Banco Products


That’s over the top. You are wrong. Enough said.


My sincere APOLOGY to all who felt offended at my post.


I appreciate Rahul’s sincere last reply :slight_smile:

Since VP mostly covers microcap, smallcap and midcap, we must not forget that recent rally is not restricted to stocks covered in this forum.

There are hundreds of stocks which are not covered here yet sky rocketed in last 6 months.

Let’s use VP as learning tool instead of side track talk.

By the way real big wealth is created by long term (value) investors and not by operators.


Banco Products selling stake in Tanzania-based Lake Cement for $17.7M . However they did not divulge the name of the buyer.

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Q4/FY14 results out. Flat sales and depressing consolidated figures pulls down the scrip by ~9%.(CMP Rs 93)


period q4 fy 14 q4 fy 13 q3fy 14 12M fy 14 12fy 13

sales 119 115 101 447 446

NP 23 10 12 66 35

eps 3.19 1.35 1.63 9.3 4.9


period q4 fy 14 q4 fy 13 q3fy 14 12M fy 14 12fy 13

sales 282 246 264 1162 1024

NP 9 7 23 90 61

eps 1.31 0.9 3.18 12.6 8.6

This one is zooming!

Is anyone following the Banco story? Would appreciate info on it’s subsidiaries.

What is the current view on banco for long term? recently they increased their Dividend payout. past two quarters were flat. I am holding it for the past 1.3 years. need experts view on this

Bought Banco recently and putting up a short write up on the company.


Company was established in 1961 and is based out of Bhaili near Vadodara in Gujarat.


ENGINE COOLING SYSTEMS include radiators, charge air coolers, oil coolers, transmission and hydraulic, fuel coolers, battery coolers, invertor coolers, in aluminium and brass/copper configurations and accessories expansion tanks, Fan motor assembly, Fan shroud, and guard and miscellaneous mounting and plumbing accessories.

SEALING PRODUCTS include engine cylinder head, and peripheral gaskets, heat shields and industrial gasket with a wide material range and sizes for demanding application of sealing. Materials include various types of gaskets.

Over the years as a measure to derisk its business model, the company has reduced the revenue contribution from automobiles to the overall revenues by focusing on non auto sectors like railways, power sector, earth moving and construction segment etc.

Subsidiaries of the company include NRF BV Netherlands, Kilimanjaro Biochem Ltd, Lake Mineral Mauritius and Banco Gaskets. (spun off in 2012)

NRF manufactures aluminium, brass and copper radiators, marine heat exchangers, oil coolers, air coolers, and automotive air conditioning products. It was a client of Banco for 15 years and was acquired at below book value at a cost of 17.7 million euro against net current assets of 24.8 million euro.

Domestic sales contributes 75% while exports contribute 25% of revenues.


CMP 226,(ex dividend Rs 5.8 as of today) market cap 1650 crores. Outstanding 7.15crores shares of face value of Rs 2 each.

Promoter holding 67.88%, no pledging. Other shareholders include Franklin India smaller cap fund which holds 3%, HDFC small cap fund 1.17%, besides some individual investors who hold chunks in ranges of 0.5% to 1.4% as per the latest annual report.

As on March 2018 company had investments of 10 crores, cash and equivalents of 48 crores and bank balances of 152 crores. Total cash and equivalents amounts to 210 crores. Borrowing is 32 crores. Company is a net cash company with 120 crores of net cash.

Sales after stagnating in the range of 1000-1200 crores range from 2011 to 2017 has jumped to 1469 crores in FY 18. Even net profits which were stuck in a range of 60-90 crores from 2011 to 2017 have crossed 100 crores mark and reached 125 cores for FY 18.

For q1 fy 19, consolidated sales increased from 386 to 446 crores while net profit increased from 22 to 32 crores. FY 18 EPS was at 16.33 per share. Q1 fy 19 eps was at 4.36 per share as compared to 3.18 per share for q1 FY 18. Full year EPS could be around 20 if the same momentum continues in rest of quarters as shown in q1.

Forex outgo for fy 18 was 204 crores (164 crores in FY 17) while forex inflow was 195 crores (197 crores in FY 17). Company seems to have some natural hedge against forex volatility.

Dividend of Rs 9 was paid in FY 17 and Rs 10 in FY 18. Same could be repeated or exceeded in FY 19 as per the previous track record. This provides decent downside protection.


After a lackluster 3 years preceding FY 18, Banco seems to be showing decent topline and bottomline growth. Company is a net cash company available at close to less than 12 times expected FY 19 earnings with nearly 5% dividend yield. From these data points downside seems limited. If growth continues and re rating happens, there could be decent upsides.

