Haldyn recently had a fraud of 16 Cr in their March qtr. On top of that the Shetty family seems to be leeching money off the company. They recently gave themselves a raise for the increase in turnover, despite there being no increase in capacity.
People worried about financial fraud may be interested in this: -http://articles.timesofindia.indiatimes.com/2002-10-01/delhi/27318864_1_whiskey-bottles-mumbai-police
I don’t think the management of Haldyn (assuming of course this is the same Haldyn which is reported in the article) would have been so naive as to unknowingly accept production orders for an international brand that too from a “plastic” bottle manufacturer. No international brand orders anything from anybody withoutempanelling him.
As Buffett once said - “If something is too good to be true, then it probably is”. I was also once attracted by the mouth watering valuation numbers of this company but was repelled by this Times of India article.
This taint would remain for long unless the management can demonstrate good governance over a long period of time… the magnitude of the financial fraud further establishes weak internal control systems 
No one here tracking this company anymore…Just declared Q1 results…Not bad numbers given the macro environment…Yes there was a fraud by some employees but that maybe accounted for by now…Also management does not seem to communicate…But clean balance sheet and looks very cheap
Though Gujarat Being Dry state ,Advantage of Gujarat is substantial savings in freight cost of raw material and natural gas. This locational advantage comes by its plant’s proximity to the mines in Gujarat and Rajasthan and gas fields of ONGC.
competitive edge with substantial savings in freight cost of raw material and natural gas. This locational advantage comes by its plant’s proximity to the mines in Gujarat and Rajasthan and gas fields of ONG
competitive edge with substantial savings in freight cost of raw material and natural gas. This locational advantage comes by its plant’s proximity to the mines in Gujarat and Rajasthan and gas fields of ONG
Hitesh, Sandeep,
Can i have your current view on this scrip.
Results are little bad. Whther Red flag can be nullified? or still Mgmt clarity is overhanging.
Thanks
Karthik
Karthik…Unless the sales numbers show growth Q on Q, I would avoid this. When the discussion was initiated, Haldyn seemed destined to a 25% growth based on expansions in pipeline. However, will wait and monitor closely.
Haldyn has mentioned capacity capacity expansion in its latest Annual Report. Also, it has entered in to a JV with Heinz Glas International GmbH to produce glass containers for cosmetics and perfumery industry.
- Does anyone have an idea about the capacity addition Haldyn in planning?
- Are the margins higher for glass in cosmetics and perfumery?
Looks like this thread is quiet for some time now - I was going through the last 5 years balance sheet of the company and there are few observations - anyone who tracks it more closely can have answers.
- March is always subdued in terms of its revenues - every single year this can be observed - and the same time change in inventory is drastic - can someone explain this.
- Can someone share more details on JV with Heinz - I believe its a 50:50 but I need to understand what has Haldyn gained from this.I am asking this because at the end we need to understand what can drive the growth going forward - it has increased but not that way an investor would generally see.
- I am also not to happy about the operating margin which generally hovers around 9% - so this adds to the low revenue in last 5 years.
4.Also, could someone shed light on how are they placed compared to their competitors.
5.Their dividend payment has been consistent - but any idea about management and other related details.
Will share more details as I get going forward.
Not invested as of now.
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any idea who are their competitors in this space? i have very limited knowledge about this sector
Haldyn Glass came out with a disappointing set of Q4 numbers, after a series of good quarters, & the stock was severely punished. The Co. mainly supplies glass bottles to the liquor industry. As such it was first affected by demonetization & later by the ban on sale of liquor on Highways, which resulted in reduced liquor sales of 10-20%.
The Co. had in 15-16 undertaken major capex for expanding capacity. This was carried out entirely from internal accruals.The current price correction seems to have brought the stock to interesting levels. At Rs. 36, the market cap is is about 195 crs. The Co. has a JV with German Heinz glass which will start contributing to the numbers from the current year. The JV will largely be exporting to Heinz overseas clients, supplying largely to the perfume & cosmetic industry thereby reducing the Co.'s dependence on the liquor industry somewhat, though the liquor industry itself is high growth, the current head winds notwithstanding.
Disc: Invested
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The consolidated BS shows increase of long term borrowings from Rs. 19 lacs to Rs. 1431 lacs…the short term borrowings on the other hand decreased from Rs.1779 lacs to Rs.132 lacs. The increase must be for investment in JV with Heinz.
Do you have any idea on the expected additional sales and what will be the profit sharing ratio with Heinz. It was mentioned in the prospero tree report that “The plant is expected to commence production by July’16 and will have a revenue potential of Rs. 100 crore to Rs. 150 crore”.
