I completely endorse the views of @chetanbharath and expect the management to deliver as per their plan.
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Decent Results from Rossell India.
Also considering demerger of Rossell Techsys from Tea Business. Would love to hear your thoughts here @ayushmit sir.
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This demerger development comes as a big positive surprise! I feel this sector has lot of tailwinds with manufacturing moving to India and Rossell has been aggressively getting more and more orders. In past many people used to reject the idea because of the tea business being presentā¦perhaps this will now interest more people. On the concern - valuations are not cheap now and the company needs to scale up faster on the aviation segment.
Disc: same as before
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With 500 jets, Air India seals mother of all aviation deals
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The latest annual report of the company is out and as usual its very optimistic 
Anyways given the tailwinds in the sector its good to see the developmentsā¦hopefully the co will start delivering the nos also
There are few other interesting things too in the annual report. One negative is the increase in remuneration being proposed to 15% of NPā¦i feel investors should raise objection towards it.
Ayush
Disc: Invested in family and client acs
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5 years ago there were the following subdivisions of the company, Rossell tea, Techsys, Aerospace Services, and Hospitality. In 2019, the companyās focus became clear that Techsys is the next growth engine and they proceeded to shut off hospitality and aerospace services. In 2019, revenues from Techsys was 98 crs which now has become 185 crs (which is a 13% cagr). Here revenue jumps are possible on the acquisition of new clients/new platforms which is a long business. Along with this, due to the nature of the industry, it had a very long cash conversion cycle due to high inventory levels. The company has been able to cater to this, this year by shifting some inventory purchases to be done locally. How they win contracts is by establishing a relationship with an aerospace company, then they are invited to RFP(request for proposal) by them. Once the company receives all RFPs the price is locked according to their proposal not subjected to be changed for the entirety of the duration. Wire Harness as a market is just under $2 Billion with the Industry going through a consolidation. The company believes in value unlocking due to 2 areas, demerger of both divisions and new business (expectation of Boeing and Lockheed to expand along with adding IAI as a client).
The company has reduced almost all of its long-term borrowing. Hoping to see the efforts end up bettering return rations.
Disclosure: Not invested
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Ayush Ji they are not participating in TEJAS program.
What is the recording date for the eligibility to get Russelll Techsys shares, if someone buying Rosell India now still eligible to get the Rusesell Techsys share, or is the time over for that?
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Looks like the competition is increasing in this space with increased interest in EMS companies. The recently listed company like Cyient DLM has aerospace wiring harness division with Honeywell as itās main customer and itās working with this company in many areas including the design and development and testing of avionics components through itās parent organization Cyient Ltd. Because of this parent company link they are very strong in design lead manufacturing. As the market is big it may not be concern at this point in time, however itās better to watch the competitor companies. I have invested in Rossell India and started tracking position in the Cyient DLM.
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Financial Analysis of Rossell India Limited Q4 FY2023-24 Results
Financial Overview
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Revenue Growth:
- Q4 FY2023-24: Revenue from operations stood at ā¹6,338 lakh, compared to ā¹6,513 lakh in Q4 FY2022-23.
- Full Year FY2023-24: Revenue from operations totaled ā¹35,864 lakh, a marginal increase from ā¹34,868 lakh in FY2022-23.
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Profitability:
- Quarterly Performance: A loss before tax of ā¹1,745 lakh was reported in Q4 FY2023-24 compared to a loss of ā¹1,691 lakh in Q4 FY2022-23.
- Annual Performance: The company reported a profit before tax of ā¹1,526 lakh for FY2023-24, down from ā¹3,124 lakh in the previous fiscal year.
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Expenses:
- Cost of Materials: The cost of materials consumed increased to ā¹10,879 lakh for the full year FY2023-24 from ā¹8,722 lakh in the previous year.
- Employee Benefits: Employee benefits expense rose to ā¹14,254 lakh in FY2023-24, compared to ā¹13,692 lakh in FY2022-23.
- Finance Costs: Finance costs increased to ā¹1,423 lakh for the year, compared to ā¹1,178 lakh in the previous year.
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Exceptional Items:
- The company incurred ā¹50 lakh in expenses related to the demerger process during FY2023-24.
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Dividend:
- A dividend of ā¹0.30 per fully paid-up equity share of ā¹2 each (15%) was recommended for FY2023-24, down from 20% in the previous year.
