Sorry to burst your bubble, but it is extremely rare to find a management that will sit and educate you about their business in such detail. And it is not a reflection of their quality or shareholder friendliness.
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[quote=âLeading_Nowhere, post:23, topic:2737, full:trueâ]
Sorry to burst your bubble, but it is extremely rare to find a management that will sit and educate you about [/quote]
Your statement says it all. It is extremely ârareâ and thatâs what we are here for. Finding the next RARE MANAGEMENT.
You have to take your chances. Quality of shareholder friendliness âalsoâ depends on how they reply and how approachable are they. No reply is definitely a red flag atleast for me.
I take my chances.
Well, it is a fallacy to think not replying to shareholders is somehow indicative of management quality. In small companies, people have multiple roles and they do not often have the time or the inclination to reply to long pages with detailed inquiries. When companies grow larger and often when they have the bandwidth and need to respond to shareholders, they do so. However, this in no way means that the company is not working for your benefit even if they do not respond.
When you are investing in really small companies, the responsiveness of the management often swings at the extremes. I, for one, do not take it as a red flag. There are tons of examples of companies that have created immense wealth for shareholders and still do not respond much to shareholders (Force Motors is one for me). Theyâre just busy.
Anyway, I do not wish to argue over this. To each his own philosophy.
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Sharing some data that I am aware of. Hope it will help clear the air somewhat.
The Pant Nagar plant has recently been commissioned. The IT benefits are no longer available there but the excise benefits will continue. The new plant at Baddi should be operational in a few months from now. The Co. operations are currently running from a rented premises. The Guwahati plant is again running from a leased property & the Co. plans to set up a modern plant in due course, I guess once the new Baddi plant is up & running. Sohna, to my mind is only the registered office with no plant. The plant in the South is perhaps only on the drawing board stage, & will probably come up at Kakinada where the Co. has land.
The concept of installed capacity has limited value in these plastic companies as as there may be smaller products weighing less that could be more profitable. I gather that the current capacity utilization is about 80-82%. The current business environment for the Co. is very positive with the likes of Patanjali etc. growing & that is why the mgt. is aggressively expanding. The current operating margins are about 20% which are likely to be maintained & improved as economies of scale kick in. The Co. hopes to maintain its current debt levels & use internal accruals for growth.
The merger with Jauss is more a question of when & not whether! The results for the year ended March 2016 will be consolidated for the first time & has the potential to re-rate the stock. The March qtr is usually the best for Co.'s in the sector.
The Container freight station at Kakinada is still some time away, though the land has been allotted. The promoter who hails from there is probably well connected to have got the land allotted.
It makes sense for the Co. to expand gradually giving time to consolidate as it grows.
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Patanjali is aiming to double sales to 10,000 crs in 16-17. This can only mean good news for Innovative Tech. I feel the opportunity is huge, but a lot will depend on the Co.'s ability to scale up.
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Hi Rajeev,
Thanks for sharing thoughts and information on Innovative Tech Pack. Company looks interesting based on existing numbers due to followingâŚ
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Last 4 quarters EBIDTA stands at Rs 15.3 cr, while Jauss Polymers EBIDTA stands at Rs 4.8cr (Innovativeâs share will be 1.97cr). Thus, Consol EBIDTA stands at close to Rs 17cr.
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EBIDTA margins and Return numbers are healthy.
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Working capital cycle is well managed.
Core business, thus look very interesting given historical numbers and incremental capex with manageable debt.
ConcernâŚ
Over last 4 years FY12-FY15, Exceptional Loss in form of change in Depreciation method and Chit fund loss stood at Rs 5.9cr. Though same for 9M FY16 has been Rs 1.2 mn. Can we get some clarity here, if the same will not be repeated.
Jauss Polymer Acquisition
It seems ITPL has acquired Jauss polymer really cheap based on what numbers are coming out of Jauss for last few quarters. Based on available info, total cost for Jauss acquisition is Rs 2.6cr (for 41.05% stake)
Jauss Polymer Transaction
So, company hasnât spent much to acquire Jauss Polymer. September 2015 balance sheet shows spike in Long Term Borrowing from 7cr (March 2015) to Rs 16cr, while Short Term debt fell from Rs 10cr to Rs 7cr. Company has announced inauguration of 2 new manufacturing facilities at existing locations (Pantnagar and Baddi) in Dec and Jan. Both are expected to be commissioned by July 2016. Increase in LT debt could be for this expansion, since Jauss transaction is too small.
Please share your views.
Thanks.
Disc - Initiated tracking position.
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Hi Nirav,
thanks for putting question about cheat fund business.
Hello Rajiv ji,
Thanks for your inputs.
In addition to above question can you put here sales growth in terms of number of units sold as growth on value basis looks completely flat for last 3 years.
