Marshall Machines Limited

Management has come out with a press release on the order book and order bids. Present order book stands at 51 crores, a jump of 82%. Management is targetting a revenue of 250 crores with 25% EBITDA margin over next few years.
MARSHALL_11102021152905_Marshall_press_release_11_10_2021_Order_Book_Bid_September_2021.pdf (127.8 KB)

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A few updates:

  1. The latest Annual Report (AR) on the company website has been corrected to reflect the correct shareholding NIL of Ashish Kacholia as on 31 March 2021. The AR on NSE is still not fixed.

  2. Siddhant Sarup is a third-generation promoter of the company having significant holding of the company. He is the son on Gaurav Sarup. Gaurav and his brother Prashant Sarup both have around 33% holding of the company. Prashant’s spouse also has significant holding.

    A silly episode happened this week. Siddhant resigned as whole-time director. Within a day, the board conducted a meeting and rejected the resignation. Furthermore, Siddhant was given the CTO post along with the post of whole-time director.

    The company does not seem to be doing justice to the dignity of the CTO post by such sudden decision (I am not questioning if Siddhant is qualified for the post). This episode further confirms my suspicion that there is some kind of struggle ongoing in the company. Also, this episode does not seem to be over as of now.

  3. I read up a bit more about the promoters. Found another ‘gem’ in the IPO prospectus that the spouse of promoter Archana Sarup is incorrectly mentioned at one place. The company really needs to get its acts together regarding their conduct in the public domain.

  4. There are two offsprings of Gautam Sarup and two of Prashant as per the IPO prospectus. Except for Siddhant, the others appear to be too young to join the company but will probably do so in a few years. It will be positive to see younger people at the helm in a few years.

  5. Frankly speaking, their team does not appear to be technically highly qualified and they do not appear to have a strong R&D team. However, as of now, it seems the company can do well without needing too much higher research.

The current low valuation is lucrative but there are serious doubts about the long term.

Disclosure: Invested.

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As per latest update by the company to the exchange ( oct 20 th ) Sidhant Sarup resigned from the post of whole time director and consequently board has appointed Mrs Rita Aggarwal ( not able to identify via simple google search ) as an independent director.
Looks like something is brewing in the backyard.
The board was balanced with promoter family 2 each from each brothers. Prasanths wife Archana Sarup and Gauravs son Siddanth . Now looks like this balance is tilted.
Disc : Invested

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Marshall machines intimated the exchanges that it has migrated to main board w.e.f Nov 22 nd

The company has announced joint training with Maruti Centre of excellence on Industry 4.0 technology at MACE, Gurgaon. MACE will impart training for Industry 4.0 Technologies to automotive component suppliers of Maruti.
Marshall has installed its proprietary equipment for training on four types of machines at MACE:- Vertical Machining Center, CNC Turning Center, Injection Moulding Machine and Hydraulic Press.
The training will cover three most important areas for machine shops: Productivity, Quality and Health. The training program will follow the LOPI Model: Learn - Observe - Practice - Implement.MARSHALL_01122021121325_Marshall_Maruti_Center_for_Excellence_Brochure.pdf (5.1 MB)

The trainees will then implement Industry 4.0 Technologies in their factories.

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The promoters are infusing interest-free loan to the company to meet working capital requirements. The promoters are selling 3.5% equity to raise the funds.
MARSHALL_27122021155306_Marshall_Fund_Infusion_Promoters_Press_Release.pdf (133.6 KB)

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The company has announced steep jump in order book and order bid position for the period ending December 2021. Order book position has increased by 47% to 50 Crores. Order bid has increased by 233% percent. It looks like the company is bidding aggresively.
MARSHALL_04012022120410_Marshall_Order_Book_Bid_December_2021_Quarter_Press_Release.pdf (134.9 KB)

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Marshall has issued a press release regarding its research and development work. It has already been granted 7 patents [6 in India and 1 in USA]. Further 22 patent applications have been filed, which are awaiting approval.
MARSHALL_10012022111954_Press_Release_Marshall_10_01_2022.pdf (533.3 KB)

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In the light of the patents abroad, the company should clarify if Marshall Automation America already is or is going to become a subsidiary of Marshall Machines. The company has been quiet about MAA lately.

It is a genuine concern. I think on the disclosure front, Marshall ought to be more transparent. If such transparency is not shown, a long journey in the stock market is likely to be bumpy.