As per a presentation of its subsidiary NRF, made in 2017, it has plans for covering different geographies with its products by opening sales offices across the globe. nrf presentation 2017.pdf (2.8 MB)


In the past management has done some unrelated diversifications in cement, alcohol etc and any similar future diversification could be perceived as a risk.

Economic slowdown can affect the company and its products.

Raw material price volatility could affect profitability.

PS ; AGM to be held on 22 Sep at company site would provide more insights into the company. I would put up updates post that if I can attend that.


Thank you for sharing detailed analysis.

In long term, revenue from Automobile parts should significantly come down once EVs start gaining traction as electric engines are much simpler than IC engines & have very less moving parts.

Management must be worried about transition to EVs hence they have been trying too hard to diversify. I won’t be surprised if they try to diversify into new business in short term (a risk mentioned by Hitesh sir). After all, automobile makers are heavily investing their current capital into EVs.

Disc: have a small tracking position.


Is it part of Banco business?


AGM of Banco Ltd was held on 22 Sep 2018 at the company site at Baroda.

It was attended by around 10-15 analyst/investor types and rest of the people included company employees and some old timer shareholders.

Mr Mehul Patel and Mr Anandpara replied to most questions besides group CFO Mr Shailesh Thakkar.


Company wants to be a one stop solution for all the cooling needs of various business segments like CV, tractors, construction equipment, power equipment, marine equipment and some select segment of high end 2 wheelers. Company is into passenger vehicle market through after sales market but in domestic market its not in OEM due to poor margins.

About geographical presence, company is a leading player in India, and strong in Europe through its subsidiary NRF Netherland and its step down subsidiaries main of which is the one in Poland.

NRF allows the company to have technological edge in terms of product technology as well as lesser time to markets in the products in Europe.

Company has been trying to gain a foothold in the US markets but till now because of too much competition from cheaper Chinese products has been unable to make much headway. The US-China trade war could possible offer some opportunity though management was not too commital about it.

Company’s revenue mix is 60% to OEMs and 40% aftermarket. Exports mainly consist of aftermarkets though of late company is trying to gain entry into OEM markets. The aftermarket segment is a much higher margin business compared to the OEM where there is tough competition and company wants to pursue only profitable growth and not growth only for the sake of growth.

Indian govt’s Anti Dumping duty has prevented dumping of cheaper quality products into Indian makets. GST also has provided some fillip to company’s prospects.

Annual Capex is to the tune of 15-20 crores but FY 18-19 would see slightly higher capex. Cash on balance sheet is more than enough to meet all capex needs.

Company manufactures copper and aluminium based products. In last few quarters copper based products has shown good growth spurred by demand from some power genset players.


Volatility of prices of raw materials in form of metals is in most cases dealt with by negotiating with OEMs while in case of after market is a pass through. In case of currency volatility company is largeley insulated due to a sort of natural hedge. Company is constantly trying to work on these risks and reduce its impact.

Company is working on operational efficiency constantly and this has played out in case of Banco Gaskets which now is a much more stable business as compared to earlier.


NRF Netherlands is a subsidiary and has stepdown subsidiaries among which NRF Poland is in a very sweet spot as it is a very cost efficient operation. Netherland itself is a small market but it the acquisition has helped the company gain entry into Europe markets and reduced time to market.

Lake Minerals has 95% holding in Kilimanjaro Biochem which is into ethanol business. This business is suffering some headwinds due to local drought leading to low availability of molasses. On the other hand a lot of other ethanol players have come up leading to high demand and hence higher prices of molasses.

Loan given to Lake Cement came back last year to the parent.


Company has been successful in getting into OEM with some high end bike segment for cooling solutions in the domestic market.

BS VI norms will be implemented from April 2020 and company is hopeful of good prospects from the same. The engines and technology needed for this has been available to the company through NRF which has launched similar products in Europe since a long time.

Currently Indian manufacturers follow BS IV norms. For different vehicle segments there are different set of emission parameters. Cooling system needs change according to change in Emission Norms.

BS VI will involve a lot of change of cooling products under the bonnet where more number of cooling units would be needed. Sometimes for vehicles like tractors 4-5 cooling products would be needed. Per unit price may remain same but number of units needed might go up due to implementation of BS VI norms. Because of more focus on safety, OEMs demand more data on simulations of products and thats where company is strong due to technological edge of NRF.

Over a period of time air cooling is going to be changing to liquid cooling where company has strong presence.

Company does not have a domestic listed peer though unlisted players like Tata Toyo, Alcraft, some company from Maruti group and Denso.

Company focusses on bespoke solutions in consultation with OEM customers rather than standardised manufacturing.

