Pragnesh's portfolio

Ganesha eco


1…Economy of scale

=Leading market position among RPSF manufacturers

=– With an installed capacity of 108,600 metric tonne per annum
(MTPA), GEL continues to be the largest manufacturer of RPSF in the country.

= Supported by its large scale of operations,which results in economies of scale and augments bargaining power with suppliers, the company has demonstrated
healthy and steady profitability over the years.

=: Apart from us there are 35-36 more recyclers in the country having varied kind of capacities.

= Of course, we are the largest one and we are having the advantage because of our large production
base and large customer base.

= Our company is commanding 18% of the Indian market share of this recycled fiber. We are
making all kinds of fiber. So, if a customer has any requirement of any kind of fiber our company
can supply that. It is our Speciality.

2…Value added products

=Strong focus on R&D and development of
value added products – expend the current value-added product portfolio from the current 25% to 50% over next 2-3 years

=…incremental margin will come from the value-added products,

=Increasing the share in Non-woven and technical textile sector where prices are more stable and margins are better.

=Share of revenue
of value-added
products, 2014-15

=Share of revenue
of value-added
products, 2019-20

3…New products and .Strong r nd

=Presently, we are working on development of certain specialty fibres. It is like flame retardant
fibre, antibacterial fibres and biodegradable fibres. All these fibres are specialty fibres and are
being introduced for the first time in India in the recycled fibre segment. All these specialty fibre
products will fetch up around 35% to 40% extra margins.

= This flame-retardant fibre finds its
application in certain critical applications where the fire hazard is more and the

=antibacterial fibres it can kill 99.99% bacteria on the fabrics and the

=biodegradable fibre has been introduced
just now. It is fully capable to biodegrade under landfill and ocean in one year and the soil left
behind from the degradation will contain no plastics and it will remain perfectly fertile.

=We are also going to introduce a fibre which is another sort of the specialty fibres and it will be
having its application in cement and paper industries, so all these products are under different
stages of developments and the trial sampling has already been done.

=We have also executed certain orders in the European markets and in the Indian markets and the customers are
evaluating our products.

=Further, we have also sent all these samples in European labs for testing so that it can have
international acceptance and acquisition.

=Focusing on new product developments
more particularly -
 Anti –microbial Fibre with licensed
 Bio-degradable Fibre
 High tenacity Hollow conjugated
 Micro Fibre
 Dope dyed high tenacity Fibre

=Right now, all these specialty fibres are under introduction stage. We are at trial stage in the Fire
Retardant, antibacterial and in the biodegradable fibre, after having approval of the European
labs we will be further expanding all over the world and also in the Indian market. It will take
some time but certainly the initial outcome is very encouraging

4…South plant@improved margin

=Once we ramp up the new in South we would be getting some freight advantage and apart from this we are going for products which are value-added products, like filament yarn and recycled chips. So, there
the realizations and margins are much higher. So, the blended EBITDA margins of 25% we are
looking from the South facility.

5… …south plant.less competition…good demand

=It would be having
…44% capacity for the fibre and
… 27% for the filament yarn
…27% for the chip.
So, it is bifurcated into three segments.


…There is a large market for PSF and filament yarn. In PSF the recycled capacity is quite large,
and the market is expanding. So, the incremental demand is being met by the recycled fiber
which is around 40,000-50,000 tonnes per annum. And south market there is a big textile market.

.=Demand shift
So far, the textile market was dominated by cotton and virgin polyester. Now the market is
shifting from cotton to PC Yarn (polyester cotton yarn), blended yarn, they are shifting. So, the
demand is increasing for polyester also. The kind of capacity which we are putting up there is
not very big capacity. So, we don’t see any problem there. We are already having the customer

B…Filament yarn
=And as far as the filament yarn, there is not much recycling capacity in the country, only 1
or 2 players are there so far.

=And market is larger than the PSF market. And with the kind of
requirement of recycled stuff by the brands and the large manufacturers, the demand is muchmuch higher. So, we don’t see any problem in selling the filament yarn.

=In chips side also there
is a very high demand in developed countries like Europe and US. So, we are having some good
enquiries and we are also trying with few brands. So, the capacity is not very high in terms of the demand, so we don’t see any problem in selling the entire material and ramp up the capacity
in six months period. We are very optimistic to ramp up the capacity in six months period after
the plant is operational

=The chips plant which we are putting state of the art plant. We are already getting the US FDA
approval for this product. And quality would be at par with the virgin fiber, with the recycled
tag. So, there is 35%-40% premium for the recycled chips as against the PET chips.

=If a new player comes with new capacities so how easy or difficult is it
for them to on-board a new customer or let’s say replace us there?

=Actually, about selling the products of this South project we are already having serious inquiries
from several customers. Basically, it is from abroad. So, they are very-very seriously asking
when we can supply them chips and flakes and the filaments, etc. So, at present we don’t at all
anticipate about any problems in selling the products which will be manufactured in our south
plant. It will be sellable in India also.

6…Big basket of products

=We are making all kinds of fiber. So, if a customer has any requirement of any kind of fiber our company
can supply that. It is our Speciality.

…if our competitors give a slightly lower price so this business can go there, right?

= Actually, every customer has to understand his pricing also much so far little bit variation is there, then the customer will always buy from me, not from a competitor.

