Balmer Lawrie - a great opportunity to invest in a Navratna

Value Investors,

I opened a thread on Balmer Lawrie company…
Balmer: Logistic business is bottom line driver, Tour and Travel segment is top line driver
BLC’s expansion plans to provide one stop logistics solutions with diversified operations, like setting up satellite branches
at Guntur and Indore, JV with Vizag Port Trust for setting up a Multi Modal Logistics Hub (which is already being approved
by Central Govt.) and setting up three new temperature controlled warehouses at Hyderabad, NCR and Mumbai would
boost high EBIT margin logistics business.

Balmer Lawrie (BL) is a Mini-Ratna I company with a rich history spread over
one and a half centuries of existence. It has a significant presence in industrial
packaging, logistics, travel & vacations, greases & lubricants, leather
chemicals and refinery & oilfield services. BL is the market leader in steel
barrels, greases and oilfield services in India. Its logistics division is the profit
driver of BL with over 3 CFS in Nhava Sheva, Chennai & Kolkata and offers a
wide range of logistics solutions for ocean, air & road freight. Its oils &
lubricants business has a growing retail presence with its Balmerol brand. It is
also one of the oldest IATA accredited travel agencies in India.
Logistics business to continue to drive growth and profitability with
major expansion plans

RISKS: It is a govt. owned enterprise. So govt. has a major say.
Is a diversified group in 5 businesses. So not easy to evaluate the performance of the company.
Though the numbers are broken down by each business unit, it is difficult to see year on year how the performance may change due to government policies ever changing in the last 5 -7 years


Performance Highlights - FY 2016-17

Turnover (Gross): : Rs. 1901.17 crores PBT : Rs. 254.11 crores
Turnover (Net): : Rs. 1779.45 crores PAT: : Rs. 170.42 crores
Total Share Capital: : Rs. 114.00 crores Earnings per share: : Rs. 14.95
Dividend Payout: : - Net Worth: : Rs. 1165.99 crores

(i) The Standalone un-audited financial results for the quarter ended September 30, 2017 are as per the notified Indian Accounting Standards.

(ii) Post implementation of Goods and Services Tax (“GST”) with effect from 1 July 2017, total income from operations is disclosed net of GST. Total income from operations for the earlier periods included excise duty which is now subsumed in the GST. Total income from operations for the half year ended 30 September 2017 includes excise duty upto 30 June
2017. Accordingly, total income from operations for the quarter and half year ended 30 September 2017 are not comparable with those of the previous period presented.

1 Non-Current Assets
( a ) Property, Plant and Equipment 374.46 382.67
( b ) Capital Work-in-Progress 28.65 23.31

With capex plans of ~ ₹ 4 bn over the next 2 years, BL is setting up 3 cold chain
facilities in Hyderabad, Delhi NCR and Mumbai and a multimodal logistics park at
Vishakapatnam Port. With various policy initiatives for boosting agriculture & the
rural economy, considerable upside potential in cold storage usage and eventual
passage of GST, we believe this to be a logical move which would help augment
growth for BL. Also, the mobilization of ample cash reserves towards expansion is
expected to further improve ROE and bolster margins.
Increasing contributions from industrial packaging and lubricants
businesses on the back of subdued commodity prices
The industrial packaging and greases & lubricants businesses have witnessed
considerable expansion in margins in spite of a flat growth in sales due to benign
steel and crude oil prices. BL is also looking to widen its retail presence in
automobile lubricants with its Balmerol brand. We expect that the supply glut in
commodities would continue over the medium term and help the India - Centric
businesses of BL contribute even more to its bottom-line.
Other niche businesses to steadily expand
Travel and vacations segment is expected to continue to do well with stable demand
from government & PSUs for its ticketing business and a push to grow its value
added package tours segment. Leather chemicals and refinery & oilfield services
divisions continue to serve niche markets and offer potential upside triggers.

Disclosure: Not invested.
Balmer Lawrie financials.xlsx (13.7 KB)



BALMLAWRIE morningstar report.pdf (66.6 KB)

Balmer Lawrie_LKP SECURITIES_Mar 16.pdf (645.6 KB)

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Topline will be 4x in next 5 years

There is some news/rumour going around regarding the sale of some of some %age of govt share. Will that be possible? I mean that the market cap of this company is small there isn’t much benefit for the govt after dilution.

Interim dividend to be discussed on the 8th Feb. This is not normal. Something cooking.

