Kalpesh's Portfolio

KG Petrochem
Reason for sell -
Their artificial leather business not yet producing any profit, and interest on debt taken for this business will start from next year.
It will be the case of producing cash from textile business and burning it in art leather business.
I think it was a wrong capital allocation decision by management and now they stuck with huge debt and a cash burning business.

stock is trading well below the intrinsic value of its textile business alone but I doubt rationality of management, so sold entire stake.


Sudarshan Chemicals

Rejected the idea as I suspect governance issue.

Its an excellent business available at excellent valuations but I found they have related party transactions with “Rabro Speciality Chemicals Private Limited” which is a related party and owned by same promotors as of listed company.

In AR they did not mentioned much about this entity except Commission to selling agents 17.51cr for FY20 & 17.24cr for FY21

This is a huge amount compared to net profit of the company for the same period.
I wrote to the CS and even after repeated follow up he has not replied.

I have also gone through last 19 con-call transcripts and surprised that not a single analyst asked any question about this related party transaction, and this company is widely followed by huge number of analysts :thinking:

Why would the company cannot employ the same services inhouse that the same promotors can provide through a related party?

I think there is a possibility of siphoning money off from listed entity by promotors,

These are my thoughts and I could be wrong.


Hi @kalpesh4430 what are your thoughts on satia? Last few quarters they were very confident about the zume tie up 40%+ margins they were envisioning. However last quarter was a complete turn around in stance now saying margins about 20% and not sure about feasibility. They mentioned a lot of smaller players have come up which are producing cutlery at a much cheaper rate. What I don’t understand is why can’t a company with the backward integration as good as satia produce cheaper than them? Look forward to your views.

Satia Industries

Let us see the business in three parts
Purchase side | Processing | Sale side

They are usually in advantageous position in first two.
based out of the area where abundant raw material is available &
they are capable to run plants and machineries at high efficiency and always try to improve further.
on the sale side they have no advantage as paper prices are market driven, not in their control.

They are doing some capex on steam system, pulp & now planning for speed increase of PM3 which will further increase plant efficiency in coming years.

Intrinsic value of business is going in only one direction :arrow_upper_right:

Long term risk that I see (5 to 10 years) -
With plastic ban in force, paper cutlery will become hot sector and every Tom, Dick & Harry will put a plant in that area due to raw material availability.
It will increase raw material demand and rates & high competition for cutlery division.
Also HPCL has put 2G ethanol factory in Bhatinda, Punjab which use agri residue as raw material.

This will not affect only cutlery business for Satia but paper, power & cutlery all divisions.

So out of the two advantages one will slowly go away with time(may take several years), but I think Satia is safe for next few years and may do good even after that.

I don’t have facts to support this. only people involved in this business in that particular area can guide us. I can be wrong as this is just a thought came to my mind & I didn’t find any data on google to check the facts.

Disc: Heavily invested

SATIA IND 129.65 41.1% 34.2%
TIME TECHNOPLAST 106.30 24.8% 151.1%
DHP INDIA 1,035.05 18.4% 108.5%
VIPUL ORGANICS 147.00 15.7% 51.3%

How to analyse management –

There is no straight forward answer to this, its case-to-case basis but to give fair idea here we go –

First thing I look for is intensions of management/promotors, if their intension is to grow listed entity that’s great, lets go ahead

Next I look at how management has treated minority stakeholders (Not just shareholders) and how honest they are with stakeholders.

After that I look at how rational management has acted in the past and how rational they are acting now. I feel very very comfortable by this ability alone, and need to keep tracking their rationality going forward.

I want them to understand in & out the industry they operate in and able to run business efficiently. (Capable management)

I want them to be great capital allocators

I also look for if they have walked the talk in the past

How to do it –

Read at least last 10 years Annual reports

Read all concall-transcripts ( I like reading & not audio records, though sometimes I do cheat :wink:)

Look for management interviews

Read ValuePickr threads

Google them etc.

It’s case to case basis, sometimes I go beyond 10 years sometime 4-5 years is enough to build confidence, its all about self-satisfaction.