=We are having a big basket of products with us, we are having product for every application for the customers. So, customer benefits because we are having ready products for them, so they
prefer to buy from us,if there is not much price difference




1…(june 2021)

Recently The company has been awarded a contract under the Jal Jivan Mission for the rural drinking water supply to 1000 villages in two districts of Uttar Pradesh namely Varanasi and Aligarh
• The value of this project is approximately Rs 1000 Cr and details regarding it will be out post approval of the detailed report and the project should be constructed and commissioned within 21 months of signing of the contract

1…(2017)Goa plant for membranes started in 2017
=Integrated and automated reverse
osmosis membrane manufacturing
process at Verna, Goa.

2…(2019).new rnd centre at hyderabad

3…strong order book
(Oct 2020)The company has an approximate order book of INR 6,500 Mn excluding Sri
Lanka project. The Sri Lanka project outstanding USD 90 Mn.

4…Over 50 patents
Over 100 products launched

5…(High margin)Selective profitable orders

=We continue to remain conservative. We avoid the tendency to pick up
orders at lower margins and also prefer not to pick up orders just for the sake of filling the
books. In the long run, we do have to execute these orders and they may constraint our
capacity to invoice the more profitable orders. So we prefer to be selective about the orders
we want to pursue aggressively and profitability is an important criteria which we use for the

=Government orders are minuscule compared to industrial orders, so impact on WC is not that much (I’m sure the question was asked with VA Tech Wabag in mind).

6…Your company also continued to maintain its market
leadership in innovative and advanced Zero Liquid
Discharge (ZLD) projects.


=The Resin Division continued to contribute to the
company’s growth and profitability. Whilst the company
has established its position as a reliable and quality
supplier in geographies such as USA, Europe, it has
successfully exported its products to the SE Asian market through its established presence in these

=Integrating its innovation in ion exchange resin
technology and standard engineering, your company
launched a unique product INDION SWIFT 5Gx to meet
the growing requirements of high purity water systems
required by the pharmaceutical, power, semi-conductor
and electronic industries. Based on several unique
features of this product, the company received a large
number of orders for this product during the year under

The resin facility at Ankleshwar has also obtained renewed prestigious certificates

=It has secured breakthrough orders for membranes
manufactured in the newly constructed state-of-the-art
integrated Reverse Osmosis membrane manufacturing
facility in Goa.

…Your company has posted a turnover of INR 315 crores
driven by the chemicals business in addition to revenues
from ongoing engineering projects including Sri Lanka.
…It has secured breakthrough orders for membranes
manufactured in the newly constructed state-of-the-art
integrated Reverse Osmosis membrane manufacturing
facility in Goa.
…Your company consolidated business in geographies
like the North America, Middle East, SE Asia, South and
East Africa by increasing business presence in many
countries in these geographies.

11…The water and wastewater treatment market and company will continue to
grow on account of

…increase in demand due to rapid
…Water demand in the country is expected to grow at 21% CAGR over 2015-2020.

=A study by the Central Pollution Control Board (CPCB) has revealed that almost 62,000 MLD of sewage is generated across
urban India and there are just 816 STP installed that treat 23,277 MLD or 37.5% of sewage per day.

=Strict sewage disposal directives issued by
Central Pollution Control Board (CPCB) necessitate efficient

…Implementation of Zero Liquid Discharge
regulation by the government on industries, is expected to
stimulate the wastewater treatment market even further.
…In India only 60% of industrial waste water is treated.
…Around 40% of the STP’s do not conform to the environment protection standards. Compliance by state owned STP’s is low.
…The waste water treatment sector is expected to grow faster than the water treatment sector.
… Increased government regulations on waste water discharge to drive demand for water and waste water treatment chemicals.

of water for industrial and
domestic uses.

probable projects
INR 500 bn (USD 7.7 bn) has been allocated for investment in 500 towns and cities under AMRUT and another INR 480 bn
(USD 7.4 bn) has been put aside for upgrading 100 cities to attain ‘smart’ status.

=•“Namami Gange”,
…the clean Ganga initiative, can create significant opportunities.
… INR 200 bn (USD 3 bn) has been pledged by the government over the next five years to clean up the Ganga

1 Like

=I had added
Beta drugs
Anup enginnering, from fresh capital.

=Sold some quantity of jenburkt pharma with loss and added beta drugs from that amount.

=My updated portfolio with avg buy price

1…Acrysil…(Rs 190.97)…(8.4%)
2…Astec life … ( rs 1017.39 )…(7.1%)
3…Lt food …( rs 45.18 )…(7.%)
4…Kei ind…(rs 405.25 )…(6.8%)
5…Moldtek pack…( 259.20 )…(6.4%)
6…Ganesha eco(Rs 515)…(6.4%)
7…Paushak …(rs 2615)…(6.3%)
8…Beta drugs(277.18)…(6.5%)
9…Apcotex …(Rs 191.62 ) …( 6%)
10…Grauer&weil …(Rs53.06 )…(6%)

12…Jenburkt ph…(.rs 620 )…(4.68%)
13…kpr mill……(rs745)…(4.6.0%)
14…Ion ex ……(rs652.14 ) ……(3.6%)

15…Ratnamani …(.rs 1298 ) …(2.5%)
16…Auro lab …(rs 68.72 ) …(2.2%)
17…Suven phar …(rs 251.64) …(.2.1%)
18…Ccl products …(rs 270) …(1.9.%)
19…Alkyl amine@ (791.56)( after split)@( 1.5%)

20…other stocks… …( 3%)
Ice make
bajaj finance
ambika cotton,
Minda industries
Jamna auto
Rajoo engineer
Emmbi ind
Rain industries

=Portfolio is 77 % up of invested amount

(Investment is done in staggered manner from sept 2017 to uptil today with buy and hold approach


Astec life


1…we want to increase our EBITDA
margins from 20% to 25%. We want to grow at the rate of 20%compounded.