One of their flagship businesses - Travels is impacted due to COVID and might be impacted for next 2-3 years. Given this, what growth prospects the company has? Even if the government wants to disinvest, no business would want a bunch of businesses together. Selling them by breaking will also lose the value.

Do you foresee value in this?

I don’t think they would break the business and sell it (or even sell the business at all). The thing with Travel is that it’s government’s official agent. So whatever government travel happen, it will come through Balmer Lawrie or the other authorized agents. I’m not too worried about this segment as it will survive and figures aren’t big enough to make a substantial damage.

I recently exited my position because I found it too complicated to figure out where growth and increased profitability will come from. And the margins were under pressure from all fronts.

But this doesn’t change the fact that the wealth creation that has happened over the past decade has been phenomenal (with dividends). The approach I took was to buy the holding company and this given the dividend arbitrage opportunity. I continue to track it and will take a position if I figure out what is happening.

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I was just going through the past annual reports of Balmer Lawrie and something did not seem to reconcile in the Segment-wise revenues. All through the period from 2012 till 2016, Travel & Tourism segment was taking up about 37% of the total revenue and PBIT for this segment was appearing just about 3% of the segment revenue. Eg. 2012-13 sales 1132 Crores and PBIT 36 Crore.

And then suddenly in 2016-17, the Travel and Tourism segment revenue is showing up 163 Crore (which is much lower than the previous years’ corresponding data) and the PBIT of 35 Crore. In so doing, it is also restating the revenue of the previous year (2015-16) as 165 Crore. The same was shown in the previous year’s annual report as 1245 Crore. Not sure if I am missing something. I checked for any subsidiary that may have been sold in the intervening period or something else that explains this. I could not find anything.

Maybe, someone can help me understand what could have caused this. I am a newbie.

Disclosure: I am invested on this stock and just thought of reviewing my position.

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On the restatement bit, here’s what happened - earlier they used to book the entire ticket amount as their revenue - i.e. If the ticket cost 5000, they would book 5000+commission/charges as the revenue. They revised this to only include their commission/charges subsequently. Hence the major drop in revenue. I did write to them asking what happened and stuff but didn’t get a reply. Came across this in the notes subsequently.

Hope this helps.


What happens to this company when Air India is privatized. They used to operate as travel agent for PSU/govt employees for Air India bookings. This arrangement is likely to go away.

Wow! That’s absolutely crazy. It makes all the past earnings statements incomparable. And all through those statements I kept wondering why that segment is being sustained given so low margins. Is there somewhere in the notes on the same AR that explains this? I would think they are expected to mention in the notes in such scenarios.

Thanks for the info.

@purohitjii, I don’t recall the exact year, but I remember finding it in the notes in one of those ARs around that time. You’ll have to compare the notes in the two ARs. Even I spent some time comparing, but it doesn’t really make much of a difference. I guess the key in understanding the company is understanding the business lines and the future scope. It ultimately comes down to one thing - what is the scope of the logistics arm? Can it bring in more money?

@nav_1996 , They are the government’s agents. Any booking from the government goes through them - Air India or otherwise. So I don’t think it should really make a difference. They are one of the 3 booking agents for the government.

Disc: Used to have a position. Exited sometime back (mentioned earlier in the thread).

From Tea to IT. Another Tata conglomerate into making :grinning:

On a serious note diversification beyond logistics makes little sense to me for this PSU.


With the formation of National Land Monetisation Pipeline, I think if the Govt is thinking to seriously monetise unused land and buildings, this stock can provide decent returns.

It comes with the set of risks since many people have been invested for many years considering the same. But forming a dedicated company for this specific purpose can initiate the process. I used to have a position in Balmer Lawrie but exited a few months back.

Considering Balmer Lawrie investments this time, it has 10.6 crores shares of Balmer Lawrie - 10.6 x 118 = appx 1200 cr. Market cap of appx 880 crore of BL Invest gives a holding company discount of 30% but in this case since BLI is performing only the function of a holding company and nothing else, wouldnt the discount start shrinking once the asset sale starts ?
Are there any precedents of such situation, if anyone can throw some light, would be worth while!

During my Research and study for investment purposes, I came across two stocks with similar story and decided to put it down here for a good read. This is not an investment thesis or suggestion but plainly for sharing.

