SmallCap Hunter : Trying to find the dark horses with triggers


Lykis is an FMCG brand with over 1000 skus and does some private labelling for FMCG brands as well. (all of their brands and businesses are mainly export, so no real domestic presence)

Mr. Vijay Kedia held a large stake and was promoter of the company for years until Mr. Nadir Dhrolia took over recently. This resulted in a mega turnaround of the company. (top-line as grown multifold during the past couple of years)

Lykis disposed its loss-making tea business very recently, and Mr. Dhrolia used his rich experience in African exports to scale lykis’s revenues multifold (from ~100cr to current TTM of ~450cr). Mr. Dhrolia then purchased part of Mr. Kedia’s stake and ran an open offer to eventually hold close to 70% of the firm with Mr. Kedia has either exited or holds less than 1% now.

Lykis currently faces issues on generation of cash flows although the turnaround has just begun so it might be acceptable.

The valuations are cheap all things considered, it trades at a market cap of ~150cr with ttm rev. of ~450cr and Op. profits of ~12cr and PAT of 11cr (PAT is close to Op. profits primarily due to tax advantages due to previous loss making years) a multiple of ~14x currently. OPMs have also significantly improved, touching ~5.5% last quarter.

Is anyone tracking this company? Objective is to see if their accounting profits/turnaround translate into cash flows for the company and eventually FCF with improving ratios.

(disc. I may have made mistakes with the info/narrative above, If there are errors do let me know/correct, I will edit or delete the post. Further, all numbers are ~from


I agree on the cancellation part. TBH they shouldn’t have grown their order book to 1900cr + given they do a sales of 200cr a year. It was bound to happen.

#2 Lot of other small caps companies pay 15%+ rates to promoters for the unsecured loan or a hefty rent is paid to promoters. Here it is the opposite. The management is willing to put their money to get the company going. I personally see this as a positive.

#4 This is precisely the question worth investigating. They have the capacities, they have the orders, the theme is strong. Can they be profitable? Why were they profitable earlier and not now?

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I m tracking Lykis from past few months. What I hv observed from exchange filings and other media news is that they have shifted their office from Kolkata to Mumbai after taking over from mr kedia sir. And kedia sir has either completely exited or reduced to below 1%. I am not an expert and my sources are limited so I my be wrong in my understanding and assumptions. (I hold around 8% of my PF)

Without Mr. Kedia involved, is there any info you have on the current mgmt. cleanliness?

I do not hv proper info on the mgt but I hv made some guesses and assumptions that may be wrong.

  1. I tried to find out in social media and on internet about any wrong doing but did not get anything meaningful.
    2)I found out that mr Drollia is associated with the company, mgt and mr kedia from very long time ie from years and mr kedia will not do business or associate very long with any improper person -personal thought.
    I hv a position in the stock so I hv a soft corner towards company and mgt and I may not see things in right perspective in certain times.
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And new mgt is not completely new in the business they were in the Business from long. And commitment after take over is clearly visible like shifting of corporate office, making company profitable, huge growth in revenue in times of crisis after corona till now etc. I think they have started acquisition in the year of corona.

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Thanks for the info, mgmt. is always a concern in small companies let alone in the Indian markets as a whole.

I still can’t understand why Mr. Kedia would choose to completely exit the company after its turnaround begun. Especially considering the potential upside should lykis start generating cash flows and grows at such pace.

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That is also beyond my understanding. may be they have agreed in that way.Here I made an assumption based my mr kedia’s quote about the mgt. That many times mgt doesn’t know how far they can go.( ie tere ko nahi pata tu kitna aage ja sakta hai)


I have only one concern that they are carrying huge debt in their balance sheet wrt their size. And debt have also grown with the rise of revenue. I hope going forward they can achieve 7-8% operating margins when inflation/RM cost eases otherwise this is very risky business to hold on.

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all their debt is short term. With such a huge increase in top-line and operations, perhaps they’ve needed adequate working capital through the year (not to mention they werent’ profitable enough either)

Maybe better to track their recievables and related cycles, working capital and related cycles & subsequently their ROCEs. But this clarity will only emerge over time.

