JVL AGRO INDUSTRIES LTD - Cash in books is more than mkt cap

Hi friends, this is my first post on this forum. Invite your comments, feedback and suggestions to improve the quality of write up.

Disclosure : Hold 5% of my portfolio since past 3-4 yrs

Business : JVL Agro Industries Ltd manufacturers Vanaspati (hydrogenated veg oils) and refined edible oils. The companyas flagship brand Jhoola is a market leader in UP and Bihar and overall, it has presence in 18 states and 2 union territories. Its manufacturing plants are located at Naupur & Varanasi (UP), Dehri-on-sone (Bihar), Alwar (RJ) and Haldia (WB). While its last year growth is nothing to talk about, what catches attention is the available cash per share.

From where further growth will come : The company intends to become a food products company from an edible oil company and has taken some steps in this direction :

1). The company plans to set up edible oil refineries in North East (70 MTPD) and Gujarat (1000 MTPD) and has identified locations / land parcels to be purchased

2). It plans to launch branded rice in 3rd quarter of 2014-15. The rice mill with capacity of 60000 Tonnes per annum is being established in Bihar

3). It is promoting an 80 acre Mega Food Park in Bihar - which it expects a will emerge as a hub for farmers, processors and downstream users coupled with adequate financing, warehousing and other support facilities

4). The present Operating margins are very low at 1.5 to 2.0% for last two years. The company plans to increase the same to 5% over next 3-4 years by following dual approach of : (i) Launching premium product categories and (ii) Leveraging Govt subsidy schemes by making investments in green field projects

5). It is already producing bakery products (bakery shortening agents)

Valuation : As per AR 13-14, the turnover has grown by 14.8% over previous year (5 yrs CAGR of 37%), and the net profit has grown just by 1.47% (5 yrs CAGR of 20%). While there is nothing special to talk about the present growth rates, the company appears to be a probable candidate for re-rating based on following :

1). As per AR 2013-14, it has got cash & bank balances of Rs.439.41 Crores (excluding inventories & receivables). This is Rs.26 cash per share. With CMP of Rs.20, the rest of the business is available for free.

2). For a 4800+ Crore FMCG company, the valuations appear cheap with PE of 5 and Mkt Capt to Sales of 0.07

3). The company is based in Varanasi which is a chosen constituency of Prime Minister Mr Narendra Modi. The city ranks high in the agenda of smart city projects. In fact, after this news, the stock has already rallied from 15-16 to present levels.

Concerns :

1). The company has signed MoU with UP Govt to invest 2200 Crores. Details are not available as to how the company plans to raise this money. (http://www.business-standard.com/article/pti-stories/investors-ink-mous-to-invest-rs-60-000-cr-in-u-p-114061201104_1.html)

2). The company has set up a cement unit at Rohtas, Bihar, which is a totally unrelated business

Like with all cigar butts, the question is if the butt is wet - meaning if the numbers can be trusted. They hardly pay 4 % in taxes - so one needs some

I am sure you have heard of KS oils etc. a lot of these firms are fronts for politicians to suck up money - agro processing is tax exempt and if using back door policies, you provide land and power at subsidized cost, it is a way to take out money legally from the farmers in the constituency into a corporate entity without paying much in taxes. I know of several STPI companies which do this.

I am not saying JVL is doing this - I would be comfortable if :

)- the auditor had at least a website - a varanasi based auditor

)- trading revenues from commodity - again one has to figure out if this is sustainable

)- company’s capex subsidy inflows were Rs. 55 Cr. the oldest trick in the book is to overinvoice capex - get higher subsidies and then show that as extra profits.

)- company’s name changed from jhunjhunwala vanaspati to JVL. check the IT cases on the latter’s name - judgement given by Katju. Same tricks as discussed earlier to avoid tax:


I am not saying there it’s an issue but I want to be sure what you see is what you get.

Best would be to find out “scuttlebutt” on jhoola brand from some distributors/traders in north india.

Sunidhi Securities has come out a research report on the company with price target of 30.

During Q2FY15, net profit jumped 42% to Rs 18.9 crore on 53% higher sales of Rs 1170 cr. Q2FY15 EPS stood at Rs 1.1 against Rs 0.8 in Q2FY14.During H1FY15, net profit rose 20% to Rs 35.9 crore on 18% higher sales of Rs 2389 crore. H1FY15 EPS stands at Rs 2.1 against Rs 1.8 in H1FY14.

