Garware Technical Fibres (Earlier: Garware Wallropes)

Garware Wallropes, a decent small sized company belonging to the Garware Group, is involved in the manufacturing of wallropes, nets, geo-textiles etc. used in shipping/offshore/road construction/pulleys/sports nets etc. The business is quite robust as can be seen from almost a continuous trend of rise in sales. The Company has a sales of nearly 600 crores and is available at a market cap of 120-125 crores. The company is optimally leveraged, and is available at a P/E of about 5 times last year’s PAT and about 3 times the cash earnings of the company. Moreover, if one goes through the Annual Report, one can find that the company is focussed on developing and introducing new products in its sphere of activity, something which is very important for a company trying to find new applications for its products and penetrate new geographies.

Given all these, the stock appears quite under-valued and hence shows a promise of delivering good returns.


Hi Vivek,

The ROE/ROCE numbers are consistently quite average at around 11-12 at a consistent DE ratio of 0.5. A near 5% dividend yield is only positive sign. Market won’t pay PE ratio of greater than 5-6 for such small sized company, with such average numbers, that too with any known sustainable moat. The downside seems to be limited to may be 10% below current level.

Seems to me a decent dividend play.

Hi Subhas,

I agree its not a company that satisfies all criteria for investment. But then, any company that does so, wont be available at these valuations. I guess, even if they maintain this RoE, that would be great, as the ‘E’ component would be going up in the future as the company ploughs back the profits. More, at this price, because the stock is quoting at a steep discount to the book-value, effective RoE, which is nothing but the earnings yield, is so high.

As we say, its a toad with the jewel on the head…not attractive at the outset, but definitely worth accumulating.



Hi Vivek,

In the strange and big universe of Indian equity, such strange undervaluations with high ROE do exists. Let me give you two examples : Indag Rubber (ROE,ROCE ~ 25 in last 3-4 years, DE ~ 0, PE at 5.73, Div Yield - 2%, MCap 139Cr). Gujarat Automotive (ROE, ROCE ~30+ in last 4 years, DE ~ 0, PE at 6.72, Div yield - 5%, MCap 35 Cr). The second is a pure value buy.

GRP, Munjal auto, Setco Auto, La Opala (pre recent run-up) are few more examples. Kaveri, Mayur, Alembic are few midcap whose PE is yet to catch up with ROE, ROCE numbers.

well, most of them are auto ancilliaries. Have you looked at Rane Madras and India Nippon, for the sake of valuations? The thing is, because of their dependence on a particular sector, auto ancilliaries seldom get what they deserve to get. However, some of them, like the names you mentioned, do deserve some serious undertaking of interest.

Hi Vivek,

These 2 seems decent company to invest to me. Rane Madras has very high debt level, whereas India Nippon has a not-so-nicely growing EPS figure. These 2 are one of the reasons why I wouldn’t invest in them.

There is another unscientific yardstick I use when judging companies to invest. They should be a consistence wealth creator in the past. In other way, to say it is that they should be at the lower-middle, or middle of S-shaped growth curve, where I can get the maximum benefit.

GAG has given approx 40X gain from IPO days, 500% gain in last 5yr, 200% in last 2 year, and 50% in last 1 year. Still it is a 37Crore company. That is what attracts me. These 2 companies doesn’t pass that test.

Irrespective of the sector where the company operates, if it is giving consistent ROCE 30+ for last 3-4 years, Dividend yield of 5%, earning yield of 15% (at PE of 6.71), it gives a solid margin of safety for the investor. That is what constitute a solid value buy for me.

Autoancillariesneed timing…Rane Madras made a low of less than 30 rupees in 2009. It subsequently made a high of 190+ in 2011. So, even if somebody would have bought it at even 50 rupees would have made almost made a four-bagger, ignoring dividends. And dividend yield would have neared 15 p.c. at the acquisition cost.

Please note, I am not saying against the companies you have mentioned. But I surely prefer companies with a big turnover, say, at least 200-300 crores. Then, if the company does a 2 p.c operating margin gain, it fetches about 5 -odd crores. So, if the equity size is small, the resultant change in EPS is big enough to allow a spurt in stock prices. So, generally I look at stocks with a sales to market cap in that ratio of least 2 to 3 times. Thats when I merit a stock to be cheap enough for accumulation.

Coming back to Garware, I think its not a stock that will hog the limelight anytime. Its not a company whose product is visible. But, at the cureent levels, given that it is consistently jacking up its turnover, I think it will do better than the broader markets, considering that at current price it is fetching a neat 5 p.c So, all it would need to do better than the market is a brief 10 p.c. kind of CAGR in prices.