I had sent an email to the company secretary âVishesh Chaturvediâ as well as Chairman âK.S. Raoâ about the flat growth and Chit fund business. Got a response from Vishesh saying flat topline is due to decline in Crude prices and Company is not involved in any Chit Fund business. I spoke to him yesterday over the phone to confirm about the Chit fund business and he replied saying Innovative Tech is not involved in any chit fund business. I have that mail in my inbox.
Disclosure - Invested and adding more on declines.
ok. but then what are those chit losses mentioned in AR. I will try to probe more.
@RajeevJ Sir, my concern was about SHP from 2005 - 2010, Promoter holding was below 20% and Others were holding 75+%. Post 2010 it reversed. I tried searching what exactly happened during those days, couldnât get any info.
That raised doubt on the promoter integrity.
Now my questions,
- Was there any management revamping post 2010?
- What was happening in the company during 2005 - 2010?
@nerolu_praveen : When dealing with micro / small cap stocks, I avoid looking that far back as data even for the current period is not always forth coming! I am not saying that one shouldnât, but I usually donât. I feel for the stock to create wealth for us, the Co. should be able to scale up & that is something we need to watch out for. The next few qtrs should see the effects of expansion coming in, & that really is the investment thesis here.
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Hello anyone here has any idea about the current capacity and new capacity after adding 2 new facilities?
The results came out yesterday. I only see standalone statement and no consolidated statement. Anyone knows why?
PBIT is inline taking into account higher raw material cost. Raw material cost has increased to 69% of sales in Q4 compared to roughly 50% of sales in Q3. (EDIT - Statement not correct, check next 2 posts)
Long term debt at 21.5Cr. Q4 standalone PAT(and hence overall PAT for FY) affected by extraordinary items( write-off and some part of building renovation expensed). Tax payment has started too as expected.
Q4 topline always seem to be higher than other quarters in the past 3 years. Any ideas why?
With the new plant in Baddi being commissioned in June, need to watch the next few quarters performance.
Disc: Invested. Small portion of portfolio. Views could be positively biased.
Hi Jana,
Sales number arenât comparable. If you see notes, it says quarter had trading activity of Rs 1481 lacs with margin of Rs 10 lacs. If the same is adjusted, topline is flattish qoq while yoy its up 32%. EBIDTA Margins adjusting for this trading activity is 26.4% (EBIDTA of Rs 6.2cr on topline of Rs 23.4cr). Operational nos thus continue to be very healthy. Company has again provided googly with exceptional items though 
Capex is very well reflected in balance sheet impact of which should come over coming years. WC is well managed.
Disc - Invested and added recently.
@Nirav8
Thanks for correcting my mistake. I had misread the notes earlier - trading activity as 148 lakhs instead of the correct 1481 lakhs and hence the confusion. So my statement regarding raw material cost as 69% of sales is certainly not correct since the reported raw material cost in the statement will include raw material traded as well.
However, if I subtract 14.8 Cr from topline we get ~24Cr which is flattish compared to Q4FY15 while higher compared to Q3FY16. We do see higher topline in Q4 compared to other quarters as in last 3 years.
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We have no information about the total capacity and expected revenue from the new units. I have used fixed asset turnover ratio to arrive at an approximate number. Assumptions could be completely flawed.
Average fixed asset turnover ratio (net block) for the last ten years (2006-15) is 2.55. In 2015 AR, company has mentioned that it is going to spend 25 crores for setting up 3 manufacturing facilities. Sales from new facilities could be (2.55 * 25 crores) 63.96 crores.
Note: An attempt to identify approximate sales numbers from new facilities. Final number could be completely wrong.
And Patanjali is attracting a lot of packaging companies. Hence, there is huge competition to get a share of its packaging business.
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During the year 2014, promoters increased their salary to 54 lakhs per annum (promoter and his sonâs salary together) whereas the total profit was just 1.85 crores. It does not look good. If we assume just 64 crore revenue from the new plants, it looks a high risk low return opportunity at current levels.
Disc: No Holding
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Observations on Q1FY17 nos - Topline and Bottomline are flat YoY. OPM continue to be healthy at roughly 24-25%.
Jauss Polymer results show top line growth YoY and the OPM is roughly about 15%.
Is there any way to figure out if there has been any volume increase in Q1 and capacity utilization in their new plants for Innovative Tech Pack?
@RajeevJ, @Nirav8 - Your views/inputs would be greatly appreciated. Thanks.
The Annual Report for 2015-16 is out & makes for interesting reading. The mgt. seems to very positive about the future. It is clearly looking at sustained growth over the next 3-4 years & plans to become a pan India player. It current customer base includes Dabur, Patanjali, Mother Dairy, Wipro, Godrej,SC Johnsons, Perfetti etc.
Innovative 15-16.pdf (1.6 MB)
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Rajeev Ji
If it is not my mistake than top ten shareholder list mention in latest AR, Sh Rajeev Jawahar hold 1.0121 % total quantity 2,21,292.
I am learner and have not vast experience to read AR, please sorry if I am wrong.