2…New herbicide plant

=Now reaching close to
completion of the construction of the plants and we want to inaugurate the plant in the third week of February 2021 , so the full impact of the revenues will come in 2 years of the

=The herbicide plant is being used for contract manufacturing,

= ICRA notes the company’s planned efforts towards diversification with the ongoing capex towards setting up an herbicides manufacturing facility, which is expected to commence operations in FY2021.

3…new R n d setup

… Furthermore, it is making
investments for setting up a new R&D facility, which is expected to result in a significant boost to its R&D
capabilities and will facilitate its new product development plans.

=At the moment, we are not really doing early stage research. Our new R&D center, which is
going to be commissioned next year will be at a scale where we can start doing the contract
research part as well. Currently we are so busy with doing process development and bring
products online that we do not have the bandwith to do basic research.

=We come at a stage where there is either a product without a technology, we just have to do the process
development or there is a tech available and then we take it and take it forward

=. So those are the two models at the stage, the development of the molecule, we are not involved for the
moment, this is the plan for the future.

=Furthermore, the company’s investments in the new R&D lab are expected to
provide a significant boost to R&D capabilities, enabling it to develop new products and also benefit from the opportunities that the global demand shift from China may present for the Indian entities.

…we want to increase our EBITDA
margins from 20% to 25%. We want to grow at the rate of 20% compounded.

= So we need to develop the capability, which attacks the higher margin
products, so what are we doing in the new R&D facility

=, we are going to be developing
capabilities through
-fluorination as you know Navin Fluorine, SRF have a monopoly on
this, we are going to develop the capability for this.

  • Organometallic chemistry,
  • chiral chemistry,
  • high pressure chemistry,
  • flow chemistry, hydrogenation, some biochemistry
    these are just the short list the kind of things that we will be developing in the new lab,

4…Backward integration

=A new plant to manufacture the intermediates was commissioned during 2018-19 at mahad and is performing as per
expectations. This has led to improvement and stability in margins and less dependence on China.

=This is not only helping the Company in reducing its reliance on
China, but is also aiding in margin expansion.

= Astec’s operations are
supported by its backward-integrated operations, providing a steady supply of raw materials at cost effective rates, thus reducing the reliance on Chinese imports to some extent and aiding in profitability improvement.

=We import 70% of our total purchases, of that 75% comes from China.

=Yes, the good news is that we have commissioned one product, 50% of our purchases from
China of one particular product and we have commissioned that plant, we have the position
to make as much as we need, so depending on the price from China, we are the make or buy
from there, so that immediately brings our total purchases from China down from 50% of our total purchases to 25% if you chose to do that , so we do not have a specific number, but
as far as possible we want to minimize the dependence on China and that is ongoing

5…expansion of manufacturing capacity of certain
existing products

= Measures taken by the company for adding capacities
by way of new manufacturing plants as well as de-bottlenecking existing capacities through process improvements augur
well for the business amid growing demand in India due to supply disruptions in China and high utilisation of existing

6… china derisk strtegy

=Disruption in the supply of agrochemicals from China
places India at a sweet spot with international firms, as the latter are looking at partnering with Indian
manufacturers for contract manufacturing business.

=This provides a long-term revenue visibility to the Indian agrochemical companies.

=As global companies look for alternate manufacturing locations outside China, the opportunity available to Indian manufacturers including your Company
will be huge. Organizations with deep technical capabilities of technical or intermediate chemistries are likely to gain from this shift / diversification of the manufacturing base.

7…The Company has
made substantial investment to bring Environment,
Health, Safety (EHS) standard to international levels. The
Company is therefore optimistic of making substantial
strides in developing this business segment and
developing new products.

8…new molecule
=next financial year about 2 to 3 molecules
and every year we want to launch at least 2 molecules.


Adding Stylam industries

=I had added
…Anup engineering and
… Stylam industries in last 2 months

=My updated portfolio with avg buy price

1…Acrysil…(Rs 190.97)…(7.8%)
2…Astec life … ( rs 1017.39 )…(6.6%)
3…Lt food …( rs 45.18 )…(6.5.%)
4…Kei ind…(rs 405.25 )…(6.3%)
5…Moldtek pack…( 259.20 )…(5.9%)
6…Ganesha eco(Rs 515)…(5.9%)
7…Beta drugs(277.18)…(6.0%)
8…Paushak …(rs 2615)…(5.8%)
9…Apcotex …(Rs 191.62 ) …( 5.5%)
10…Grauer&weil …(Rs53.06 )…(5.5%)

13…Jenburkt ph…(.rs 620 )…(4.31%)
14…kpr mill……(rs745)…(4.3%)
15…Ion ex ……(rs652.14 ) ……(3.5%)

16…Ratnamani …(.rs 1298 ) …(2.35%)
17…Auro lab …(rs 68.72 ) …(2.0%)
18…Suven phar …(rs 251.64) …(1.9%)
19…Ccl products …(rs 270) …(1.9%)
20…Alkyl amine@ (791.56)( after split)@( 1.4%)

21…other stocks… …( 3%)
Ice make
bajaj finance
ambika cotton,
Minda industries
Jamna auto
Rajoo engineer
Emmbi ind
Rain industries