How do you define management rationality – in simple words they take decisions based on facts & data and not emotions. I want to stay away from managements who do things just because competitor is doing it.
They don’t hesitate to sell off businesses/division’s where long term prospects are not great

How do you know management is great capital allocator or not – I want them to analyse facts and then start slowly, after the clouds are clear they can gradually increase their speed of expansions. (Size of expansion should be limited to how far they can see clearly)

I want them to put their hands only where return ratios will be well above cost of capital

I feel comfortable when management is focused in the core business only where they know in & outs of the industry, expansions in this limited area I think are almost risk free. (Core of the business can change, they can change their focus to where they find new success slowly with time)

I like managements who do things differently, Afterall to make money in capitalism is to do things differently otherwise capitalism is brutal, and all great capital allocators know this fact very well.

I want to stay away from managements who want to put big money in relatively unknown area or outside their core competency.

When great capital allocators don’t find any good opportunity, they return the cash to shareholders through buybacks or dividends.(They don’t do stupid acquisitions or buy unrelated businesses just because money is available at their disposal)

Another important thing to note is great people don’t talk much, stay away from publicity they just want to work silently and live simple modest life, they surround themselves with other great people(employees/colleagues), they don’t hesitate to take responsibility.

Looks simple right, but not easy, lots of work involved compared to analysing business & doing valuations.

There are always exceptions, I do overlook some of above points based on either attractiveness of present valuations or near to medium term business prospective, case to case basis.

Hope this is value adding, Thank you


Hello @kalpesh4430 sir, I just wanted to know what CAGR are you aiming for?

Kalpesh ji,

If you have fund, which stock you will add more from your these 4 stocks.

OR which new stock investment you may think of

No particular CAGR in mind, never calculated till date.
but 20%+ will be great.

I would either add all 4 equally as I did recently or look for an opportunity in Banks/Auto ancillary space at the moment for long term.


Satia Industries Q1 FY23 result

Very much satisfied with the result,
as per the thesis they are one of the lowest cost producers, so revenue scaling up is not an issue.
OPM are down due to increase in agri raw material costs,
Net profits margins are down due to both increase in raw material costs and depreciation.

company will do full capacity utilization easily + they have done steam system capex + doing PM3 speed increase capex.

some time in future I expect agri raw material cost to come down and benefits of new capex will get capitalised(Operating leverage) by then, owners earnings will be substantially high and thesis will play out completely.


This scenario may be playing out.

1 Like

Sir, If you may explain in some more details.

Your original post has a mention of a & b possibilities “Consider two scenarios”.

However, the quoted text has a mention of b scenario alone.

Isn’t the paper industry in uptrend for India, with issues reported abroad?

Any views on Century Textiles & Industries, West Coast Paper Mills, in comparison to Satia Ind?

One can classify paper industry on type of raw material used,

  1. companies that use major raw material as wood
  2. companies that use major raw material as waste paper
  3. companies that use major raw material as agriculture waste

yes paper realisations are high presently.
companies like JK which use wood as major raw material are benefitting the high realisations and cheap raw material at the same time so they are enjoying high profit margins currently.
Companies like Satia which uses agri waste as raw material are facing headwinds at the moment due to price inflation, central banks around the world including India are trying their best to bring down inflation, prices of many commodities are already coming down, so as and when their raw material cost comes down which will happen one day (I think in 3-4 Qtrs ) their profits will increase significantly, and so will the price.