Recently, Balmer Lawrie was in the news because the government wants Disinvestment in the company to proceed at a valuation of 1600crs. (surprisingly, the current market cap is 1956crs) while the management insists that the valuation should be put at 8000crs.

This can be due to the excess land parcels held by the company at historical valuations. Balmer Lawrie: Cash & excess land bank could unlock huge value

So, what is interesting here? The resemblance of this company to ITC. Let’s start.

  1. Both are 100 year old companies. Balmer Lawrie was founded in 1967 while ITC ltd was founded a little later in 1910. Both companies have had an interesting history in India. Both companies have survived better than other companies of the time like Andrew Yule (It had a turnover of 23cr in 1947) and Parry’s.

  2. Both have European parentage. Balmer Lawrie was founded by two Scotsmen, Stephen George Balmer and Alexander Lawrie. ITC was incorporated as Imperial Tobacco Company by the British Cigarette behemoth.

  3. Both Started out as agri commodities players. Imperial Tobacco was king of tobacco trading while Balmer Lawrie did a good business in tea. Balmer Lawrie shut its tea business in 2013. While Tobacco has lent near monopoly to ITC, tea is a very tough business to be in with regular loss making quarters with the added government redtape.

  4. Both have stuttered numerous businesses over the years to reach where they are. Balmer Lawrie was into Banking, Blecco roof, Tea, Indo Burmah Petroleum etc. ITC has exited Lifestyle retail, cooking oil, Finance and a few other ventures.

  5. Both are based in Kolkata. Kolkata was a very important city in British times. Kolkata made sense for the East India Company as it also had a hold on Myanmar. Hence, many of the historical companies are based out of Kolkata.

  6. Both businesses are a group of businesses being run together. ITC operates in cigarettes, FMCG, Agri, Hotels, Paperboard, IT and then some more. Balmer Lawrie operates in logistics, logistics infra, chemicals, grease and lubricants, holidays and refinery and oil field services.

  7. Both have zero promoter holding. This one is dicey in a way that ITC doesn’t have promoters as Promoter company is declassified as FII. Balmer Lawrie on the other hand went to the government entirely. Both companies have a sizeable chunk of govt. shareholding and this means the govt holds a lot of sway in how both companies function.

  8. Huge dividend Payouts: This is what happens when the govt. holds shares in your company. You have to pay good dividends. 3 years avearage dividend payout for ITC is 91.7% and 81.8% for Balmer Lawrie.

  9. Both companies are staring at an uncertain future, Balmer Lawrie more so. ITC is regularly in the news for demerger talks. Balmer Lawrie is regularly in the news for Disinvestment.

  10. Both are cash rich companies. ITC has cash equivalents of 4800cr as per screener as of sep 22. Balmer Lawries has cash equivalents of 243cr as of sept 22 as per screener.

The similarities end here and there are a lot more dissimilarities but I decided to put it up here for reading. Balmer Lawrie has a huge chunk of revenue coming in from many fields but its lacks a torchbearer, Similar to what Tobacco is to other ITC businesses. Additionally, none of the sectors of Balmer Lawrie seem to be lucrative and high margin businesses. Neither is there any cohesion of the various business segments.

I do see hope for Balmer Lawrie if govt decides to take a back seat, let it be run professionally and allow the company to grow. I do see good potential in logistics infrastructure business with the government’s gati shakti scheme if opportunity is exploited in the field of Container freight stations (CFS), Inland Container depots (ICD) and Cold storage. Gateway Distriparks seems to be making the right noises.

It would be sad if the government just decides to sell history for scrapes.

It is ridiculous to see DIPAM and NITI Aayog valuing Balmer Lawrie at 1600 Cr when the land parcel itself is worth 2000+ Cr. The fair value should be at least 4000 Cr as private players can easily improve the sales & operating margins and make it a 300 Cr profit making company within 2 yrs of acquisition.

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Balmer Lawries has set a 5 year target here for achieving 100cr by 2027 in the cold chain unit business.
Balmer Lawrie has also set a 2-3 year sales target of 3500cr followed by 10,000cr target by 2030 for the company.

apart from these a spate of announcements have been made.

  1. Setting up a cold chain unit in Rayanapadu
  2. setting up a subsidiary in Dubai for Logistics.
  3. Acquired license for Vishakhapatnam Port Logistics which was a drag on results.

Problem is that Balmer Lawrie has to go to the government (DIPAM) for approval everytime as mentioned in this article.

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