=Portfolio is 87 % up of invested amount

(Investment is done in staggered manner from sept 2017 to uptil today with buy and hold approach



Pragnesh, could you also give some insights or research analysis on Beta Drugs which is on SME board but seems promising, congrats for your performance


Following points are summerized from concall and telephonic talk with management and medical representatives

Primarily focused on new molecule

2…CRAM @50%
3A…injectables@55%@direct hospil

1…25% of the products are manufactured under own brand (Adley)

2…75% under other entities’ brand names;


=We are one of the very few backwardly integrated companies


A=we have only onco products
=Very few(probably only) company in india is totally focused on onco
=onco.products are less in quantity and more costly
=Shilpa n natco have antiviral,cephalosporin lines also

B=They have main business in usa also,so they require huge asset

=So our Roe is better

=New products
We just tell this is our basic price.

=What attracts them is that we are continuously developing new molecules, which attracts them

=Hospital network
=Doctors prescription

=Earlier I(Mr ashutosh) have worked for Torrent, I have worked for DRL, I have also worked Ford. So,
we were the only company who started their business right from scratch.

=So, we know the nitty-gritties of the market and how we can capture those hospitals. However, the strategy for
different-different hospitals is different. So, our market intelligence is good.

=The team which we have recruited in last couple of years those are all experienced people, and they are having
very good association with the chief pharmacist of those hospitals. We have a target list of
hospitals. We have the market intelligence, what exactly is happening in those set of hospitals,
and then we are targeting it accordingly.

=Before last year, we hardly had any presence like
around 40 to 50% of the corporate hospitals.

=But with our efforts last year, we have made our
presence in almost all the corporate hospitals.

=Some states we are doing
pretty well, like we are in top 1 to 10 and some states we are picking up very nicely

=We have certain brands which have
become number one position in India

5…R N D

= We are totally a research and development-based company.

= We focus ourselves towards
developing new molecules to be the first one to come up with the molecules which are
becoming off-patent both in API and formulations.

= So, we are not based on the raw material being procured from outside parties. The strategy is very simple and clear.

=If the molecule is
getting off-patent, the API needs to be developed first, the batches need to be taken for
formulations first and then when they are becoming off-patent, it should be launched as the
first one to be launched to Indian market

=Our R&D is the main key success towards our growth.

=15-20 yrs ecperienced r n d team
=gradually in coming forward years, it will be around 2% to 3% we will be
spending on the R&D front, right

6…Why big companies will not enter on only onco plant

1=Big companies make other products also as onco products are very less quantity.

So if big companies make other products in same plant,they have less ROE

For them,it is better to outsource onco products from other companies.

2…Mostly big companies have huge usa business.
=So they require more expense on plant for usfda maintenence


1…API plant started in 2017

2…Set up Oncology Plant in UZbekistan

3…incresing network of branded business

4…Our major focus towards TKIs and our own API expansion

1 Like


Invest X amount for 20 yrs

Suppose your return is 15% cagr

U will double in 5 yrs


1…It takes 15 years for X amount to compound at Rs 8X

2…But it takes only 5 yrs for 8X amount to become 16X
(from 15th to 20th yr)

So ,in last 5 yrs you get return that u achieved in first 15 yrs





Adding RACL geartech

@Pragnesh Our stock selection matches to a degree :). One common stock we have got it LT foods. I have it for past 1.5 yrs. Bought it around Rs. 50-55 when there was a good margin of safety. I like this business because of being a part of essentials for human being, brand, they are launching good products, They are in European market where there is scope for better margins, Above all impressive cash flow in past FY20 and FY21, Stock trading at about 5 times the annual cash flow for last year etc.

There are concerns around muted sales growth and very low 4-6% Net profit margin. These aspects are making me consider the trimming of the position.

It would be very interesting to understand your views, investment rationale and stock being terrible under-performer…


For L .T .foods

1…Muted sales growth was due to corona impact on HORECA segment

2…Its net margin is low but operating margin is stable at around 10% since last 10 yrs (fluctuating operating margin indicates commodity business)

Even D mart has low margin

I think stable or increasing operating margin with sales growth is more important than absolute % of net margin

3…ROE = NPM×Asset turnover

Company can also increase its ROE by increasing turnover even with low net profit margin.So i m keeping eye on its sales growth and how company utilises its asset for next few yrs( i dont consider quarterly results very useful)

LT foods stock has not much appreciated in last few yrs as compared to my other holdings


Company has shown

1…Superb profit growth in last 5 yrs
2…Decreasing D/E ratiio
3…Stable margin
4…Increasing branded business
5…Adding new products, new market

I normally keep underperforming stock for minimum 5 yrs before taking decision

Disc…invested since 2018 with avg price of Rs 46 and seen many ups n downs.


Hello Pragnesh,

Could you please share your thoughts behind adding Raclgear to your portfolio ?

Lt foods need to hold rice for long time as they sell rice that is 1 year old or 2 year old. If they hold rice for minimum 1 year with 10% profit margin then this business is not a good business but a bad allocation of capital.

They have good brands of rice but long inventory hold and low opm are bad for business. According to screener they inventory days of 700 days.

For example, if i sell one candy per day of Rs 1 with 50 paise per margin that is 50% margin. If i sell one candy for 700 days i estned profit of Rs 350. Where as Dawat on Rs 400 bag will earn Rs 40 only.