I do however, appreciate the ‘unscientific’ bias of yours towards stocks which deliver a consistent performance. So, even though I hardly look at past price behaviour for determining my current purchases, I do feel, using this yardstick would give you decent returns. But then, the market, as you yourself said, has all kind of stocks. I hunt for bargains, not the past best performers. My stocks would generally never carry any kind of tag. The only qualitative thing that I generally look for iscommitment of the company towards its business. I want consistent rise in turnover. A company which fails to do so, in my opinion, is at the mature lever of its life-cycle. There’s nothing more annoying than to see a drop of turnover, irrespective of the reasons being subscribed for the same, except if the drop is on account of planned shut-down.

Anyways, I will surely like to have a deeper understanding of your picks, namely Indag Rubber and Gujarat Automotive.

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September Quarter results are out, and they arent so bad considering the prevailing business environment. Whats more interesting to note is that the company has retired a good deal of short-term borrowing, as a result of which the balance sheet size has reduced. Now, all the company needs to do is to reduce its interest outgo, and concentrate on the turnover, and the results would improve automatically.

From Capital market:

Garware-Wall Ropes net profit rises 30.72% in the December 2012 quarter
Sales decline 2.09% to Rs 136.85 crore

Net profit of Garware-Wall Ropes rose 30.72% to Rs 5.66 crore in the quarter ended December 2012 as against Rs 4.33 crore during the previous quarter ended December 2011. Sales declined 2.09% to Rs 136.85 crore in the quarter ended December 2012 as against Rs 139.77 crore during the previous quarter ended December 2011.

Particulars Quarter Ended
Dec. 2012 Dec. 2011 % Var.
Sales 136.85 139.77 -2
OPM % 11.32 11.07 2
PBDT 11.92 10.73 11
PBT 7.84 6.73 16
NP 5.66 4.33 31

Upcoming quarterly results are expected to be way better than any of the previous quarters with the company venturing into more niche areas which will substantially contribute to the earnings with the FY 15 EPS expected to be around 14-16.

It’s no more a mere dividend play :slight_smile:

Request serious participation and discussion on this company, the kind seen in Kitex garments and in some of the showcase threads. Will try and do my bit on this thread going forward.

Came out with strong numbers today. Net profit up 57% YoY, 9.74cr (June 14) against 6.2cr (June 13)

Could u plz share some links on this: “Upcoming quarterly results are expected to be way better than any of the previous quarters”?


Could u plz share some links on this: “Upcoming quarterly results are expected to be way better than any of the previous quarters”?


Garware wall ropes has bought back some of its shares from the market in the June 2014 quarter. He probably took a hint from there.


That (buy back) is just one tiny piece of the multiple developments that have happened :-). Short cut to developing conviction is to simply to through the ARs of the last several years. Gives one a fair insight.

Following are my thoughts in a nut shell.

The company seems to be in a sweet spot because of:

  • Consistent growth over the last 10-15 years in Sales, NPMs, EPS, etc., though the Returns rations might not look great at the moment
  • Seems to be a literal monopoly in the spaces it operates
  • Presence in all continents with around 75 countries covered
  • Din’t too bad even during recession
  • Pick up in economy with the new govt. This might of course apply to other good companies as well
  • Regular shareholder friendly corporate actions and constant emphasis on reduction of debt
  • Geo-synthetic division is going to be a great contributor to their top line as well as bottom line going forward

There seems to be huge number entry barriers in terms of

  • Developing a huge chain of distribution network and that too in so many countries
  • Developing expertise across multiple segments the company operates in
  • Huge CapEx which takes multiple years to break even

There are multiple other barriers which explain why the company has managed to be a near monopoly throughout it’s 3.8 decades (started in 1976) of existence.

What’s impressive is they haven’t skipped dividend in any of these years.


Not sure I understood your question right. By link if you mean the source of data for previous quarters, it can be obtained through Moneycontrol or Indianivesh or from several other options that are available in todays web world.


Just to add to the EPS expectation I had put forth earlier, EPS for the Q1 FY15 stands at 4.46 and they’re not a company which has fluctuating EPSs QoQ. So, they’re well on their way to achieving 16 EPS for this FY.

They’re targeting 1,000 cr turnover by FY16 end. Should be able to get their if the focus sustains.

BTW their company website is a huge source of information as well outside te ARs.

Excuse the typos. replace “their” by “there” and “te” by “the”.

My apologies for intruding. I have been following the company since the news of share buy back broke out. I also went through couple of ARs after that. I agree with you that the company will retain its monopoly in near future due to it’s niche businesses.

Disc - Invested one day before the quarterly results.

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_Means, If the PE > ROCE & ROE than , we avoid the shares?

Projections for Q4 and for FY15

Revenue - 785 Cr
PAT - 40+
EPS - 18-20

For just the quarter:

Revenue - 200
PAT - ~ 12
EPS - 5+