Hello rajeev sir .now liquor industry is reviving and it is considered as best consumption story by many ace investors.if consumption of liquor increases then it is positive indication for sales of this company.your views sir
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I was looking into this company as prima facie it looked cheap by most valuation standards. However I came across the following issues and want to share with other members
Haldyn Corporation Ltd
The promoter of the company is Haldyn Corporation Ltd which hold around 53%. This hold co is controlled by the Shetty family and it has the same office address as that of the listed entity. There are significant related party transactions by the listed entity with this hold co as follows:
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Payment of Royalty
In the past few years, the following amount (in rs crores) has been paid as royalty (which is expensed in the P&L and thereby reduces the margins of the listed company)
Mar-21 Mar-20 Mar-19 Mar-18 Mar-17 Mar-16
1.75 2.34 2.27 1.69 1.80 1.40
It is a commodity glass making business and giving royalty seems strange -
Large Purchases from Haldyn Corporation Ltd
The company regularly purchases material (worth 19 crores in FY 21) from the promoter entity and this pattern is also in the previous years. While this maybe a benign issue but it is important to keep in mind that these kind of arrangements have been used as a margin management tool or used to earn money at the expense of the listed entity by other companies. -
Payment of rent to Haldyn Corporation Ltd and to promoter TN Shetty
The company has paid Rs 1.27 crores of rent to the aforesaid people. This has been continuing since many years -
It APPEARS that the loan in Haldyn Corporation Ltd is more than listed entity
As per MCA website, the holdco has a charge of around Rs 7.7 crores. This charge is more than the loan of the listed entity (that has loan of Rs 3 crores). It is important to note that the charge of Rs 7.70 crores does not necessarily mean that much loan is outstanding and it could be lesser than that as well and one can only know the exact number after seeing the balance sheet of Haldyn Corporation Ltd. However, this clearly shows that related party transactions will continue so as to service the loans of the promoter entity
Some strange things
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Very high legal & professional fees of around 2.5 crores which has been there for many years now. This amount is high especially when you compare it with the payment to auditors which is around 19 lacs. With its high legal & professional costs, one wonders if its a real estate developer or a glass manufacturer
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Donation of Rs 1.31 crores (over and above the CSR) is 10% of the Profits.
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In the CFO section of the Cashflow Statement, the company is adjusting for non-current assets & liabilities as part of working capital!
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There was a large increase in provisions for expected credit losses this year of 2.41 crores
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There are some loans Rs 1.49 crores and security deposits of Rs 2.47 crores given but not disclosed to whom
Joint Venture: Haldyn Heinz Fine Glass Pvt Ltd
The company had formed a 50%-50% JV with Heinz Germany for making perfumes and cosmetic bottles. As per its website this JV has a capacity of 55 Tons/day. With the amount of money being pumped in this JV, its clear management is serious about this segment.
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The company has become a 55.6% shareholder in April 2021 (i.e. From FY 22 onwards) and purchased the extra 5.6% at a valuation of Rs 8 crores in effect valuing the JV company at Rs 143 crores. This valuation for purchasing 5.6% seems very high when you see the replacement cost of such kind of factory as given hereinbelow. There certainly could be a justification to this purchase of Rs 8 crores but the same is not mentioned and needs to be asked
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Another company - HSIL is setting up a greenfield facility at a cost of Rs 220 crores to manufacture pharma vials as well as specialty vials for perfumes & cosmetics with a capacity of 150 tons/day. Thus a VERY ROUGH estimate of the replacement cost of setting this kind of unit would be 220/150*55 = 80 crores.
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The MCA website also shows total outstanding loan charges of 34 crores on this JV. As mentioned even earlier, this does not NECESSARILY mean that the entire loan is outstanding and the exact amount can be known only from seeing the balance sheet of this JV. This is also kind of corrobated with the credit rating note of Mar-20 which states that Rs 25 crores would be taken as debt in the JV (detailed below). If we were to assume the entire charge is outstanding then valuation (as per replacement cost) of JV would be 80 - 34 = 46 crores x 55.6% = 26 crores for the company’s share.
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Since its a new factory, the JV has been losing money every year in the past few years. While the losses are coming down, one should wait till the results stabilize and profitability starts to show. This is more important considering the fact that, as per Credit Rating note, for the optimum utilization of furnace of the JV the company plans to set up an ADDITIONAL bottling line in the JV. The said capex is expected to be completed in FY21 with an outlay of Rs.25 crore. The company plans to fund the entire capex through bank borrowings. In case if banks require promoters to infuse funds, HGL might have to infuse equity capital amounting Rs.2.5 crore.
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The accounting treatment of this JV is also peculiar. From FY22 onwards, this JV ought to be consolidated into this company. However in the FY21 AR, the company states that the company will not do so because despite the majority share its rights would remain restricted and thereby there is no need of consolidation in FY22
. Obviously the company doesn’t want to consolidate as consolidated statements would show lower margins and higher debt of the loss making JV .
The aforesaid items can be pondered over in case you want to invest in this company
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Directorate General of Trade Remedies (#DGTR) recommends Anti-dumping Duty (ADD) on imports of toughened glass, duty for 5 years on toughened glass imports from #China , says Commerce Ministry.
It’s recommendation and not yet implemented.
https://twitter.com/CNBCTV18Live/status/1696710799505694754?t=ILZOPE5DziiTm7eOfpKpHg&s=19