ValuePickr Forum

Garware Polyester Ltd - Worth a good look

My first post in the forum.-

The Company : Garware Polyester Limited (GPL) founded in the year 1957, is the pioneer and the largest exporters of polyester films in India. GPL is the only manufacture of sun control window films in India and a trend-setter in Sun Control Film industry with a history of more than 3 decades of technological development. The Company has four manufacturing plants for Polyester Film and manufactures Film of thickness ranging from 10 micron to 350 micron.

The Company possesses Patented Technology for Dyed Polyester Film in India and USA and is the Second Company in the world to possess such Technology. The Company is already backward integrated through the establishment of a Batch Process Polyester Chips plant which ensures a steady stream of supply of chips for the Film Lines. The BOPP line set up by Company in last year was part of the Company’s efforts to ensure forward integration too. Thus Company’s strength is its integrated manufacturing facilities, R&D Center and development of specialty products for various applications.

Products : The Company manufactures Bi-axially oriented polyethylene terephthalate (BOPET) / Polyester Films, Sun Control Films, BOPP Films, Thermal Lamination Films and Specialty Polyester Films of high quality for a variety of end applications. GPL also manufactures the premium grade heat rejection films based on the latest `Nano Technology’ developed in its in-house R&D facility center. The Company has introduced Infrared rejection films which can reduce infrared heat up to 92%. It has also developed the film to reduce the impact of mobile tower radiation.

Domestic Business : Growing Retail sector, increasing preference towards packaged items, liberalization and rising middleclass is expected to increase in consumption of Polyester Films thereby adding to growth of this segment in the domestic market. Increased usage of window films in offices, commercial buildings and malls will continue to add to the growth of the Company’s business in the premium segment of window films. GPL has well recognized brands and integrated manufacturing facilities which are expected to augur well for the company’s future growth.

Global Business : Through its subsidiaries situated in USA and UK the company has developed a wide network of dedicated customers in Europe, USA, Far East, Middle East, Brazil, Australia, China, Russia, New Zealand, Eastern Europe, Mexico and Africa. The quality of GPL products is rated amongst the best in the world and the Company pays special attention on customer service and satisfaction due to which the customer base is consistent and increasing. The aim is to expand export base and catapult international operations into a major growth driver. GPF is the marketer of the brand ‘GLOBAL WINDOW FILMS’ which is registered in the US and is one the most popular brands. The subsidiary is catering to Russia, Europe, Asia-Pacific and Africa market film under the brand “Garware Sun Control”.

Future Strategy : The strategy is to focus on the specialty films, launch new products, strengthen network and Services and speed up brand building initiatives. Plans are afoot on a marketing warpath, overhauling the product portfolio and penetrate newer markets, launch aggressive advertisement campaigns. The shrink label application film is very well stabilized in the market. With demand outlook for High Shrink films remaining robust, the Company has plans to shift to the specialty PET shrink Films, where it sees a tremendous opportunity. In thermal film, GPL has developed Gold & Feather feel films. With foray into BOPP, GPL has now become the only company in the segment which will be manufacturing BOPET, Sun control Films, Thermal Lamination and BOPP.

Valuation : GPL, a six decade old company with promoter holding of 61% (Zero Pledge) posted a Consolidated total revenue for FY 17 of 925 Cr & Net Profit of 19.9 Cr on an equity of 23.23 Cr giving an EPS of Rs 8.57 per share. Borrowing stands at 267 Cr (Short Term) and 19.9 Cr (Long Term) Finance cost remained 32 Cr. The company is having 4 Lakh shares of Garware Wall Ropes (At current market price of 850 per share, the value is close to 33 Cr)Freehold Land, Lease hold land and an entire Building in Vile Parle, Mumbai, near Airport, the value of which should be many times of current market cap (300 Cr).

If company can sell even part of its mentioned asset and retire the entire debt than savings on interest alone directly gets added to the bottom line, which can boost the EPS by 15 Rs per share. Debt to Equity Ratio is 0.63, Debtor Days at 19.31. With bottoming out of the Polyfilm Industry in near future and Softening of interest rates, and falling Crude price, the profitability of the company with reducing debt, may improve going forward by 15 to 20% CAGR for the next few years, plus the company is back on dividend paying list after 5 years, that shows confidence of management towards future growth of the company, hence Investor may study this asset rich company for long term investment.


QoQ growth -ve, ROE very low…primafacie looks like a risky one.

