Permanent Magnets

Permanent Magnets appear to be a competitor with products like Shunt Resistors listed among products - also claims to be supplying and working on products for electric vehicles. Numbers appear good. TTM PAT 12cr, networth 24cr, net debt 13cr, promoters holding 72% (pledge 0.51% only). Would appeciate view on this if anyone had a look at this and how does it compare to Shivalik as competitor.

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I would suggest you creat another thread for the company highlighting what are its product, sales, management team and also risk. Permanent magnet has not paid dividend since inception and also has auditor qualification for non-payment of ICICI custom loan. Personally, I also liked the number posted, but the hygiene and corporate governance standards are missing for me and hence not invested. May be great thread to start with Permanent magnet but please also highlight risk of investing which you are aware so that people can evaluate investment opportunity properly. Also, please let us know your investment position in Permanent magnet on that thread.

Happy investing !!!

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@dd1474

Hi Dhiraj
I have a tracking position in Permanent Magnets. And happened to go through this post of yours, and could not understand ," the hygiene and corporate governance standard are missing" part # PML. Also never read(tried to google) about the auditor qualification for non payment of ICICI custom loan. Could you please elaborate on this, or send a link wherein I can read.

Since PML belongs to the old and affluent Taparia group that includes companies such as Supreme Industries, Supreme Petrochemicals, Famy Care Ltd, Taparia Tools, Permanent Magnets Ltd, Alliance Marbles and Pregna International, I assumed it qualifies on corporate governance part, as never came across any issues with its group companies…

Also was impressed with PML ability to take advantage of EV revolution that is to take place in the near future( can’t say already has), but its recent numbers since 4-5 qtrs are quite impressive.

Will appreciate a response.

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Permanent Magnets buys shunt strips from the likes of Shivalik, assemble them with other components to supply ‘shunt assembly for energy meters’ to utilities. Permanent Magnets is not into manufacturing of Electron Beam Welded shunt strips - which is Shivalik’s main product. Permanent Magnets is not in any way as of now a threat to Shivalik.

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@deeann

Find enclosed my concern about Hygiene and corporate governance from Annual report FY18:


On second point about maangment related to Supreme group, I feel there is no business connection as per my limited understanding. There are no companies which have common directors/ or cross holdings between Promoter of Supreme and Permanent Magnet in my limited understanding. I would suggest you to do more work unless you have understanding about family relations of the promoters.

AR FY2008 Extract: Nearly ~ 31,00,000 shares issued are by Merger of three companies and conversion of prefrence share. I do not have not details, but assumed that these companies are related companies to promoter which assisted them to increase stake in the company at par.

Company had its old plant in Borivali (East) (Just opposite Tata Steel land which now acquired by Oberoi). That plant is closed
AR FY2005 extract of resolution

FY18 annual report mentioned about 15% of development area being owned by the company for development in Borivali Land, there are no benefit to the minority shareholder of the company despite land being developed. It is possible the project is not complete and flats are not ready However, there is absolutely no details / information being shared in annual report which raise concern in my mind.

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First off, your knowledge/research about the company needs to be saluted. I do feel small, considering how vast and deep your research goes. I don’t think I would have gone as far as 2005 AR.

The concerns raised by you are there for real, but they don’t look so terrible, prima facie, but then again, such issues of non payment of interest does raise concerns about the company’s intention. And one can be clear about the true picture, in this regard, only if close to the management, else it is a matter of one’s perception.

You are correct on the fact that there is no business connection b/w Supreme and PML, and no cross holdings(atleast not in PML and Taparia tools), just family of 4 brothers into diff business, and only that Famy care was a part of PML, that was later sold to Mylan in Nov 2015. (now need to dig into this aspect too as to who got all the sale proceeds)

And as for 2008 AR, the companies are definitely related to PML, (TMPL a.k.a Taparia Magnetics ltd, SCSL a.k.a Sarla Credt and Securities ltd. all headed by Jaiprakash Taparia). I am not able to see anything wrong in that. Although their old history from inception till it came under the provision of sick industrial company in 1989, has been a challenging/messy journey of losses/rights issues and what not. Its only from the last year that numbers are looking pretty impressive.

About the Borivali plant sale, and 15% being owned by the Company, why idoes the auditors(?) report say that the Company did not have “any” immovable property except 15% share? Means it never had the whole plant? I am confused.

Really grateful for your time and efforts to point out the concerns.

Thanks.

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This post is related to permanent magnets ltd (maybe we can move this to the PML thread later). Few points which I got to know based on interaction with few people at PML. (Actually I got interested in PML by its recent no and thought it as play on EV sector but that turned out to be not completely true)

Significant growth in FY18 and FY19 is lead by traditional products like cast magnets,magnetic assemble and products for smart meters.

Traditional products mainly used in domestic automobile. Increase in volume and expansion of customer base has contributed to growth.

Majority of growth comes from parts and accessories for smart meters(NOT EV).PML supply shunt and terminals directly to manufacturer. Could not get any customer name specifically. It predominantly lead by exports. Smart meters trend in India is increasing but continuation of it depends on Govt policies.

working capital cycle is long and working on it.

They do manufacture shunt resistor for EV but can not share the information about revenue from the same,cost,customers and doesn’t seems to be much. Nothing significant seems to have happened regarding products for EV(like flux concentrators mentioned in the AR). My questions about customers for EV,products developed for battery management system, competition,margins …etc went unanswered citing various reasons. Repeated request to meet management to know more about business has been turned down.
My impression: they haven’t done much in terms of products for EV even though they are mentioning about it in last few annual reports( I may be wrong here). PML may be play on smart meters segment rather than EV theme at this point.
Discl;tracking position

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@narendra

I think, if we closely read the MD&A, in AR 2018, 2017, 2016, especially 2018(since we got impressed by the sudden spurt in income and profits from that year in the first place), we will notice, that the management goes gaga over their edge in smart meters and I assume smart meter contributed max to the numbers. Whereas, under EV segment (across all past 3 ARs , its plain data about the EV markets, NITI Aayog 's emphasis on mainstreaming EVs and the fiscal initiatives to such automotive industries). In short, nothing materialistically important to us investors about what product are they coming up with in this regard. (Its not that the company is mentioning anything on EV even in AR, its just some random data on EV market)

Maybe they are still under going R&D for products related to EVs and till nothing substantial comes out they would ( understandably ) not want to share.

I think if one is really keen, then going to the AGM will give a first hand sense of the company and even the management , which is the key to investing in this particular case, where the management is too conservative( ?), or some reliable scuttlebutt (now that’s a good oxymoron) can be of great help.

@sensaptarishi Apologies for writing on this thread about PML.

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