Disc: this is general observation and not a recommendation. I am not an expert. No holdings.

1 Like

1…Basmati industry need aging for aroma
So it requires avg 250 days aging
(700 days is exceptional in 2021 due to corona)

So it is not specific to l t foods but it is industry norm

2…As basmati industry is working capital intensive business(huge inventory period),it is non attractive business that attracts few competitiors


3…It is only working capital and not long term asset that is allocated for aging of rice .
It is not bad allocation but industry requirement.

1 Like

I will share it in short time


(Material is collected from annual report concall,valuepicker)


47%@ two wheeler
16%@ Tractors

70% export
57% Europe
43% asia pacific

A=40-45 %
2 wheelers niche, high end bikes of 600+ cc,

agri mainly exports,

=New segment Recreational vehicles like snow scooters, snowmobile

1= gears (majority)
2=suspension, Break and handle parts.


1…Pricing power

A=: International business

Domestic OEMs face challenge on pricing. We also face some challenge. But in overseas OEMs the issue is different. Our market is niche and unlike domestic market OEMs, we don’t face that much issue. 1% - 2% doesn’t matter much.

=Whenever we sign an agreement with new customer, we also sign an agreement with customer to reduce pricing for first 3 years but after that there is not such issue.

=Focus on higher margins International business- RACL’s concious shift from domestic to International OEMs has insured higher margins & lesser competition which it would face in domestic auto industry. RACL generates Operating Margins of 20% plus which is very high for an Auto Component company. 70% of revenues generated from exports


Our MNCs customers are not much under price pressure. There is not much issue here. . Foreign buyers are more focussed on quality than prices. Their risk is more on quality as they procure product 7000 kms away. In India, there is not the case. Overseas buyers takes 3 – 4 months for procurement. They will never hurt you for 1 – 2% price. Their risk is more on 100% of confirmed quality and delivery.

2…Niche/Luxury product

=As a product, we chose niche product like luxury markets which doesn’t slow down. Our product is for bikes of 1 liter and above. It doesn’t cost less than 30,000 – 40,000 EUR. The person buying such product is not salaried class.

3…Quality and Timely delivery

Operating in niche space, quality and timely delivery is key which they are proud of.

=Its very imp
Their labour costs are high. If line dries up for 1 hour, they loose
millions of dollar.

4…Promoter-Technology guy

=How did we acquire such prestigious customers? Main advantage is that top leadership, is an engineer. Normally, other cos have top management who just talk about numbers. BMW (for bikes) got confident meeting me. For those customers, main issue is the right product at the right time with right technology. We were offering them solution. We work with the customers to make product cheaper without compromising from technology. It always starts with humble nos.

5…Technology know-how and core tech team

…Core technical team
has been with them for 2-3 decades. Technical capability doesn’t come overnight. It comes with sustained effort. This has happened because we nurture our people. We give them a positive work environment. We create a kind of a family culture. And this leads to technical capabilities.
(Corporate culture as a moat… Probably hard & time consuming for somebody else to replicate)

…All clients are biggy
Typically, in such situations, the supplier gets squeezed. But this is not what happened in RACL’s case, indicating there is something more to this business than being just an also-ran auto ancillary player.

=Lets think about it. Why would multi-billion dollar companies let a tiny supplier like RACL make high margins and high ROE, when they might as well go to other auto-ancillary co’s and give them lower margins?

=Know-how is a competition reducer. The longer it takes to learn how to do what your company is doing, the fewer competitors will be around to do it for less.”

=Basically, they were saying, employees at their manufacturing plants have built their skill set over several decades. Plus, the machinery is prohibitively expensive. Even if another ancillary co. does put up the money to buy costly machinery, they will need to go through a learning curve, which could take many years.
The other option is to poach a ton of employees from RACL, which is less likely because a lot of RACL’s employees have been around for decades and seem to be quite loyal to the co

6…The supply chains of global customers are considered super-efficient. A BMW or a Kubota, would want their suppliers’ plants to be in and around their own plants. But that is not the case with RACL. Forget being close to the customer’s plants, their plants are not even close to the port. RACL’s plants are located around Delhi, which is hundreds of kilometres away from the nearest port. If large OEMs are okay with a gear vendor being located hundreds/thousands of miles away (which is reflected in RACL’s growth over the last few years), it tells us something about RACL’s competitive advantage

7…High entry barrier

=Gear manufacturers is most difficult post CrankShaft, plus heavy investment + technology. High barriers to entry. Hence 30 years in company, we understand fully and not many enter this space

=Opportunity for growth is tremendous as more outsourcing is the way forward, gear manfg is highly capital intensive,

8…Low cost
.India has competitive edge due to low cost and labor competitiveness ,

9…USP/ Differentiation of RACL

=Approach for competetion - competetion exists in China, Japan, Thailand and EU etc in all sizes - RACL takes competetion specific approach - e.g. Japan is too slow in prod dev(4+ yrs), China has quality challenges/perception, EU is not cost effective any more - India and RACL at advantages

10…R N D
=We develop the product with customer R&D, which gets good value for money to customer + margins to us. We also give our own ideas so that we get value addition, we have team of engineers. We are not doing Product R&D, hence u may not find R&D as major expense. We invest in process R&D and invest in people where 15% work here.


(500 Crs revenue @2025 guidance is a safe target and we are on track.)