It undergoes regular audits from customers in the OEM segment and because of that there are constant upgradations in plant and machinery.
Internationally company is majorly present in after maket replacement market.

The threat of Electric Vehicles in India esp in the CV segments seems to be some distance away because of poor infrastructure for EVs. There is still lack of narrative about whether EVs will be in the form of pure EV or hybrids etc.

Most of the CV companies in India are still focussed on IC engines. There are still a lot of issues which need to be sorted out before EVs become relevant esp in CV market.

EV cooling systems is something which company is looking out for though not much work seems to have been done.


There were some demands from big shareholders about company meeting big investor groups and conducting concalls, analyst meets on a regular basis.

Management narrative was that since company is the only listed player in Indian market they dont want to divulge too much information about business secrets in the open as that would harm the company by offering too much details to competitors about company’s margins and product details etc.

Basically its a toss up between being investor/market savvy and being business savvy.

Still management noted the demands and assured to look into the matter and see what could be done about it.


Company has been paying out a lot of dividends over the years. Rs 9 per share in FY 17 and Rs 10 in FY 18. Since company receives a lot of dividends from subsidiaries it has the benefit of dividend pass through. Seems high dividend payout is likely to remain.

Suggestion about buyback was made and management noted it but over due course of time it might be considered.


The management seemed to answer most questions in a forthright and satisfactory manner.

Because it doesnt do investor activities like presentations, concalls, analyst meets, the broader investor community does not know too much about the company. Whether this stand is going to change or not is a thing time will tell.

Overall the management came across as very decent but conservative people who know their business very well and have a lot of focus on profitable growth rather than just growth.

disc: Invested as disclosed before.


I had a look at your investment thesis,BS VI cooling requirement are mostly one off but what about scaling after that? So it’s going be lumpy till 2020 and then stabilize to a minimum growth?

Company in board meet today decided to sell the Lake Minerals as well as it’s subsidiary Killimanjaro Biochem to other promoter entity “Agro Scientific Investments”.
The sale amounts to Rs 43.55 Cr (excluding Taxes) . The investment in above companies as per books of accounts is 17 Cr.
Now it seems management will be able to concentrate more on the Auto business.

Quarterly numbers are average.
Revenue 428 Cr vs 386 Cr (YoY)
PAT 36.7 Cr vs 37,6 Cr (YoY)


Consolidated q1 fy 19 sales numbers are good as mentioned above at 428 crores vs 386 in q1 fy 18.

Net profit is affected because of higher tax paid of 21 crores against 16 crores in q1 fy 18.

It seems company has paid very high tax in H1 FY 19. On a PBT of 114 crores tax paid is 46 crores which is nearly 40%. Dont know the reason for the same.

Here the bet is on dividend yield (now more than 5%) offering downside cushion. But in current market mood, no logic holds it seems. Results have been okay. topline growth has been encouraging but margins may be a tad bit affected due to ?aluminium price rise. Net profit affected partly due to high tax paid.

The more interesting thing is divestment of stake in Lake Minerals and clearly stated intent to focus on the autoancillaries business.


Is it possible that they paid the tax for the income produced by the sale of stake in Lake Minerals? If we combine that income with PBT, the tax paid stands at nearly ~30%

As mentioned in the note on stake sale associated with results, the deal would need regulatory approvals which should take around 6 months. So i dont think higher tax is on account of that



The other income is dividend received from subsidiaries. It was mentioned as one of the reasons they preferred to pay out high dividends as it was pass through and probably more tax efficient. (I still did not get the point explained by management)

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Sales and profit rising steadily. Price has contracted. Clearly deserves attention on future earnings esp considering renewed focus on core competency.

I studied about Banco - here are the observation, will be great if you can share your point of views -

  1. Overall the growth is not great over a 5-7 year window, 6-7% CAGR types, though recent year profit has grown a little higher - might be due to operative leverage
  2. It’s end industry is automotive, and looking at yearly performance it is evident that performance will be cyclical.
  3. A simple google search gives names of radiator product company. Not sure how much the Japan technology helps, but it seems lot of options are available as substitute for end customer. This might explain why it has not been able to post good growth.
  4. Any change in RM prices don’t look like a full pass thru as margins keep on fluctuating.
  5. Diversification into unrelated business or geographies
  6. Its overall export revenue share has reduced a lot 33% in 2010 vs 24% in 2017. Not a good sign IMHO.
  7. Recent years have shown good growth

Now coming to questions : -

  1. Is the current sales stable
  2. Who are the major customers
  3. What is the mix of radiator and Gasket.
  4. What would be the capacity
  5. Any trigger for growth in products
  6. Competitive intensity

I could not find answer to these question on my research. Any inputs will help.