**The company claims that its “Jhoola” brand is very popular in north and north eastern states. Anybody from those places, have heard of this and any comments? **

The company is also making some positive noises viz 1. Capacity expansion 2. Entering new segments (branded rice/food park/bakery additives) and has committed to increase the gross margins from present 2% to 5% in next 2-3 yrs.

I think it presents value and warrants scrutiny. Request comments from seniors pls.

One thing I don’t understand is why does the company carry so much debt if it has so much cash, and the other probably even bigger question is that why is it deriving such a small interest income if it has so many FDs. I don’t know if the cash is real.

Had a look at his company since it looked a little interesting from quantitative standpoint.

A few notes from my analysis of it:

  1. Cash can’t really be counted on since it seems they are some FDRs pledged against which there is a margin money account. I don’t understand the technicalities of this much, but I have a sense that if short term loans rise (which will happen in near future) this cash will be wiped out.

  2. There is a “Capital Subsidy” income of appx 40 to 50 crores every year - kind of Govt incentives in that sector; so since the company is expanding even foraying into infra for food processing (Mega food park) its getting this incentive. I saw how it should be accounted for, in CAClubIndia and it seems this money should be spread over useful life of assets if they are depreciable assets else they go to P&L as one-time income. Since the AR doesn’t talk much about this subsidy we are left to guess!

  3. Remove the above “Capital Subsidy” income and your actual core income is hardly much! PBT of appx 18-20 crore at most? So taxes are in line with that considering some deductions they might be getting in the sector.

  4. Rice segment is hardly material to be reported as a secondary segment, but riding on that they do say they are a "FMCG’ now. :smile:

  5. Most of all what struck me was management is too worried about their “Cheap” valuation! They have actually dedicated pages in the AR to make a case for REVALUATION! Come on now! If you think its cheap, why not quietly buy from the open market and increase your stake?! That would give investors also confidence right?!!
    I guess their motive in getting a price rise in the shares may be - pledging shares or selling them!

Overall, a highly cut-throat competitive industry, no differentiation possibility. Promoters’ worry over share valuation is a big red flag!

Also, its an industry where they would have to KEEP RUNNING JUST TO STAY WHERE THEY ARE. (Red queen effect). Can’t really expect much here unless we get to buy at MCAP below 100 crores!

That’s all based on AR 2015 and IMHO.



@Advait_6270 @theashworld @ParvinW

Any updates on the food park business?

What i liked about the business:
1)One of the largest vanaspathi ghee processors with 1.65 LTPA capacities

  1. OPM Margins have been rock solid albeit low reflecting the fixed margin refining business.

  2. Has portfolio of own brands “Jhoola” which seems to do quite well in North Markets


  1. Huge consumption opportunity as per AR: Edible oil consumption is forecast to rise by 4% to 22.4 million metric tonnes.Expanding population, rising disposable incomes, growing demand from hotels, restaurants, institutions, households and food-based industries will encourage higher consumption. The per capita edible oil consumption in India is also increasing and was estimated at 17.18 kilograms for 2015-16. However, this remains below the global average per capita consumption of 24.86 kilograms.

  2. Strategic focus by the management from being a B2B to a B2C player by not only growing into branded edible oil player but also diversifying into multi food products. (In the last five years, the Company has added 6 new products to its product portfolio including rice. In order to reduce its dependence on the oil business, It has also set up a chemical plant in Assam producing cosmetic products, as a part of its forward integration strategy in addition to the Food Park).

  3. Good Earnings yield and return on capital available at 0.5 PBV…

Key Risks:

  1. Managing Input Costs and ability to pass on the same to consumers esp. as its evolving into B2C.
  2. Capital Allocation/Diversification risks
  3. Evolving consumer preferences as they switch to more healthier cooking oils eg Rice Bran etc.

Disclaimer: These are purely part of a general discussions and not a recommendation of buy or sell. Please do your research before investing. No position in the mentioned stock.

promoters are issuing pref. shares and warrants n also taking debt and profit generated are piling into cash and investments Does it make sense?