1…New customers

=Add a new big customer every 2-3 years. Develop a customer - Build a relationship over time - Develop technology for them - Then comes the boost in sales from the custome

=Every year we keep on adding new customers. Last year we added Schaefler which is a big company. All our clients are growing and none of our clients have left us. They are scaling up organically.

=One more important point I feel is that till date the growth were driven mostly by the old customers, as their business were growing or they were adding more parts from RACL. The revenue will start flowing now from the new customers, and this will drive the next phase of growth.

=We 1st get customers, then do capital investment

=We are always hungry for new customers

=Domestic market: 2021
A…Escorts Kubota (agri tractor),

B…TVS (in their apache bike + 300cc BMW bike) and

C… Kawasaki (which earlier had joint venture with Bajaj; now manufacturing alone) in Indian business segment.

Export market additions: 2021

D…CFMOTO (2-wheeler, KTM has tied up with CFMOTO to enter into China market, RACL had relation with KTM and are providing fully furnished gearbox to them),

E… Moto Guzzi (2-wheeler high end Italian motorbike company, owned by Piaggio, they have had a long relationship with Piaggio),

F…ZF (new client; biggest auto parts manufacturing company globally; entered Chassis component of passenger car (for both electric and conventional cars) which is a new segment; first Indian company to supply fully finished parts to passenger cars to ZF),

G… Man trucks (Europe’s second largest CV manufacturer); New capacity: 50% will go to ZF and rest will go to Man trucks.
MAN Trucks (old client till the time they exited India) - RACL have huge order from them and the capacity expansion shall be utilized for them too. Trucks are not going to get converted into Electric anytime soon, as management indicated.

H…We created Entire drive or kinematics of the e-scooter for the european scooter is something we are working on. They came to us few years ago this was outside our competence zone back then but in last 3 years we ramped up. We invest where customer demands. This electric scooter will be on our drive train. We will be a single source for the next 10 years. If they are saying certain volumes, they will commit to it

I…For EV, We are working with client whose details will be out in next 3- months and the whole world will know , cant specify which country the client belongs to, they are big player and has presence in Europe, USA, China, Japan and in India too (most likely could be Toyota or VW)

2…New products

=They mentioned in the opening remarks that they do chassis, braking & suspension components apart from gears

=New Initiatives- Entered into an agreement with a European 4 wheeler player as a Chassis Supplier. Tie up with domestic 2 wheeler player for gear components.

=Our core competence is gear manufacturing and the size of operation we are, as of today, we
really want to stick to our core competence or allied products, which are very similar to our
core competence. We’re producing gears so some precision parts or break parts or suspension
parts, which requires critical machining. And, incidentally, this area is where it is capital intensive,

3…New segment

=We have already invested capital expenditure for new
projects and futuristic technologies to enter into the Premium Passenger Car segment through one
of the largest players in the market.

RACL has several multi-billion dollar clients. BMW, for example, sold bikes worth 21000 Crs in 2019. And RACL’s annual sales is a paltry 1% of BMW’s. And this is just from one client. Will RACL be able to scale up their business multi-fold across geographies and across clients? Time will tell.

5…china effect

=lot of shift is happening from China where environment issues and increase in labour costs have caused lot of shake up.

6…Futuristic projects

A=On ZF- this product that they are doing wasn’t there in the market till 2015 and they want to be “big” in this. This product is vehicle agnostic.

A new, EV/ICE agnostic, product in which they want to be big and have taken BMW as the first customer and have “2-3 more projects” for a different end customer, with ZF in place. Discussions with other customer
also going on. This says a lot!

B…E-Scooter- They worked with ‘a European major’ for the last two and a half years and have developed this with them.

And now they are saying that value addition in this product is higher than the fuel.

A contract for 10 years that too single source is massive. This highlights the OEM’s trust in RACL’s quality and supply reliability.

These are futuristic projects with the world’s largest and best OEM’s. They are making themselves EV immune brilliantly.

Associating with such OEMs and a company like ZF, they should remain ahead in the curve. These product developments with ZF for BMW and “a European major” are a testimony to that.

C=Austria ZF client, chassis components, top end premium car. BMW 7 series car. We are entering in car segment. This will be futuristic 2022 car. (this is their entry into premium passenger car market)


export% of sales increasing


8…Long term contracts

Many of these contracts are very long term nature contracts running over say 10 years with commitment towards volumes.

9…For BS VI, we have already developed products and technology. Quality levels will improve for BS VI. Business share has increased because of that. We in fact got more business because of BS VI.


=By next year, 3-4% of our revenue will be from components which end up in EV. One of our clients is launching e-scooter in Europe

=EV gears are going to be high precision, higher technology required for manufacturing. Gross profit margins will be much more. Technology is different. Investment is also much higher. All our New technology and capex is EV friendly

=For EV, We are working with client whose details will be out in next 3- months and the whole world will know , cant specify which country the client belongs to, they are big player and has presence in Europe, USA, China, Japan and in India too (most likely could be Toyota or VW)

=…E-Scooter- They worked with ‘a European major’ for the last two and a half years and have developed this with them.

11…Margin improve
One key difference that has happened in FY20 & FY21 is on margin front - reaching to 25% from mid teen -

A=biggest factor is export mix increasing and

B= .Outsourcing of capital intensive jobs( heat treatment, forging press etc

=40% work for forging press work is done now in-house (earlier 100% were outsourced), improving raw material consumption and cost efficiency. Management are thinking of adding some more internal capacities.

=Heat treatment have high cost and having higher overhead, they are mostly oursourced.


