“Institutional investors wanted entry”
That doesn’t correspond to the actual quantity sold. Unless you assume rest of 30 lakh shares were bought by institutional investors in tranches of < 1%.
If i need to give 20 lakh shares to institutions, i will sell 20 lakh, not 50 lakh.
I think they needed money and that explains the quantities sold. Agree that they have every right to sell, and if they tell the reason at some point in time, that will be sweet.
Today they came out with a press release which has the answer to who bought 26 lakh shares.
To quote from PR, buyers were:
“FIIs, DIIs, Multi strategy funds and reputable family offices”
The only point in the press release that surprised me a bit is the point that they made about the presence of institutional investors making it easy for them to potentially raise further funds in future. Then again maybe it is for opportunities yet to come.
Btw, just wanted to add that this is a brilliant thread sharing such granular details on the company and the stakeholders. Hats off!
Disclosure : Invested
Disc - I have completely sold my holdings in last 2 months. This is not a buy or sell recommendation. Views are biased due to recent selling.
There are 2-3 areas that need to be addressed.
Promoter Selling
People who track Shivalik for many years know that management is very conservative and was very averse to share information in the earlier years. That changed in recent years with presentations and conference calls (better for investors, better in the long term).
The company did big institutional days in Mumbai in last few months and came out with detailed presentations. The company did not need funds at that time - capex was done for 1600cr revenue capacity and rations/cash flows are absolutely superb and they can fund any future capex from internal accruals. So it was very clear that promoter selling stake was absolutely one of the possibilities for such an investor overdrive. Other was big acquisition - that will take business to next trajectory.
But promoter selling needs to be put in the context of promoter’s view and past track record. Here are promoters who have painstakingly built an absolutely niche business, dedicating many decades of their life, their own capital, developed own technology etc. They did not sell shares during those decades. For them, wanting to get some cash for their stake after 20-30 years of Tapasya is absolutely fair. There are examples of companies like Page Industries, P I Industries - where companies have created enormous wealth even after the promoter selling.
Why Did I Sell
With all this Gyaan, why did I sell my holdings hypocritically - It was a matter of process/discipline. I am still not sure if it was right decision to sell. From hereon, most of the money would be made from earnings growth rather than rerating (although one can never rule out rerating). The balance of probability has shifted in favor of compounding returns rather than multi-bagger returns.
The other two factors that have kind of discouraging are that - They are guiding for 1600cr growth by 2030 or in 6-7 years. That is 20%+ CAGR growth over 6-7 years. At 690-700, that was like buying 20% growth at 50-55 PE.
The other factor is that business was making 16-18% margins previously and now it moved to 24-25% kind of margin range. I am unsure if these margins are sustainable - to be fair, gross margins have not moved all that much and probability is pretty decent that margins might be sustainable. But we have seen so many cases where margins moved up for companies around COVID times only to regress badly. With expensive valuations, I thought it was better to err on the side of caution.
Another thing was that their market share in some of the segments is already in double digit globally. So ebbs and flows of industry will impact your performance - business can not grow despite the environment at that kind of market share.
From hereon, I am still very interested in tracking the story - looking at how things are unfolding in smart meter space. I am ready to jump back on bandwagon if I get clarity that margins are sustainable and growth rate will move from 20% to 30%. This will be a trading bet and that will have different process in terms of entry/allocation/exit etc.
Business
Now coming to the interesting parts - what is happening in smart meter space in India is absolutely amazing (Exponential growth).
So the real next step is to do some work to figure our/narrow down Shivalik’s place in smart meter supply chain.
Doing some online searches - do see following Chinese players in some of the products -
On the homepage of the company (https://www.weijiaelec.com/), there is a video where they talk about having 50,000 shunts per day capacity. They also briefly mention beam welding. 50K per day shunt capacity is not that big, assuming 0.25$ per shunt cot - revenue comes to only 40cr annually.
Following is another Chinese company which have Shunt resistors that are listed on their website. I have no idea if they are manufactured in-house or procured from outside by the company.
Great analysis. In the concall the management mentioned that since last 2 years they are witnessing the relay manufacturers setting up base in India which will help them selling shunts to them along with contacts which isn’t possible if it’s produced overseas as they would procure shunts locally.
I,too ,found it bit pricey beyond 580 but having taken somewhat material profits In 2022 and finding the reentry somewhat challenging and projecting the potential revenue at a margin of 23 to 28( despite management guiding it caution is must ) at full capacity (and Peter Lynch’s lessons)didn’t want to exit at 727 but rather add more below 514 
. Of course I could have been wrong. Thanks for the critical analysis!
Actually each meter value is roughly 3000-5000 range based on specs. The quotation of 8000-10,000 is for the overall value of the order for AMISP’s on Design Build Finance Own Operate Transfer (DBFOOT) basis including software solutions for end to end automated system management.