This article makes several interesting observations on the coming automation boom in factories. What is happening in China can be a forerunner to future trend in India.

During the quarter ended 31st Dec 21, promoter shareholding has come down from 73.39% in Sep 21 to 67.55%, all of it due to market sale by one of the promoter- Prashant Sarup. Since then, another promoter Gaurav Sarup has sold a further 81036 shares in the market.

Promoters announced on 27.12.2021 that they will be infusing interest free loan in the company to meet the capital requirement of the company. The fund shall be generated through sell of some promoter holding.
Quote,
"Infusion of Zero Interest Funds by Promoters will ensure the following:

  1. Instant availability of Funds
  2. Equity Capital of the Company will not increase
  3. Interest Cost of the Company will not increase
    Promoters will generate these Funds by diluting their Equity Stake from 73.4% to 70%.
    Mr. Gaurav Sarup, Managing Director of Marshall Machines Limited stated, “Strong demand for our automated machines has resulted into a healthy order book and robust order bid. Considering our strengths and market potential, our plan is to achieve Sales of Rs. 250 cr and EBIDTA Margin of 25% in next few years.”
    MARSHALL_27122021155306_Marshall_Fund_Infusion_Promoters_Press_Release.pdf (133.6 KB)
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How long will it take to do a turnover of 250 cr by marshall?

The company first postponed the results from May end to 6 June. On 6 June, the waiting investors were let down with no information or notification. Next day they again postponed the results to 16 June. The company is debt-laden and recently the promoters also sold a part of their holding ostensibly to provide working capital.

Corporate governance has not improved and previous financial results were not encouraging. Personally I find it too much mental effort to monitor their developments. I have exited the stock with no intention of buying in the future.

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Board meeting for accounts shifted from 30th May to 6th June to 18th June to 25th June to 4th July. Various reasons forwarded each time for the postponement. Seems to be “The Curious Case of the Board that Couldn’t Meet”- worthy of a Sherlock Holmes story, indeed :slight_smile:

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Results have been pathetic last year. But in the last few days, the volume has increased a lot. Some buying is going on for reasons not known to us.

https://twitter.com/Ankur14111978/status/1617513872805761026 he is an influencer on twitter and shared below. visited their 2 Plants today …World class Facility… ~Competitior- #CNCMachines ~Management Given guidance for 200 cr Revenue. ~ Negative - Promoter sold 6.5% Stake… it shows sudden spike in volume and price in the last month

Marshall Machines has defaulted on various loans. The company’s total outstanding borrowings from banks and financial institutions amount to Rs. 33.77 Crores



Defaults on Cash Credit and Working Capital Demand Loans (WCDL):
Name of Lender: HDFC Bank
Date of Default: October 2, 2023
Default Amount: Rs. 0.21 Crores
Total Principal Outstanding: Rs. 31.88 Crores
Total Outstanding Borrowings: Rs. 33.77 Crores

Defaults on Secured Loans:
Names of Lenders: HDFC Bank Limited, Aditya Birla Finance Limited, Ashv Finance Limited, Electronica Finance Limited, Hero Fincorp Limited, IDFC First Bank Limited, Siemens Financial Services Private Limited, Small Industries Development Bank of India (SIDBI), Tata Capital Financial Services Limited
Dates of Default: Between October 2, 2023, and October 11, 2023
Default Amount: Rs. 0.31 Crores (Principal), Rs. 0.12 Crores (Interest)
Total Principal Outstanding: Rs. 31.88 Crores
Total Outstanding Borrowings: Rs. 33.77 Crores

Defaults on Unsecured Loans:
Names of Lenders: Aditya Birla Finance Limited, Ashv Finance Limited, Clix Capital Services Private Limited, IDFC First Bank Limited, Magma Fincorp Limited, Moneywise Financial Services Private Limited, NeoGrowth Credit Private Limited, Tata Capital Financial Services Limited
Dates of Default: Between October 3, 2023, and October 21, 2023
Default Amount: Rs. 0.11 Crores (Principal), Rs. 0.02 Crores (Interest)
Total Principal Outstanding: Rs. 31.88 Crores
Total Outstanding Borrowings: Rs. 33.77 Crores

Had taken position post management bullish projection, they did investor session also on projection of 250 crore plus topline with 25% EBITDA in mid term. They have brought rights issue but one thing I have learnt very painfully , turnarounds are messy , complex and very rarely very successful. Exited fully with some profit but lessons learnt, any company with high leverage and stress is clear no no.

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