=Another aspect that stands out is decoupling from industry cyclical nature - Last 3 years has been good for them both top line


=We have planned a Capex of Rs. 50 Crore for FY 22. We did 50 last year and we are going to do another 50 for Capex this year.

=The ongoing expansion is on account of the
new orders received by the company from new customers in export market. The installation of the machinery is in line with
order specifications provided by the new customers.

=Expansion: Plant is already ready; end of 2021 will start production. Volumes will start coming in 2022

=…Normally companies will first invest and then they start hunting for customers. RACL
doesn’t do this. We first hunt customers and then make investments so that our investments
are never idle, although there’s a little bit of gestation period.

= Capex is 3 fold,

A… first of all it is for creating capacity for existing product,

B… creating capacities for
new customers and

C…modernization of existing plant and machine.
=Let’s not forget we are a 30 years old organization, so we have to continuously upgrade our existing equipment also, we
have to take care of the life of the machine also. If we carry the dead machines with us, or we
keep on spending extra money on maintenance then we can claim to be a high technology



A=Incidentally, we are not much present in low end cars or low end bikes. We deal in luxury
segment and premium bikes. So, the utility of our present capital equipment, for the next 10-
15 years will be fairly in these areas itself.

B=The new investments are being done in a judicious
way that all those equipments should be adaptable to EV also. And that’s how we have created the product mix.

=Our free cash flow has been on weaker side because we are doing capex. WC is on higher side.
For manufacturing, why keep free cash, invest in capex. Keeping money in banks not healthy for shareholders.
At some stage, need to invest keeps reducing. Today Asset turn is 1.4x, in future, it will move up. % of capex at some stage will go down

=Capacity expansion during an industry down cycle
The co. announced Capex worth 50 Crs in FY2020 AGM. This is at a time, when their fixed assets were 100 odd Crs. Why would a co. that sells non-compulsory goods, increase capacity by 50% during a pandemic? It is not like they are selling roti, kapda, makaan, or anything close to that.
I think it is because they have high visibility for future orders, from clients, which is why they are taking such a huge risk of putting up 50 Crs, that too, 3/4th of it through debt.


=EV risk management was made clear in this concall(DDIT V)
1 ) Delay
2) Diversify
3)EV technology(precision+noise)
4) EV investment


…Delay impact through
a) Right customer segment selection : Premium bikes , off-roaders , Heavy Commercial etc
b) Relentless reduction in cost to ensure RACL is last man standing even in declining industry

=In EV also, throughout the world when it comes – it will come in phased manners like public transport, passenger vehicles, commercial vehicles and then tractors (we are not sure if it will come or not).

.=.We are present in tractors and luxury bikes. When you bike 1.5 liter bike, you don’t buy for price or mileage, you buy for acceleration and noise. I asked the same question to BMW – they said that we have supply for the contract till 2033.

…Diversify into product segment which are fuel neutral
a) New/ incremental capital allocation to Chassis and Suspension system - ZF
b) E- axle drive for scooters - beyond Transmission system to motor and power electronics ?? - A bit surprised as this is very R&D intensive

C…EV Technology

C1…EV has gears
=Fortunately for us, even if EV comes, EV is not without gear. Even E – rickshaw has 4 gears. They have reduction gears. We are supplying to EV cars model of the largest tractor manufacturer of India. We are supplying them gears.

C2…Precision of gears
will increase manifold in e-vehicles. Investments have been into doing precision gears which makes less noise which is required in EVs

…In ev, since the gear operates at higher RPMs and torques than ICE, it would need higher precision

=Value will come down for gears in EV but quality is many folds higher. Noise has to reduce for EVs. That is the reason we are investing a lot in technology. Even in fueled emission, noise emission is also a norm in EU and developed cos.

D…Investment for EV
…We are investing in that so that when EV comes, we are present. We always think 2 - 3 years ahead of competition

…Incidentally, we are not much present in low end cars or low end bikes. We deal in luxury
segment and premium bikes. So, the utility of our present capital equipment, for the next 10-
15 years will be fairly in these areas itself. The new investments are being done in a judicious
way that all those equipments should be adaptable to EV also. And that’s how we have
created the product mix.

Less volume,more value

My last question is that as you have earlier mentioned that as the gears shift from ICE to EV,
the precision etc., that goes up substantially and hence, the value of gear is higher. But also,
I believe the number of gears reduces substantially between an ICE and electric vehicles.
…So, that is a great thing that I have to produce less and earn more, then what is the harm in
that. ICE gear, I’m selling at Rs. 100 and an EV gear I sell for Rs. 500. So, that is a great thing



=How does view EV disruption in RACL : no of components that EV requires is far less than Traditional vehicle
"An electric car doesn’t need a clutch, it also doesn’t require gears. Electric vehicles don’t feature a multi-speed gearbox like conventional petrol or diesel vehicles. Instead, they have just one gear. This is because they can achieve much higher revs than a standard fuel engine. A conventional car can usually reach around 4,000-6,000 revs per minute (rpm), whereas an electric motor can achieve up to 20,000 rpm.