Update from Shivalik’s Linkedin Page - Deal was priced at 1.4x premium over last 6 months price
I somehow continued looking for more Shunt suppliers in smart meter space and few things I found and few questions -
From above pdf from the earlier post, it looks like one can use one shunt (phase element) + one CT/Hall effect sensor (neutral element), two shunts (proper isolations), two CTs (proper isolation) in the meter.
I still have not found the what configuration would be used by Genus/Secure Meter/Tata Meters/HPL etc. If someone knows it, please do share.
It talks about three phase smart meters which are used for industrial smart meters. Most of the residential smart meters are single phase smart meters (again would be good if someone with expertise confirms this, this assumption is based on various readings).
In general shunt is a better choice vs CT (accuracy, sensitivity, standalone cost etc.) but it requires proper isolation. ST Micro do have some isolator products. I am unaware of cost of it and how it fits in overall cost of smart meter. We need to figure out if Indian smart meter manufacturers are using 1 shunt + 1 CT or 2 shunts?
Few comments on few of the suppliers →
Due to this, the first question becomes very important - when SBCL is talking about 50 rs opportunity per meter for Shunts - is it talking this for 1 shunt or 2 shunts?
It is good to clarify this. Given all the things we know about business quality and large market share of SBCL in world in Shunts, it is probably fair to assume that they can compete against China. But good to clarify !
Now few things about Chinese players -
GRT Relays (Zhejiang Great Electrical Company Ltd)
What I find out interesting about above page was - “Export to India for Smart Meter” part in title.
Jiaxing Haihan Electronic Co. Ltd
http://xjsjme.r23.35.com/cate-21285-21406.html
The most interesting thing about the link above is - it is a catalogue for shunts and there are product SKUs from HS01-HS43 !
HEYI Electrical Solutions
Final Comments
Overall, I am not sure if smart meter shunt can be compared to say EV shunt. Based on competitive landscape and number of suppliers present in China, this segment does look far more competitive.
Balance of probability is that SBCL is competitive against Chinese suppliers based on whatever we know about their strengths. But it would still be best to clarify this ! (We do not want to be in scenario where SBCL wants to sell 1 shunt for 50 Rs vs Chinese suppliers giving it for 25-30Rs. for smart meters)
The SBCL story for shunts in Smart Meter segment will get a turbo boost if there were tarrif/non-tariff barriers against Chinese suppliers. The question whether there would be blanket barriers against Chinese suppliers is not fully settled in my mind.
Most of the Chinese players in above list seem to have several components of smart meters available with them. (The usual single product vs basket argument that gets used).
SBCL has said that they have 65-70% market share in single phase meter shunts. At 0.7cr meters installed * 50 rs per meter - this is 35cr opportunity, 25cr revenue for SBCL (and not in a single year).
When total opportunity goes to 23cr * 50 rs = 1150cr (over 5-7 years) and we have Chinese suppliers who offer basket of products - what is the probability that this market share will still remain 60-70% ?
Disc - same as before
Just an additional info here, smart meters can be hacked during war times to shut distribution grids, so it is likely that government prevents use of Chinese components in them.
@rupeshtatiya Very interesting post. In my calculations I had taken domestic smart meters market share over a period of years for sbcl to be 50% even though the management had said they have 60-70% domestic market share for shunts in single phase meters and going forward expect similar market share in smart meters as well , specially with Genus,HPL etc already as their clients. In view of the post by @Simrat about the possibility of these smartmeters getting hacked a case for raising barriers could be made , but only future concalls can reveal where sbcl stands as regards lower cost shunts from Chinese competitors if that is the case(that is if such a ban fails to materialize for whatever reasons). The SBCL management had shared that the government is adding and implementing phase wise duty structures on import of certain parts and components for smart meters.
If everything is so good, why the management itself is not confident of their future business plans? Hope our senior members have a opinion on this.
I am definitely not an expert but there can be several reasons for promoter/promoters for selling.
I don’t think the company will give any stupendous return from here on, but expectations of 20-22% growth still remain based on the business performance and projections given.
Promoter selling is a concern but can not be a deal breaker/maker imo or else I would have been loading up on Adani and Patanjali stocks instead.
News update : https://youtu.be/C7UD6xmJPh4
“Vishay is a clear frontrunner in the market for current sense resistors, delivering superior quality and continuously expanding our portfolio of products to meet the evolving demands of design engineers,” said Joel Smejkal, President and Chief Executive Officer at Vishay.
“Given the significant rise in automotive, industrial, consumer, and aerospace applications for these products, we’re committed to expanding our production capacity to meet the rapidly growing demand and provide unparalleled service to our valued customers and distributors.”