“Big money is not in buying or selling, its in the waiting” ~ Charles T Munger


Satia Industries India Rating credit rating Aug 2022

• All ratings upgraded from A- to A positive
• SIL doubled its production capacity to 2,05,000 tonnes per annum (MTPA) from 1,05,000 MTPA in February 2022, leading to a significant increase in the company’s scale as well as market position.
• The expansion could also improve the company’s product profile by increasing the proportion of high-quality wood-based paper to 40% (from 25%).
• Maplitho paper and snow-white paper are the highest sale contributors, accounting for 37% and 31%, respectively, of the total sales in FY22, followed by cream wove (8%), cover (6%), surface size (4%), cup stock (3%) paper
• The new capacity could enable the company to manufacture a higher-quality copier paper in addition to catering to incremental demand from state education boards.
The management also expects a reasonable uptick in its operating margins over the medium term, driven by the change in product and higher operational leverage
• While the paper industry is fragmented with over 750 paper mills in existence, less than 100 mills have a capacity of more than 50,000 tonnes per annum and less than 15-20 have a scale and integration that is comparable with SIL
• High capital investment, technical expertise, gestation period and raw material procurement challenges restrict the entry of players of this scale in the industry.
SIL’s plant is located in Muktsar (Punjab), which is considered the state’s wheat belt and has adequate availability of wheat straw, wood chips and veneer waste to meet the company’s raw material requirements.
• In FY22, SIL procured 95% (FY21: 95%) of its raw material (wheat straw and wood chips) from local catchment areas.
• The company has a fully-integrated manufacturing facility, which includes paper machines; an in-house pulp manufacturing facility; a captive power generation plant to meet 100% of its power requirement; and a chemical recovery plant. SIL also has eucalyptus plantations coverage of 540 acres of land for effluent treatment and to supplement the company’s raw material requirements.
• SIL continues to have a healthy market share of 10%-15% in the state’s book boards market in India
• The state’s textbook segment commands higher operating margins than the open market sales and contributes 40%-50% to SIL’s overall sales
• SIL’s healthy order book position in the state textbook segment provides revenue visibility over the medium term.
• Paper demand rebounded in FY22 after witnessing a sharp fall in FY21, despite continued online classes in educational institutions and the hybrid working model adopted by various offices for a large part of the year
• SIL’s sale volumes grew 21% yoy, with the company selling 143,605mt which was 8% higher than the pre-covid level witnessed in FY20
Furthermore, the volumes grew 49% yoy in 1QFY23, led by the commencement of the new plant.
• The company also plans to increase its exports (FY22: 4% of revenue), given the opportunities created by a rise in demand for waste paper and pulp prices globally
• The growth in volumes coupled with a 25% yoy jump in realisation to INR62/kg in FY22 (FY20: INR60.9/kg), resulted in over 50% yoy hike in the revenue to INR8,909 million
Realisations strengthened to over INR80/kg in 1QFY23 and are likely to remain strong in the near term led by a continued robust demand and input cost inflation.
Despite the revenue growth, the EBITDA margins moderated to 20.3% in FY22 (FY21: 23.1%, FY20: 21.6%) as the increase in paper prices was offset by a sharp increase in the raw material costs.
• The margins declined further to 16.7% in 1QFY23 as the new plant was under stabilisation and the company used a higher proportion of waste paper owing to the ongoing upgradation of its pulp mill
• However, post completion of the pulp mill upgradation in September 2022, the margins are likely to improve as the company produces more wood-based paper, while the increase in realisations is likely to offset the input cost inflation.
• The company is improving its operational efficiencies and reducing costs by measures such as installing a new boiler which would increase the proportion of low-cost rice straw as the feedstock (compared to largely rice husk) thereby reducing power and fuel costs…
• Overall EBITDA increased 33% yoy to INR1.8 billion in FY22, aided by the volume growth. It is likely to achieve similar volume-led growth in FY23, as the new capacity ramps up
SIL will undertake an additional INR3 billion-4 billion capex over the next three years for the modernisation of its pulp mill to improve yield and installation of a 75TPH boiler among others.
• Its cash flows have demonstrated resilience during economic downturns, with the cash flow from operations remaining positive over the past nine years (FY22: INR1,601 million; FY21: INR1,371 million; FY20: INR1,305 million; FY19: INR1,466 million). Ind-Ra expects SIL’s cash flow from operations to remain positive in the medium term, supported by healthy EBITDA margins and a moderate working capital cycle.
• However, the company’s free cash flow remained negative over the past seven out of 10 years (FY22: negative INR791 million; FY21: negative INR855 million; FY20: negative INR749 million), largely due to the continuous capex
• The company has repayment obligations of INR961 million and INR1,086 million in FY23 and FY24, respectively, which are likely to be funded by internal accruals.
• Ind-Ra believes the fundamental demand prospect for paper remains stable over the medium term, given its under penetration across segments
• Paper demand in the education sector would continue to grow with an increase in the literacy rate; copier paper could experience some slowdown over the near term, but the increasing use of computers in the sub-urban and rural areas will gradually replace the lost volumes from metro cities due to the ongoing remote working.
• Overall, the writing and printing segment is likely to grow at low single digits compared to mid-single digit in the pre-covid period
• However, with growing consumerism and e-commerce, and the ban on plastic usage in several states, demand for cupstock and packaging paper is likely to be healthy over the medium term.
• After falling in 2020 due to the covid impact on global paper demand, pulp prices have risen by around 50% in the past 12 months, surpassing the previous high witnessed in 2018.
• Waste paper prices also continued to rise in FY22, touching record levels, owing to a lower recovery in the waste paper segment and China policies.
• After falling 40% yoy in FY21, imports increased 6% yoy in FY22 as the rebound in pulp prices and high waste paper prices and ocean freight rates kept imports at bay.
• Sustained strong prices of pulp and paper could reduce import competitiveness, thereby limiting the threat of a rise in imports setting a cap on domestic prices in the near term
• Besides, the sharp rise in waste paper prices has benefitted integrated players.
• Furthermore, Indian exports continued to benefit from the price rise and China’s policy measures to combat pollution, which includes a ban on the import of waste paper since January 2021.
• Cyclical Industry: The paper industry is cyclical in nature and incumbents are exposed to volatility in raw material prices, as well as the threat of imports, which could prevent companies from passing on increases in raw material prices. In addition, lumpy capacity additions that are not commensurate with demand growth could simultaneously exert upward pressure on raw material prices and downward pressure on finished product prices, leading to a weakening of profit margins.