=The gear volumes would go down, nobody made any comments about that. Transmission would only need 1 gear we have known this for many months now (please check out the RACL concall notes or transcripts). Conclusion being drawn is that since the gear operates at higher RPMs and torques than ICE, it would need higher precision


=There are six major alternative of power drive configuration …

In 3a both transmission and differential gear system are required , in 3b , 3c , 3d etc gear component keeps on reducing
while in 3 e and 3f design power drive system it is nearly gear less
It is too early to understand how transmission system will evolve … but it is declining industry and hence ZF etc are outsourcing big time to smaller players …


1…Domestic growth
=Domestic sales haven’t grown for us. Reason for it? The main reason is that we were late into Hero’s and Bajaj’s of the world and these companies have their family member’s company supplying to them. They have been established since long and we were in trouble in 1990s and 2000s. All OEMs are doing vendor consolidation. We missed boat because of that. When we took over, all these vendors had already consolidated.

= We have also taken strategic decision to not enter domestic mass markets in big way. There are few things where there is discussion happening. End of the day we have to ensure growth.

= Our focus is equally on domestic market also. Coming year, domestic market shape has to change in a big way. Electric mobility will come big way in mass bikes.

2…Receivable days have increased and debt has also increased?

=Receivables have increased coz of exports proportion increasing in sales because 60 days is the shipping time for exports. Receivables are including of GST leading to higher receivable days.

=Being located at north part of india, it takes 15 days for material to reach the port.

3…Equity dilution

=Company has diluted 8% equity during the past 2 years. Most of the capex has been funded through debt, however, the company has also repaid significant long term debt taken for earlier expansions.

=The Company has issued and allotted 5,00,000 Equity Shares of the face value of 10/- each on Preferential allotment basis through Private Placement on 3rd July 2019, at a Price of 72.50/-

4…Working capital intensive nature of operations

=Being in auto ancillary industry, the operations of the company are working capital intensive in nature.

=The company has to
maintain inventory of around 3.5 months with large product range (more than 500 products under regular production).
Significant inventory (around 50%) levels are in the form of stores and spares. These are mainly consumable being used in
production process and are reusable; however having a life of less than 1 year. Also, to cater the demand of major
customers, company stocks inventory at its warehouses near customers’ factory for uninterrupted flow of products with
minimum transit time.

=Credit period of close to 2 months is allowed to domestic customers, contributing 30% of total
operating income, while collection from overseas customers, which contributes 70% of total operating income, usually happens in 3-4 months

5…Cyclicality nature of the automotive industry

=The automobile industry is highly cyclical in nature and automotive component suppliers’ sales are directly linked to sales of
auto OEMs. Furthermore, the auto-ancillary industry is highly competitive with the presence of a large number of players in
the organized as well as unorganized sector. While the organized segment majorly caters to the OEM segment, the
unorganized segment mainly caters to the replacement market and to tier II and III suppliers.

7…Customer concentration

…RGL has moderate concentration risk with top five customers contributing ~85% revenue in FY20 (PY: 71%).




2019= (-) / 31cr
2018= (-) /14cr
2017= 2.1% /6cr
2016= 3% /6cr
2015= 1.8% /2cr
2014= (-)




5…PAT(avg) growth rate
Last 5 yrs@>30%

6…Sales growth rate
Last 5 yrs@15%


= our Debt-Equity Ratios are very healthy. I think we are still less than the industry
norms, we are only 1.00. Even banks say that 1 - 1.5 should be the Debt-Equity Ratio and we
are still hovering around 1 which is healthy. And as we have told time and again that we are
a capital intensive industry and produce high technology products for which we need
matching technology. So, that way, we are at a healthy level, and we intend to maintain the
same place


9…debtor days


Added RACL and more BETA drugs

Will update portfolio in short time

My updated portfolio with avg buying price and Average time of purchase

1…Acrysil…(Rs 190.97)…(7.4%)…(dec 2020)
2…Beta drugs(314)….(7.4%)…(April 2021)

3…Astec life … ( rs 1017.39 )…(6.2%)…(Aug 2020)
4…Lt food …( rs 45.18 )…(6.1.%)…(Dec 2018)
5…Kei ind…(rs 405.25 )…(5.9%)…(Dec 2019)
6…Moldtek pack…( 259.20 )…(5.5%)…(April 2019).
7…Ganesha eco(Rs 515)…(5.5%)…(Feb 2021)
8…Racl(Rs 511)…(5.5%)…(oct 2021)
9……Paushak …(rs 2615)…(5.4%)…(June 2020)
10…Apcotex …(Rs 191.62 ) …( 5.1%)…(May 2019)
11…Grauer&weil …(Rs53.06 )…(5.1%)…(July 2018)
12…Anup…(636)…(5.1%)…(May 2021)
13…Stylam(1072)…(5.1%)…(Aug 2021)

14…Jenburkt ph…(.rs 620 )…(4.0%)…(Nov 2018)
15…kpr mill……(rs149)…(4.0%)…(oct 2020)
16…Ion ex ……(rs652.14 ) ……(3.3%)…(Dec 2019)

17…Ratnamani …(.rs 1298 ) …(2.2%)…(Feb 2020)
18…Auro lab …(rs 68.72 ) …(1.8%)…(Oct 2018)
19…Suven phar …(rs 251.64) …(1.7%)…(Aug 2020)
20…Ccl products …(rs 270) …(1.7%)…(Feb 2019)
21…Alkyl amine@ (791.56)…( 1.3%)…(June 2020)

22…other stocks… …( 2%)…(2017-2018)
Ice make
bajaj finance
ambika cotton,
Minda industries
Jamna auto
Rajoo engineer
Emmbi ind
Rain industries

=Portfolio is 107 % up of invested amount

(Investment is done in staggered manner from sept 2017 to uptil today with buy and hold approach


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