Standard Industries is a small company with only ₹202 crore market cap. What first attracted me to it is its constant presence at the top in the ‘Best Small Cap’ screen of the screener. Its seems Screener goes by statistics. That is one reason, I have ignored many of the companies in such categories. For example, you will find that most of such companies have ‘Finance’, ‘Securities’ or ‘Invest’ in their name, with low PE and other attractive financials.
I, for one am wary of small NBFCs.
Now to this company. It is into textiles under the brand name Mafatlal Stanrose. If I remember correctly, Mafatlal and Stanrose brands were quite well known when I was a small boy.
Its main area of expertise seems to be home decor fabrics, but it also dabbles in poplins, shirtings etc. Perhaps a woman can give a better opinion on this. Peter Lynch for one depended a lot on which brand was his wife, and daughter’s current favourite. According to the company website:
Textiles
Currently the Company has trading activity in textiles and deals in 100% Cotton Towels, Bed Sheets, Interlining Fabric, Cotton and blended Dhoti, Cotton/PC blended and poly viscose suiting, 100% cotton, PC Poplins and shirtings, 2x2 Rubia, 2x1 Rubia in 100% cotton as well as PC Blended and Punjabi suits (ready to stitch).The Company plans to introduce Cotton Sarees under its brand name in due course of time.
Blockquote
It is said to be a quite old company, set up in 1892.
Apart from textiles, it is into property and trading in chemicals too. It has two subsidiaries: [Standard Salt Works Ltd. Mafatlal Enterprises Ltd. The Company has been trying to sell equity in these companies or to sell in a slump sale.
The company site is rather bare, with very little information.
What draws attention to this company is its really low PE at 1.12. ROCE at 254 %, and ROCE at 376 % rather take your breath away. But then you wonder how the share has been languishing at such low price with such dreamlike indicators!
Cash flows in the company do not look very attractive.
Cash Flows
Consolidated Figures in Rs. Crores / View Standalone
| Mar 2011 | Mar 2012 | Mar 2013 | Mar 2014 | Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash from Operating Activity + | -18 | -0 | -24 | -25 | -9 | 4 | 22 | 2 | 110 | 76 | 39 | 60 |
| Cash from Investing Activity + | 47 | -17 | -47 | 41 | 14 | -21 | -6 | -77 | -84 | -65 | 87 | -16 |
| Cash from Financing Activity + | -1 | 1 | 19 | -35 | -6 | 18 | -16 | 78 | 9 | -46 | -75 | -32 |
| Net Cash Flow | 28 | -16 | -52 | -19 | -0 | 1 | -0 | 4 | 34 | -35 | 52 | 12 |
CAGR also looks good:
Compounded Profit Growth
10 Years: 34%
5 Years: 59%
3 Years: 115%
TTM: 1136%
So does the sale:
Compounded Sales Growth
10 Years: 45%
5 Years: 114%
3 Years: 200%
TTM: 3724%
But perhaps the ROE tells more accurate story:
Return on Equity
10 Years: %
5 Years: %
3 Years: %
Last Year: 376%
This sudden spurt in ROE in one year is alarming to me. So is, as I have mentioned, the bare website. There are no details even of its exports.
Details of the more recent results are here: Standard Ind Standalone September 2022 Net Sales at Rs 2.90 crore, up 85.56% Y-o-Y
These are the balance sheet details
| Mar 2011 | Mar 2012 | Mar 2013 | Mar 2014 | Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Sep 2022 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share Capital + | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 | 32 |
| Reserves | 116 | 100 | 74 | 43 | 31 | 11 | -11 | -6 | -37 | -77 | -75 | 109 | 98 |
| Borrowings + | 5 | 12 | 36 | 6 | 0 | 25 | 19 | 108 | 143 | 114 | 53 | 26 | 24 |
| Other Liabilities + | 18 | 30 | 21 | 18 | 19 | 36 | 67 | 93 | 212 | 293 | 373 | 86 | 52 |
| Total Liabilities | 170 | 174 | 163 | 100 | 82 | 104 | 107 | 228 | 350 | 361 | 382 | 253 | 206 |
| Fixed Assets + | 17 | 26 | 36 | 21 | 16 | 22 | 21 | 26 | 46 | 52 | 28 | 28 | 29 |
| CWIP | 2 | 11 | 11 | 11 | 11 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 |
| Investments | 11 | 5 | 12 | 8 | 1 | 15 | 18 | 91 | 137 | 159 | 98 | 97 | 113 |
| Other Assets + | 140 | 131 | 104 | 60 | 54 | 66 | 67 | 111 | 168 | 150 | 256 | 128 | 63 |
| Total Assets | 170 | 174 | 163 | 100 | 82 | 104 | 107 | 228 | 350 | 361 | 382 | 253 | 206 |
MoneyControl tells us that Institutional Investors have increased holdings from 4.13% to 43.00% in Sep 2022 qtr.
The Oriental Insurance Company Limited holds 1.73% of the stock in this company. Also, to my disbelief, the FIIs hold 38.87% in it.
According to the company, these are the risk factors
The Textile Industry has been adversely affected because
of the worldwide pandemic situation.
The corona pandemic came and spread swiftly creating
huge crisis, with large scale infections, deaths, flight of
labour, lockdowns, woefully short health infrastructure,
rampant scarcity and confusion.
A series of nationwide lockdowns were imposed by the
Government to curb the transmission, which brought
economic activities to a halt.
Post the lockdown, the economy is exposed to various
risks such as weakened export demand, reduced
investor confidence and non-availability of raw materials.
To me, any company with its fingers in too many pies is always a danger signal, especially if you are not a conglomerate like a Reliance, an ITC or an L&T. Most companies do better if they concentrate on one business. Asian Paints for example. You appreciate if the company goes into a related field too. For example, a steel manufacturer buying a mine, or if Tata Consumer goes into summer drinks like Rooh Afza, like it has coffee.
Property, Chemicals and Textiles are by no stretch of imagination, related fields. Its business priorities therefore appear to be mixed. According to the company:
OPPORTUNITIES & CHALLENGES
The Company largely benefits from its strong brand
name. Our Textiles brand sees enormous opportunities in
product and design innovations to address the changing
performances of customers.
The Company firmly believes that the demand for
property, in a country like India would remain robust in
the medium to long term.
For the last two days (13th and 14th December, 2022, the stock is hitting the upper circuit. Today it is ₹31.4.
Disclaimer: I hold some shares in it.