Vipul Organics Q1 FY23 result update

  • "More than three fourth of our turnover is from exports and the geo political fall-out of the War between Russia and Ukraine has had its impact on our results, as it has on the industry
  • While our top line grew, the bottom line took a hit, primarily because of increase in input costs including prices of raw materials and the cost of exports".
  • "We expect the international markets to settle to pre-war levels by the next quarter, so that should help in exports
  • In addition, we have been increasing our focus on the Indian market and from being a one hundred percent exporter, we have nearly one fourth of our topline coming from domestic sales now.
  • We have also been focusing on diversifying our product portfolio and adding more value accretive products. This and our recent capacity expansion gives us the confidence that going forward, barring unforeseen circumstances, we will be able to not only protect our margins but see an incremental growth in the bottom line."

Time Technoplast Ltd

Management talking about restructuring overseas business. They have not yet provided sufficient information to investor which I think they should have…

from my limited understanding they are talking about letting go majority stake in overseas business.

Why would they do it?
They expect huge orders in near future for composite products like LPG Cylinders & CNG cascades/onboards etc, for that they need money to increase production capacity. As they are already debt laden with high interest rate( I don’t understand why don’t they restructure debt first), there is limited scope of increasing debt for new capex. So they will bring in money by selling part of overseas business and use it for bringing down debt & new capex.

Is this a rational thing to do? is it good for minority shareholders?
I think Yes.
Overseas business is mainly packaging business & some IBC’s ( from my understanding) so packaging business has no real moat and pressure on margins only increasing since last many years, so letting go of this business in exchange for money is anyway a rational move.
IBC which is a value added business will also go with it as they will have to sell by clubbing these assets, can’t separate. ( anyway it must be a small part overseas).

How much does overseas business worth?
Approx 30% of revenue come from overseas business, so I think 30% assets, 30% WC, 30% debt & 30% profits belong to that business.
I think it is worth around 1200Cr to 1500Cr.

How much money will it bring?
If they sell 51% of stake in that business, they may get 600cr to 700cr in exchange.

It will be sufficient to solve their short to medium term problems.

With this restructuring their 15% revenue will decrease and Operating margins will go up, this may rerate the stock as revenue portion of value added products will go up, debts levels and so interest payouts will go down and future capex is towards value added products.