After spending many years in the market, I continue to get amazed by this realization that how narratives get created to support price action. Investors, who were going GaGa when the stock price was hovering around 720, suddenly turned pessimistic/negative when stock price fell to 520. In this case, no negative news have come out except promoters selling 10% for the first time in last 10+ years. It seems as if they have done some fraud, by selling the shares in the company they have started and continued to own more than 50% post this share sale.
For long term investors having conviction, this is a golden opportunity to add to the current position and enjoy fruits of this counter intuitive exercise in the years to come.
Discl - invested for last 2 years and continue to add more during last 2 weeks
They could have gone for QIP if they want fund for future business plan, not sell at a price way below the CMP.
Guys, I find there have been too many non-value additive posts in this thread, especially after the promoter stock sale transaction. Please note the textbook rule for promoter transactions is – promoter buying is always a positive, but promoter selling is not necessarily a negative. One has to go behind the reasons why the promoter has sold and then judge.
A few days after the sale Shivalik promoters have issued a press release and explained their reasoning behind the sale. Take it or leave it, but do not clutter the thread with your own views which matter little. Such posts waste reader’s time, make it difficult for someone to follow the business and reduce the overall quality of the discussion. Please refrain from such actions.
Shivalik has been a major milestone in my investment career. The exceptional execution in last 3-4 years along with end use sectors tail-wind is expected to continue drive growth in medium term for the company. However, the company allocation has increased from 2% to 20% in my portfolio since last 2-3 months. While I continue to remain optimistic for long term business prospects, in FY24, my understanding from Q1FY24 Con call, in FY24, the business (sales) would be growing at around 15-20% and Net profit may be around 20-22%. This is my expectation and may be completely wrong. Based on that, the valuation appears rich and hence, after holding for almost 5 years, last week I decided to sell 20% of my holding. I continue to hold 80% of my original holding and remain optimistic about the prospect of the company.
Since I have been contributor to thread, I thought to keep members updated (Whatever it may worth 
).
The selling proceeds from Shivalik Bimetal has been reinvested in HCL (28%, Dividend yield with growth fitting in definition of dividend compounder which I have special respect), Akzo Noble (26%, again a dividend compounder), Jagran Prakashan (14%, a medium term trade with expectation of superior profit growth due to lower input cost, higher advertisement spending and recovery in Music India, a subsidiary performance), Jenburkt Pharma (11%, my old time favourites, nothing expectational in business, but have respect for promoter group integrity and like tortoise approach of management, slow and steady) and Premco Global (10% of proceeds, amazing company in my view with manufacturing capacities in India and Vietnam, two of the most important sourcing region in global textile chain with great customer relationships and superior capital allocation (now declaring quarterly dividend).
Disclosure: Shivalik Bimetal is my second largest holding. My view may be positively/negatively biased due to holding and recent sale respectively. I am not SEBI registered advisor. I am not recommending any investment action. I may buy/sell above mentioned stocks without informing forum. Investor shall do their own due diligence before making any investment decision.
Just in case you attend the AGM of Shivalik Bimetals, certain queries in my mind if you can ask.
Queries-
Hydrogen fuel cells for cars are being developed. So how many shunts will each fuel cell utilise and are we in talks with any of the company for capitalising on this opportunity? (Google Bard gives an interesting answer to that in terms of quantity but someone advised not to trust that. So…)
EBW is also utilised in semiconductor mfg.
Does our company have plans to tie up with some companies as semiconductor push is there from the govt side?
Tesla is coming to India (most probably), will our company be benefitting from the existing arrangements that we have, as Tesla has big plans for exports from India. Has this already been factored in while giving 12000 Crrevenue estimates?
The contract manufacturing of ACs and implementation of ACs in trucks being made mandatory now also presents an opportunity wherein we are already supplying to some existing players. The temperatures around the world going up and rising middle class in India also hint at fast paced adoption of ACs. Any colour on the opportunity size in this segment? What is the revenue per AC as well as other household appliances that use Bimetal strips and shunts that can be realised.
Is the company planning to develop any new complementary products in near future?
What is the opportunity size for our company in battery storage as PLI schemes have been announced?
Lithium mining story in India will result in a massive opportunity for battery production in India and EV adoption. Does the 1600 Cr revenue forecast take into account this development or we will be able to achieve this in earlier timeframe, provided the mining process and refining issues are sorted well in time.
As of now the company is only in B2B segment, any plans in near foreseeable future for product development and going B2C or contract manufacturing by taking on some contract manufacturing from some reputed brands.
What kind of financial incentives is the company likely to receive under PLI 2.0 for SPEC, now that Shivalik has been approved.
The present capex is nearing completion, so what is the projected capacity utilisation over next 2-3 years.
Thanks