Operational Highlights
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Segment Performance:
- Tea Segment: The tea segment saw a reduction in revenue, contributing to the overall decline in quarterly revenue.
- Aerospace and Defense: Continued focus on long-term agreements and new project acquisitions in the aerospace and defense sectors.
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Inventory Management:
- Inventories increased to ā¹18,165 lakh at the end of FY2023-24 from ā¹15,168 lakh at the end of FY2022-23, indicating a buildup of stock possibly due to anticipated future sales.
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Debt Levels:
- Total borrowings were ā¹19,402 lakh at the end of FY2023-24, compared to ā¹16,161 lakh at the end of the previous fiscal year, reflecting an increase in debt to support operational and investment activities.
Sector Insights
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Tea Industry:
- The tea industry faced challenges due to fluctuating prices and increased input costs.
- Rossell India Limitedās performance in the tea segment was impacted by these industry-wide issues.
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Aerospace and Defense:
- The aerospace and defense sectors showed potential for growth with new long-term agreements and project acquisitions.
- Strategic investments and collaborations are expected to yield positive outcomes in the coming years.
Business Strategy
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Diversification:
- The company is diversifying its portfolio to mitigate risks associated with dependence on any single segment.
- Focus on expanding in aerospace and defense sectors to balance the traditionally strong tea segment.
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Cost Management:
- Implementation of cost management strategies to improve margins and operational efficiency.
- Continued investment in R&D to develop innovative products and solutions.
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Sustainability Initiatives:
- Commitment to sustainable practices aligning with industry trends and regulatory requirements.
- Focus on long-term value creation through environmentally friendly operations.
Customer and Product Focus
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Customer Base:
- Efforts to expand and diversify the customer base, particularly in the aerospace and defense sectors.
- Strong relationships with existing customers to ensure repeat business and long-term partnerships.
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Product Development:
- Investment in developing new products and first articles to meet the needs of multinational corporations in the aerospace sector.
- Introduction of innovative solutions and products to stay competitive in the market.
Conclusion
Rossell India Limited faced a challenging FY2023-24 with a decline in profitability despite slight revenue growth. The company is strategically diversifying its portfolio, focusing on cost management, and investing in sustainable practices to ensure long-term growth. While the tea segment faced industry-wide challenges, the aerospace and defense sectors showed promise with new agreements and projects. The companyās commitment to innovation and sustainability positions it well for future opportunities.
This detailed analysis highlights the financial, operational, sector-wise, business, customer, and product-related aspects of Rossell India Limitedās performance for the fourth quarter and full fiscal year 2023-24 .
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From the Annual Report
Rossell Tea produces some of the finest CTC and Orthodox Tea, exported to many countries like Canada, UK, Germany, Netherland, UAE, Saudi Arabia, Egypt etc.
Rossell Techsys offers value added services for leading global OEMs in Aerospace & Defence, for both military and commercial platforms. We cater to different platforms such as fighters, trainers, helicopters, unmanned ground vehicles, unmanned aerial vehicles, rockets, battle tanks, commercial jets and aero engine derivatives. We serve both the export and domestic sector. Major exports (~80%) are to USA, Europe and Israel. Rossell Techsys is specialized in Build to Specifications (BTS) and Build to Print (BTP).
To summarize, we anticipate the production being lower than last year due to adverse weather conditions and the increased testing of teas will restrict the use of chemicals. CTC prices may be somewhat similar to last year but marginally better for us owing to our compliance and quality. The orthodox prices will be better than the previous year. The biggest challenge will be to protect the crop and rein in the escalating costs particularly wages and fuel.
The total Operational revenue for the financial year 2023-2024 stands at 216.88 Crores, an increase of around 16.32% over the previous fiscal year 2022-2023. The Division added confirmed orders worth 638.00 Crores and confirmed strategic agreements worth around ` 2,800 Crores
The Operating Profit before depreciation and interest (EBITDA) of the Rossell Tea Division for the year was 1,198.59 lakhs as against 3,007.59 lakhs in the previous year. At the same time the Operating Profit before depreciation and interest (EBITDA) of the Rossell Techsys Division for the year was 3,553.36 lakhs as against 3,127.04 lakhs in the previous year. With the strong financial fundamentals over the year, the financial base of your Company remains strong, and it shall be further strengthened with better operating and financial performance in the years ahead, subject to the impact of demerger process being in progress at this stage.
Soft copy of the approved order of the scheme of amalgamation has been uploaded on the NCLT website on 02/08/2024.
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