Disc : invested and for my future reference.
Let’s see what management has to say in todays concall

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Satia Industries

India has no plan to import wheat as sufficient stock ready to meet local demand, government says

Download Economic Times App to stay updated with Business News -

For my future reference

So sufficient raw material is available for satia? so soon we could see the bottom line kick-off?

Q4 concall extract

S. Padmanabhan: And what about exports if India is not lucrative is there an opportunity to export anywhere
R. K. Bhandari: Yes, for export we need to have different registration for Europe you need different
registration, for US you need different registration number one. Number two we need
much bigger capacities also because their demand is huge, and they want to divert from
China to India. So, at the moment because India doesn’t have that kind of capacity to
generate the range and the quantity that is being looked for by US market. So, maybe not
too many people are coming in India. So, like we are planning another 4-5 machines so we
are already talking to one US fellow so whatever fixed products that you want from us you
just tell us, which will be a regular demand from your side we will buy only those moulds
and continuously produced for you if have some kind of arrangement based on the cost
price relationship on a longer perspective. So, that is how we are looking at this business
and the decision will be made after first July only. They were telling abt some export negotion and the same will be decided on july end.

Any updates abt this negotiation? your view?

About raw material, I expect them to stabilise in next 2-3 Qtrs(may be 4Q), as they have to stock it in particular season. as additional capacity is coming on stream they are using waste pulp at the moment,

On exports front, I don’t expect much as logistic cost are higher and container availability is still issue, with china’s zero covid tolerance policy logistics are further impacted.

Anyways I’m not focusing much on near term as whatever bad has to happen is happened (I hope so), I know their margin’s will come back sooner or later , 1 year or 2 years or 3 years from now. so as long as that does not happen all I’ll be doing is to keep checking their rationality in decisions.

DHP India Ltd AR22 notes

* Your Directors continue to be of the opinion that high quality of products and innovations in products as well as improvement in technology along with cost cutting efforts will help your company to face this competition.
* The company is expected to continue to do well and improve further in the coming years.
* Application submitted to Calcutta stock exchange on 11 Aug 2021 to delist shares from exchange
* After proper Scrutiny and verification/inspection by The Calcutta Stock Exchange Ltd., they have given approval from deli sting of our Equity Shares from The Calcutta Stock Exchange Ltd. [Securities Code: 14058 & 10014058] w. e. f. 16th September, 2021.
* For reducing the consumption of energy, the Company has installed the Energy Saving Flameless Electrically operated Melting Furnace for Zinc to achieve reduction in energy inputs.
* This will have an impact in reducing the consumption of Fuel and Power and consequently the cost of production.
* The Company concentrated on expanding the export market for its products and continues to do so
* There is a big potential of increasing the sale of LPG Regulators for the export market.
* Long Term Relationship with the Clients
* Obtain various License and Certification for Exported Goods in various Countries as well as in India for specific technical requirements and safety measurement
* High quality and safe products at affordable prices
* Ongoing product innovation and improvement.
* Strong and varied range of products as per requirement of varied market
* Weakness - Time delays in procurement of raw materials.
* Opportunities: • Potential for expansion for diversified products. • The future global market is very optimistic relating to LPG Appliances. • Growing trend for consumption of Low Pressure Regulators & Gas Appliances. • Expanding into newer untapped markets.
* Threat: • Rising price of Raw Materials & Components. • Competitive environment with diverse players.
* The Company has already shifted the main focus of its manufacturing business from domestic market to the export markets and is confident of obtaining satisfactory orders in the coming years.
* The Company considers its human resource as the most valuable ingredient of the functioning of the company and utmost endeavor is made to maintain good relations with the employees at all levels
* 5.91cr spent on new office building
* 4.02cr spent on plant & machinery
* 0.42cr spent on vehicle
* 1.66cr spent on factory shed at Dulhagarh which is not yet in use

Happy to see new statements in this years AR

Cost cutting initiatives are big positive this will further strengthen moat

5.91cr spending on office seems not a rational decision for the B2B company, I hope this is not a structural shift in managements behaviour towards money, for now I’ll just ignore it as company is in rapid growth phase.