Some major points for AR 2018 are:

  1. Reasons of loss or inadequate profits: During the financial
    year 2016-17 & 2017-18, the turnover and profitability of the
    Company has not adequate due to:-
    a) Supreme Court’s Judgments;
    I) Imposing ban on the usage of polyester film for
    ‘Gutka / Pan Masala’ packaging thereby reducing
    the domestic market size by around 1,00,000 MT
    per annum and drop in annual turnover to the
    extent of 150 Crores. II) Prohibiting usage of solar control polyester films of any visual light transmission for automotive application has drastically affected the top and bottom-lines of the Company and impacting a drop in annual turnover of 130 Crores
    b) Sharp reduction in sale price of the film in domestic and
    international market,
    c) Tough competition in domestic and international
    d) Recession in Europe and USA hit the air-conditioning
    and compressor industry in South East Asia which is a
    major manufacturing center for the business.
    e) Recession in automobile industry, internationally
    affected the sales in China and USA which are the
    major market players for automobiles.

  2. Steps taken or proposed to be taken for improvement:
     The Company will continue to focus on cost control and cost
    effective measures and give dedicated and specified thrust
    to exports.
     The Company launched multiple brands, new products and
    with aggressive and innovative marketing strategies the
    major growth in Sun Control films is expected to be sustained
    during the coming years. Sun Control films are presently
    being marketed throughout the world and the Company’s
    consistent high-class quality and better customer orientation
    are highly valued in the market.
     Expected growth of the retail sector, increasing preference
    towards packaged items, liberalization and growing
    middleclass is expected to fuel growth of Polyester Film in
    the domestic market.
     The Company expects that there will be improvements in the
    top-line and bottom-line, as the commercial production of
    BOPP film has already commenced.
     The Company is trying to explore for new market of specialty
    and Sun Control films in Europe.
     Focusing on the biggest market for automobile i.e. China (18
    million cars were sold during the year 2010-11) & USA.
     Introduction of new anticipated products will boost the higher

  3. The Solar control film market is growing internationally due to
    increasing awareness of advantages of solar control films that is
    reduction of energy costs, carbon emission reduction, reduction
    of ultra-violet (UV) rays and infrared (IR) emissivity. The surge
    in both, automobile sales in export markets and in real estate
    development globally is also helping in the growth of solar control
    films and we see good potential for growth in this segment. The
    new products are introduced which will continue to be the driver
    for growth.

The Consumer Products division has well established Suncontrol
film brands in the International Market that is “Sun control’ and
‘Global’. The company has been catering to customers across
North America, South America, Russia, Europe, China, Far East,
Middle East and Africa. ‘Global’ brand received good acceptance
in American Market. The market share in matured markets like
USA have grown exponentially. In continuation of the efforts for
Exports, the Company representatives are posted in strategic and
important markets like Russia, Malaysia, and UAE to develop and
grow the business. The efforts are made in the domestic market
with new products under Sun control brand for building application.
The Company has created strong Brand presence for Building

segment window glass application films in India with dominant
market share.
The Company has lowered down the BOPP operations to focus on
value added Nish Products.

  1. Indebtedness has increased from 118 Cr in 2017 to 171 Cr in 2018

  2. In continuation of our focus in Exports, we
    have posted our Sales persons in strategic and important markets
    like Russia, Malaysia, UAE to develop and grow the business. In
    addition to this, we also market our film in “Garware Sun Control”
    brand. In the domestic market in India, we are market leaders and
    have a strong brand recall. We also sell laminated material under
    neutral/customized packaging, dyed film and release liner, thus
    offering marketing opportunities to distributors world-wide.The Global Solar control film market is growing due to increasing
    awareness of advantages of solar control films, reduction of
    energy costs & carbon footprint, reduction of ultra-violet (UV)
    rays and infrared (IR) emissivity. The surge in both, automobile
    sales in export markets and in real estate development globally is
    also helping in the growth of solar control films and we see good
    potential for our growth in this segment. We have also introduced
    new products and CPD division will continue to be the driver for
    growth in 2018.The Company through its Step Down Subsidiary Global Pet
    Films Inc. (GPF) USA has been catering to customers across
    AMERICAS. GPF is the marketer of the brand ‘GLOBAL WINDOW
    FILMS’ which is registered in the US and is one of the most popular
    brands. The subsidiary is catering to Russia, Europe, Asia-Pacific
    and Africa market under the brand “Garware Sun Control”.


Garware polyster is posting operating cash flow of more than 100 crs since last two years. 600 crs valuation is just too cheap considering huge land bank and building

If one notices their cash flows closely. You will see that money from working capital is been released from last 2-3 years. Which in all shows good cash flows.

My point here is to what level reduction of cash working capital possible

Secondly the fixed asset turns have dropped below 1. Either the promoter had built so many assets which he is not able to run fully as of now or the business requires more than 1 rs of asset to generate 1 rs of sale.

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Even as allegations of gross corporate misgovernance have cropped up against the promoters of Garware Polyester Ltd, the 85-year-old Chairman and MD of the company, Shashikant Bhalchandra Garware has been reappointment for another five-year term.