Hello everyone. Came across this company called Raghav Productivity Enhancers.
Basic Background:
RPEL is engaged in the manufacturing of quartz based ramming mass, quartz powder, silica ramming mass and tundish board. It sells its products under the brand name of “Raghav” in domestic market as well as in foreign markets (majorly African and Asia Pacific countries).
Few graphs:
*Here 10 is FY21
Pros:
Commodities boom and metal prices skyrocketing
High promoter holding at around 73%
Last 3 years average ROCE is about 30%
Last 3 years average ROE is about 27%
Almost debt free
Operating margins at around 20 to 25%
5 years CAGR profit growth is 66%
No significant divergence between operating cash flow and profit
Exports opportunity(currently 18% of revenue)
Cons:
High debtor days at > 100 days
Capital intensive sector
Inventory turnover declined from 13x in FY15 to 3.7x in FY20
35x P/E multiple
5.5x P/B multiple
Company is paying zero dividends
Fixed assets turnover declined from 15x in FY14 to 2.4x in FY20
Large working capital requirements
Company has issued preferential equity shares to certain entities (including promoters) at a 20% discount to CMP
Non-cooperation with credit rating agency
Other interesting factors:
Mr Utpal Sheth is holding around 7% stake in the company
Mr Ashok Bhandari(CFO and president of Shree Cement for 25 years) is chief economic advisor to the company and visits the company every quarter
Customers:
R.L. Steel
Mahalakshmi TMT
Varsana SPA
Shreeyam Power and Steel Industries Ltd
United Steels Company
Rajuri Steel Pvt Ltd.
More customers
Sail, Tata, Essar, Jindal Stainless, Jindal Steel & Power, Rathi, Shah Alloys, Lloyds,
Facor, Electro them, Synergy
(from a brochure on their website. No direct link available)
Pros:
-
Gross Margin has been fairly consistent since Q2 2019 i.e. 10 quarters
-
Operating and Net margins have fluctuated a bit but they also got stable since Q1 2020 except Q4 2020 and Q1 2021 (lockdown effect)
-
YoY sales growth is consistently improving for last 5 years
-
Consistently spending on R&D. They spent ~1Cr till Dec 2020 in FY 2020-21
-
A total of over 10Cr has been spent by them, FY 2017 - 2020
-
its R&D centre is the only one to be recognised by the Department of Scientific and Industrial Research (Government of India)
-
a technical collaboration with Sweden-based JWK AB. JWK AB is a technology consulting Company with a formidable R&D track record in the field of silica used in refractory applications.
-
Their ramming mass capacity is the largest in the world. The nearest competitor is not even half their size.
-
Products selling at a premium of 20% compared to competitors (Annual Report 2020, page 29)
-
They are organising analyst meets. For a company of their size, it’s surprising.
Cons:
-
They increased non-current borrowings by ~INR 89 lac. It’s unclear what this money is being used for.
-
Couldn’t find any investor communication channel. The investor presentation is missing which they supposedly uploaded on BSE on 6th November
-
Corporate presentation on their website is inaccessible
-
What is the difference between raghavsteel.com and rammingmass.com?
Something seems odd. Everywhere they mentioned they started Raghav Ramming Mass in 2009 and later changed it into Raghav Productivity Enhancers.
- But this youtube video uploaded by them mentions Raghav Ramming Mass was established in 1977.
- Youtube: Ferro Alloys, Pig Iron and Ramming Mass by Raghav Ramming Mass Private Limited, Jaipur
RPEL has the following charges registered. The most interesting one is INR 19.26cr amount and a couple other hypothecated motor vehicles. (A charge is basically mortgaging an asset)
Can we find out what these motor vehicles are? I wouldn’t be surprised if these are some fancy cars being used for personal use.
26th April 2021
Following are the people who attended the conference call on 7th November 2020.
Param Capital Research Pvt. Ltd.
Lucky Investments Pvt. Ltd.
Emkay Global Financial Services Limited
Mr. Nishid Shah
Ramesh S Damani
Relativity Investment Advisor LLP
These are the various contact details of the company:
Email:
Phone:
9829011963
9829019963
2235760
2235761
Contact details of people for some third party/channel checks:
Customers:
Auditors:
Lawyers:
Here is the link of their DRHP https://www.bseindia.com/downloads/ipo/2016125144222DP%20RRML.pdf
Interest free unsecured loans from promoter is a clear green flag
Promoters’ personal guarantee for 15 Cr loan is green flag
Interacted with Mr Govind Saboo
Did not get many answers, as he said there are certain limitations to what can be disclosed on a one on one basis
He said that you will have to do my own independent research (especially about competitors)
But few things which he said were:
Exports is direct sales, there is no broker or agent
Around 70% is induction furnace and 30% is foundry
In that, RPEL is catering to induction furnace
Industry is unorganized, so despite only 6% market share, RPEL is a market leader
Mr Bhandari is an advisor to the company; whatever management needs help with, they ask him
Private placement price was based on automated algorithm of past few months average stock price, and management did not decide that price
Raghav Steel is a promoter group company, and raghavsteel.com is the trade website of RPEL
Corporate gifting box on website is a designing mistake and they will change it soon
Around 90%+ customers are steel companies, but made some inroads in cement
Product reduces electricity requirement by a range but broadly 20%+
Fixed deposits to be utilized soon is going to be capex
About 300 players, broadly yes because it is unorganized sector
No patents as of now
JWK of Sweden helps in product development
Exports entry is long term strategic decision
Marketing people cannot comment
Some key questions:
Inviting comments