1…Promoters have also raised their holding in SHIL
2…Outsourcing cost is always higher than manufact. cost and so operating margin will increase in BPD segment.
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Can anyone say how much debt and equity will be added to the balance sheet of Shil?
Just see results of HSIL, HSIL has till now manufactored brolllica products with a 4% margin only hence full marketing margins were passed to SHIL. Now SHIL EBIT margins will go down as 500 cr sales without any additional EBIDTA ane 650 cr loan will be added to books. Sold SHIL at 450 range and entered HSIL, i was never comfortable with this conflict of interest. Hiwever SHIL will do well in long term, saw their short format EVOK store in noida extension yesterday.
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There is a investor call for this today evening.
But this one looks bad for SHIL.
Total investment: 630cr
Loan: 550 - 570cr
Margin: 3-5%
Loan will be in tune of 10%, so will be losing 5-7% (~50 cr) on this annually.
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Margins will be incremental by 3-4%. So on top of 7%, 3% will be added. And at full capacity the plant can do revenues of 1100cr. since last quarter revenue itself was 235cr.
please correct me if i am wrong in my understanding
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1100 is what it is capable of when running 100% which is very very positive case.
FYI: For FY 2020-21, the turnover was just Rs 592.
I am expecting this to be 800cr in coming year, and can reach 1000+ cr in 3-4 years time
Benefit next year:
800cr x 3% = 24cr
Benefit (when it reaches full capacity in 3-4 years time):
1100cr x 3% = 33cr
Loan hit:
570cr * 10% = 57cr
Before division, the building product division was doing 16 to 21% margin with 18 to 24% ROCE. We can expect something in similar line going forward.
Management has guided for debt to be repaid in 2 to 3 years with benefits of additional margin and reduction of related party transaction.
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Please go through the video above by the CFO - the incremental margin uptick is 3-4% in the near term itself, as they need not pay for the outsourcing cost. Also the operating leverage will play as we cannot expect same low margin even for 500 crore turnover and also for 1000 crore turnover. There are other future benefits too as there are significant land assets being transferred too along with the factories
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Regarding Land:
Only one plant brings with it the land bank. Rest all are just plant and machinery rights (no land, not even building).
Regarding Margin:
They earlier used to pass on this 3-4% to HSIL as contractor fee
Now, they can keep this with themselves (hence expansion) but this is coming at cost of 630cr (550cr debt)
Benefits:
The immediate benefit I see is: no related party transactions.
Rest is yet to be seen over next couple of years, but this will certainly put dent on ROCE. Proof is the price movement of both HSIL and SHIL.
On debt repayment:
Yes, SHIL are planning to repay in 3-4 years but that money will not be earned by just the manufacturing units. They will pay from the total operating profits (which includes existing businesses).
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Out of the total 630 cr, 50-60 cr will be used from internal accruals, around 180 cr will be passed on as working capital. So total additional debt used will be roughly 400 cr at 6.5% interest. Personally I would wait and watch if the management walks the talk or no. There’s margin of safety here I feel.
PS - Mr porinju mentioned at the beginning of the con call that he thinks the previous mistake has been corrected by this purchase.
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Hi, Are Somany Home Innovation Ltd(SHIL) or HSIL related to Somany Ceramics ?
Somany family split their business into 3 groups among the brothers.
- HSIL which further demerged SHIL
- Cera Sanitaryware
- Somany Ceramics
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A bulk deal by Sunil Singhania in SHIL
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Somany Home Innovation Ltd stock price keep going southwards. Is it anything to attribute with the change in stance of the company to convert from an asset light model to an asset heavy model by purchasing the manufacturing unit from HSIL and now trying to rebrand itself through a name change?
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one of the key raw materials for the faucets and sanitaryware business is natural gas, and since natural gas prices have gone through the roof, I think we can expect margin contraction, and my guess is that the stock price is going down because of this
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HSIL name changed to AGI green pac. SHIL name changed to HHIL (Hindware Home Innovation Limited.)
AGI greenpac seems to be limited to Packing products.
The whole Hindware brand name and building products and FMEG business seems to be transferred to Hindware Home Innovation. This seems to be a move to distance the family name heritage and embrace the brand name ‘Hindware.’
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Yes it’s too mentioned in B&K securities report about hike in natural gas is causing Problem for tile manufacturers and they are facing steep competition from unorganised players. Price hike of about 40% has already taken by some organised players like Johnson and Kajaria.
Moreover Natural gas supply has been cut by 50% due to which prices of tiles were increased by 15% in April 11.
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