Ultimately, one would want to see their accounting profits translating into cash flows and then through streamlining of the business & various other leverage kicking in, some free-cash begins to emerge and grow.


Please read Websol and my thoughts on this thread :thread:

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You seemed to be quite prescient in Lykis. Good nos recently & reyurns too.

Nadir Dhrolia seems to hv turned around the company after taking over from Mr Vijay kedia & selling loss making tea garden in Silchar.

he is a n Agakhani who seems to hv a good reputation as far as doing business ethically & Agakhanis control the whole business chain in Africa.

No wonder business seems to have turned around for Lykis

Anyone tracking the co Lykis ?

Discl- Invested with small qty


Promoter sold some shares as per BSE disclosures. What could be the reason? any insights?

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With almost Only positive news from all corners I have recently bought Lykis. There was a disclosure made by promoter selling shares last week, since then the sentiment has dampened.
Anyone has more insights, please do share.

The stock is in ESM Stage 1. Read about this here:

Yeah, thats right. It is a small cap with 200 cr mcap.
It’s a turnaround story with top and bottom lines multiplied many folds this year, so is the price from 20rs to 100+ and it went in UCs thats the reason for the stock to be in ESM.
But the recent stake sale by promoter is the negative tag here, just wanted to check if anyone knows the reason and anyone knows more about the company and promoter ethics.

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CFO negative though co is showing profit.
Debt is 144 cr as per screener, how company is paying 6 cr interest in 144 cr debt - 4.16% interest rate.
No capax etc is planned, what’s narrative for turnaround?
Think this way if you have not thought yet, if yes ignore my message.


May be they got the higher debt at the end of FY or they have included it as part of expenses which is not good.
Thanks for the insights @Deven . Good to know screener provides such info. If there are any such other places where we can get details, please let me know.

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It is approximately 6.09 cr only. Even in the previous FY they had 100+cr borrowings and paid around 2.67 cr as interest. May be I need to learn more on these areas to understand better.
The good part is theres is huge increase in volume(may be private labelling), hope it wont be an one time income.


• Company name: Gujarat Containers ltd.
• Market Cap ₹ 117 Cr.
• Current Price ₹ 193
• Stock P/E 10
• Book Value ₹ 61.6
• ROCE 30.8 %
• ROE 38 %
• Promoter holding 59.66 %
• Price to book value 3.14
FINANCIALS: - Gujarat Containers Ltd financial results and price chart - Screener

Gujarat Containers ltd. is a leading manufacturer in India offering a huge variety of specialized BARRELS (drums) under one roof.
Financial Performance (Year Ended FY2023) :-

The company has reported total income of Rs.136 crores during the Financial Year ended March 31, 2023 as compared to Rs.150 crores during the Financial Year ended March 31, 2022.
The company has posted net profit of Rs.11 crores for the Financial Year ended March 31, 2023 as against net profit of Rs.9 crores for the Financial Year ended March 31, 2022.
Further debt equity ratio, stock turnover ratio, fixed assets to sales ratio, roe, roce, working capital days, etc are continuously improving.
The co. offers products like Galvanized Barrels, Epoxy Barrels, Composite Barrels, All side Welded, Barrels, Open Top Barrels, M.S.Plain Barrels, NRV Barrels, Carboys & Liners, GP Sheet Barrels, HMHDPE Barrels & Jerry Cans.

Other listed manufacturer of Barrels: -
Balmer Lawrie & Company Ltd.( 40% market share in India), TPL Plastech Ltd & Sicagen India Ltd.

Industry served: -
The barrels manufactured are used for storing chemicals, dyestuffs, pharmaceuticals, resins, petrochemicals, and petroleum and its by-products.

INFRASTUCTURE and Manufacturing Capacity of GCL : –
Manufacturing capacity is 2500 barrels per shift.

