margin guidance aims to maintain existing margin with slight improvement, expected range between 20% to 25%.

Market Update and Inventory Status:

  • Pursuing entry into Saudi and U.S. markets through API certification.
  • Inventory: approximately 10 crore in finished products, remainder in work-in-progress and raw materials. Anticipating 70% liquidation in Q1 FY '25 post MSME resolution.

Capacity and Expenses:

  • Current capacity: 96,000 pieces per day, 85% utilized.
  • 30% increase in employee expenses due to expansion efforts.
  • Delay in CAPEX execution for bathroom faucets due to API focus.
  • Initial plan to import faucets from China, gradual utilization of CAPEX as market develops.

API Certification and Orders:

  • API compliance expected in Q1, certification by August/September.
  • Early-stage talks ongoing for $2 million orders. Anticipate orders upon API compliance.
  • Collaborating with Canadian partners for API products.

Competitors and Market Positioning:

  • Competitors in API-related valves include Parveen Industries, Oswal Industries, and Hawa Valves, with revenues ranging from 400 to 700 crore.
  • ATAM is relatively new in this segment, aiming for significant growth in the next six to seven years.

Competitors in Existing Product Range:

  • Rotovalve and Centro Valves are competitors in plumbing and firefighting markets.
  • Rotovalve’s revenue exceeds 300 crore, while Centro Valves’ revenue is around 100 crore.

Export Security:

  • ATAM Valves does not currently utilize ECGC for export security.
  • Most exports are on an advanced payment basis, but ECGC may be considered as exports grow.

Impact of MSME Issues on Revenue Projection:

  • Initial revenue projection of 80 crore for FY '24 included sales of bathroom faucets, which were deferred due to focus on API valves.
  • Unforeseen MSME issues emerged in late February, leading to a shortfall in revenue.
  • Expectation of liquidating 70% of finished stock in Q1 to address the revenue shortfall.

Revenue Forecast for Q1 and MSME Issue Resolution:

  • Forecast for Q1 revenue is approximately 7 crore, aiming to compensate for the Q4 shortfall.
  • MSME issue resolution expected by the end of Q1, following recent comments from the Finance Minister indicating a potential adjustment period.

Current Order Book and FY '25 Guidance:

  • Current order book stands at 25 crore, with projects on hold due to market uncertainties.
  • FY '25 revenue target set at 70 to 75 crore.

Long-Term Revenue Growth and Market Expansion:

  • Confidence in increasing revenues twentyfold over the next five years attributed to entering the API valves market for oil and refinery industries.
  • Expansion plans include manufacturing larger valve sizes, aiming to capitalize on a sizable market opportunity.

Export Contribution and Cumulative CAPEX:

  • Anticipation of exports contributing at least 50% to the projected 1,000 crore topline over five years.
  • Cumulative CAPEX estimated at around 40 crore for machinery and equipment required for expansion.

Faucet Division Strategy and Revenue Expectations:

  • Faucet foray currently on hold to focus on building a brand in the plumbing valve range.
  • No expectation for the faucet division to contribute to the projected 1,000 crore topline by 2030.

Operating Margin and Profit Expectations:

  • Anticipation of improving operating margins as scale of operations increases, particularly in the larger valve sizes segment.
  • Expectation of increasing EBITDA and PAT with entry into the larger valve sizes market.

Business Model and Tender Business:

  • Primarily engaged in direct client business and dealer network, with no involvement in tender business.
  • No current plans to enter the PSU or oil marketing company markets due to regulatory approval requirements.

Timeline for Faucet Business:

  • Skeptical about timeline due to API focus.
  • Importing from China to understand market before manufacturing.
  • Decision expected by Quarter 4, possibly to begin in the future.
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