ValuePickr Forum

Pennar Industries Limited

With regards to the working capital cycle that should improve in the coming days by inventory management and decreasing debtor days.

Term loan is only 100 cr / 3 cr interest per quarter

Most of the debt is working capital debt which is capped at maximum 3.3% of gross sales and that will increase in line with revenue growth with a positive bias towards reduction over the quarters

I don’t think that is something to eagerly worried about


From past three yrs not paid single ruppe?

1 Like

For the past 5 years I haven’t generated any free cash flow and as per mgmt it’s working capital intensive business. Hopefully as you say in the coming years it generates free cash flow…

To answer your Q,

Their term debt is only 100cr, debt/EBITDA is 0.6. They have ample space on their balance to take on further capex

Most of their debt is working capital debt . As their revenue increases this will increase in line with their revenue. They have capped interest cost at 3.3% of their gross sales which I think is reasonable and over time they have guided to a reduction.

Even if they were to knock off their short term borrowings it would not help or make sense , if they buy steel from a steel company they have to give a LC , if they purchase a machine worth say for 15cr they have to give LC, for everything they do LC will be required so knocking off short term borrowings does not really help

I can’t figure out why debt repayment is bothering you, term debt is only 100 cr , they are deploying more than 100 cr is capex each year , they generate high cash profit each year which is re deployed to generate a higher eps.

Company is in a stage where they are deploying all cash profit to build more capacities plus to fund this capacity they borrow working capital

A time will come when there capex plans are complete and they will not deploy cash for capacities, when that time comes can you IMAGINE the kind of FCF they would generate???

you are wrong please check the FCF for the last 5 years. please check it FY ending march 2016

Chirag - Hyderabad factory land sale of ~Rs.300 Cr. (in medium term - 3/4 years) and corporate tax rate coming down in India to 25% are 2 other factors you have not considered. Aditya Rao has already indicated plans of disposing the land on the con call.
With sale of factory land, Pennar can pay off its long term debt and fund its capex for a year or two.
Medium term with capex moderating, Pennar should be able to distribute Rs.3/4 per annum as Dividend also which should be icing on the cake.

1 Like

Not taking any of these special situations into account .

Most of the new capex over the next 3 years will be added at more than 15% margins. So on a blended basis their margins should also increase (I have not taken that into account also) I’m rooting for a solid 10% ex depreciation (probably works out to 11% EBITDA if you were to calculate with depreciation)

Majority of people who know this company are really worried about their short term borrowings, even I was concerned at first until a few helpful boarders clarified the same.

I know it’s absolutely not right to look at investment decisions this way but just something to think of , SAIF partners invested in this company at rs 40 , 8-9 years back , there is definitely something that these guys are seeing , such a big decision on merger could not have been taken without their consent . My investment decision is not based on this but it’s just food for thought

investors who have invested in Pennar in 2013-14 have lost their money and have made no returns. The important thing to note is has company grown revenue & Profits and does it look like it would continue to grow them.
Only way Pennar is going to give multibagger returns is it becoming an engineering company from a commodity steel company.

completely agree. being recognized as a full fledged engineering firm is still some time away. they need to double revenues in each segment. their profitability is directly linked as to how much and how fast they can scale revenue without loading the balance sheet too much. Im assuming a great deal of operating leverage will play out in the process.

Nice Guess @deeps2884 , 25% corporate tax rate is a reality

Gst has been increased to 12% on railway coches and wagons. This increased gst seems to be a welcomed move by the industry.
Can anybody please explain why ?

My simple understanding is that since GST on steel a key raw material is at 12% and they would be able to net off the amount paid with amount incurred. Earlier when it was 5% set off was not happening.

2 Likes

Reduction In corporate tax rate to benefit pennar.

Have pebs shareholders got shares of pennar industries yet ?

Just in demat account, but unable to trade yet… What about you ?


It will set up a greenfield plant at Hyderabad for the additional CDW manufacturing capacity. Currently, the company has an installed capacity to manufacture 1500MT per month of CDW tubes. The new facility will produce CDW tubes of up to 150mm diameter and the thickness of 10mm. The company will incur a capex of Rs 65 crore to take its CDW capacity to 3000MT per month. The new facility is expected to be operational in June 2020.

Hi Chiragp,

I have not received any pebs shares…Whom should i contact?

Has anyone got PEBS converted Pennar Ind shares into Demat account