• Main Plant – GCL has well established plant set up to produce 2000 BARRELS per shift. In this plant, it has sheet cutting & sizing, spot welding, line welding, seaming, degreasing and partial drying in preheating oven facilities.
• Lacquer Lancing Section – GCL has developed a special type of lacquer application system to give the best quality BARRELS. Besides, it has two-way traceability methods to detect leakage and seepage in BARRELS. Entire process is on semi-auto system and least manhandled
• GI Section – Over the period of time GCL has mastered the manufacturing of GI BARRELS. Today GCL is the only Company in India having highest capacity in producing GI BARRELS & having all the required infrastructure In-house. It has ample infrastructure and manpower to produce more than 500 BARRELS per day.
• Blow moulding section – Quality of the Composite BARRELS is penetrated in its liners. To ensure zero complaint & assure best quality liners GCL has made its own blow moulding facilities at its plant. It has 5 blow moulding machines having different capacity of production. GCL utilize HMHDPE granules from IPCL / Reliance only.
• Welding section – GCL do all-sided-welding to its BARRELS on specific demand of its valued customer. This section has different types of welding equipment’s and rotators. These BARRELS are used to fill highly hazardous products.
• Quality Lab – In this section GCL has Helium Testing Facility, Automatic Degreasing plant for cleaning barrels internally and externally without manual intervention, raw material testing facilities and analysis of raw materials and chemical compatibility test of epoxy lacquer, seaming compound & GI.
Atul Limited, Meghmani Group, Murugappa Group, Privi Organics, Reliance Industries, Sun Pharma, United Phosphorous Limited, Gujarat Insecticides Limited, Oriental Aromatics, Kutch Industries, GSP Cropscience ETC.

Gujarat Containers Ltd has set an expansion project at GIDC, Dahej for projected capacity of manufacturing of 75000 barrels annually, at total outlay of RS.18 crs, which is being funded out of Internal Accruals. The project is likely to start trial Production by June 2023 and to commence its commercial operations by July, 2023.
The global steel drum market is projected to witness linear growth between 2023 and 2033 at a CAGR of 5.6%, reaching US$ 20.8 billion by the year 2033.
The steel drum is a safe and secure rigid packaging solution made from carbon steel or stainless steel. The steel container drums hold prominent features like being cost-effective, easy to handle, safe & secure for shipping, resistant to fire, reusable, recyclable, and many more, which augment the demand for steel drum.
The key reason for the swift growth of steel container drums market is that it protects the stored material against harmful UV rays, moisture and dust. Furthermore, properties such as durability, high sustainability, eco-friendliness and excellent strength make small steel drum a preferred choice in the packaging industry.
The steel drum market witnessed lucrative growth due to its demand in various industries like chemicals, petroleum & lubricants, paints, inks, & dyes, and others. The market growth for steel drum manufacturing process seems to remain sizable in the forecast period considering the benefits provided by it for storing and shipping hazardous & non-hazardous materials.
Since there is a significant correlation between the industrial output and demand for industrial packaging, demand for enhanced industrial packaging is evident, with stabilized manufacturing sector output.

Investment Thesis: -
I found GCL as a proxy play to Indian Chemical Industry.
India’s Chemical Sector Holds Market Opportunity for Steel Drum Manufacturers
India Market Size (2033) US$ 1 billion
India Market CAGR (2023 to 2033) 8%

The steel drum for sale are basically consumed by chemical industries due to the rising demand for chemicals in various end-use industries. The targeted segment is the prominently growing sector in India. The chemical sector is growing at a significant pace.
The key chemical players are targeting India market for manufacturing chemicals, which may increase the exports. Back on this factor, the market growth for steel drum manufacturers in India seems promising in the near future.
This report is very insightful on future prospects of Indian Chemical Industry.

• The intermediate bulk containers (IBCs) are hindering the steel drum market growth. Comparing steel drums and IBCs, the latter ones are cost-effective in terms of storage and transportation. Looking through the shape, the round shape of steel pan drum results in unutilized space, whereas IBCs result in maximum space utilization. Moving towards the usability feature, steel drums have low usability as compared to IBCs.
• The availability of raw materials and the price of raw materials, more particularly iron & Steel are be subject to material changes in Pricing levels.
• As GCL is a micro-cap Stock and it is very illiquid.

DISCLOSURE: - recently invested at Rs. 156/- levels. It is not a buy or sell recommendation.