Jindal Poly Film - Looks like a very good bargain

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I am currently trying to study the packaging industry dynamics. But what baffles me is that in spite of comparatively good financial performance of packaging companies since last 3-5 yrs, most of them are available at extremely low valuation (PE less than 7) as compared to financial performance. Only EPL and Mold-Teck seems to be exception.

So can anyone please explain this low valuation reason?

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@Patel_Bhai From what I know, lot of new capacity coming up in this space. This will mean margins will revert to mean and earnings could potentially drop off a cliff. Hence the market’s apathy towards cos in this sector. You may want to go through concalls / transcripts of other cos from the same sector to get a clearer picture.

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This is a cyclical business. In my opinion we have seen peak earnings and peak margins and at the peak of the cycle the p/e ratio fools us. As low single digit makes us think it is cheap. You can see marketcap to sales or price to book and compare it with median. Those are the better metrics quantitavely to look at.

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Disc: not invested

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Induced by the low valuations (specifically low price to book), I had at one point dug into promoter integrity and shareholder orientation and so many red flags popped out that I decided to strike JINDALPOLY off my watchlist completely. Others have already pointed out some red flags in this thread but here are a couple of my notes.

  1. The company seems to have effectively cheated minority shareholders by making a (effectively preferential) rights issue in a valuable subsidiary at a very discounted price. See this ET report for example and other follow up reports on ET.

  2. In Oct22, the CFO and whole-time director resigned suddenly citing personal reasons… a bit fishy perhaps?

  3. The company has had a paltry dividend payout ratio of 1%-2% over FYe20 to FYe22 despite having bumper earnings and relatively low debt.

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CFO resignation from another group Company…
15 Dec - Mr. Vinay Jain, Chief Financial Officer has given notice of resignation from services of the Company. He will continue in his current position upto 16th …
](https://www.bseindia.com/xml-data/corpfiling/AttachHis/d78878ee-4a39-4b54-8e10-6b626f8162cf.pdf)

The Company is not at all retail investor friendly and that is the reason for its cheap valuations.

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Fire damages worth 2k Crores.
Any idea on how much impact it will have on its revenue?

Because, their manufacturing facility of packaging films is situated in Nashik, Maharashtra. Production capacity is:
BOPP - 2,94,200 TPA
BOPET - 1,73,000 TPA
CPP - 33,600 TPA
Mettalised Films- 1,00,000 TPA
Coated Products- 11,000 TPA
(From screener)

Disc. Not invested. Tracking because of its low valuation.

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ED Raids BC Jindal Group, Including Jindal Poly Films, Over Alleged FEMA Violations https://share.google/dK9ITpRzHPU3SIlbf

The Enforcement Directorate (ED) has conducted raids on the BC Jindal Group, including Jindal Poly Films, across 13 locations in Delhi NCR and Hyderabad, focusing on alleged violations of the Foreign Exchange Management Act (FEMA). The investigation targets directors and employees over concerns about foreign investments and illegal fund parking, which brings the group’s international financial practices under close scrutiny.

  • The ED raid covered 13 sites associated with the BC Jindal Group, a major player in the packaging films industry through Jindal Poly Films.
  • The operation focuses on alleged FEMA violations regarding the group’s foreign exchange transactions, investments, and possible fund parking overseas.
  • Directors and employees of both the parent company and Jindal Poly Films are being investigated, suggesting possible institutional-level decision-making and compliance lapses.
  • This is a regulatory enforcement action that relies on FEMA, which is the key legislation regulating India’s foreign exchange ecosystem.

Implications and Possible Outcomes

  • Heightened Regulatory Scrutiny: Jindal Poly Films and the larger BC Jindal Group will be under increased monitoring by not just ED but possibly other regulatory bodies like SEBI and RBI.
  • Reputation Risk: Media coverage and market attention on such raids can damage reputation, impacting investor sentiment and ability to raise funds domestically or internationally.
  • Operational Disruptions: Ongoing investigations, if prolonged or escalated, can impact senior management bandwidth, internal controls, and slow down routine business activities.
  • Financial Penalties and Legal Action: If violations are proven, hefty penalties, restrictions on future transactions, or even criminal action against certain individuals may follow; could see clawbacks or seizure of overseas investments/assets.
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ED searches 13 Premises connected with Group companies of BC Jindal, Shyam Sunder Jindal, Its Directors. which comes to the words that BC Jindal Group entities remitted 5.05 Billion Rupees outside India to its own overseas Entity - STATEMENT