Few Indian companies boast of survival as long as Andrew yule. Founded in 1863, Andrew Yule today is completely different than the what it was even a decade ago. In 1913 Andrew Yule was the largest managing agency house in the country with 37 companies under its hold. The turnover of the Group in 1947 was Rs.23 crore and employed 86000 at the time. JP Morgan was a major shareholder of the company in 1919.
What most people see: A mini PSU struggling to stay afloat with a high P/E and a cyclical tea business.
What I see: A PSU that has seen the best possible turnaround in the last decade since it exited BIFR. Andrew Yule is also a promoter of Tidewateroil backed by LIC and United India Insurance. Standard Grease recently purchased its way into the promoters list but with PQR consultants holding other majority of shares,hostile takeover is not happening anytime soon. PQR consultants is owned by wife of Kallol Dutta who brought Andrew Yule back from the ashes. Another plus is the huge plots of lands, Historical Yule house and assets which have no value on books after decades of depreciation.
Current situation: The company recently shut down the loss making Hooghly printing. The major reason is mostly due to the rental conflicts with the landlord. Also, they were planning to set up two bought leaf factories for tea processing but I assume that the current requirement of cash by the Govt of India and their low cash has led to deferring the expansion. Currently the major business of the company are Tea, Electrical, Engineering, Webfil filaments and dividends from Tidewateroil recd as promoters.
They also hold shares in 'The Statesman, 'Khatras Jerriah mines, The New Beerbhoom Coal Co. Ltd., Yule Agro, Yule finance leasing etc and hold a few cr of shares of exide inds. They are also running a cafe in Kolkata.A few years ago when the tea gardens of various private companies were under financial stress, they had jointly requested to be brought under Andrew Yule group (when Mr. Kallol Datta was chairman).
Why I find this company exciting: It has a legacy which included periods of struggle and BIFR. Since it exited BIFR, the company is not only debt free but also profit making. Their tea is one of the best in the business and has good exports business too. Their Electrical and Engineering businesses need a little boost which can bring in good profits to the company in the long run. They recently shut down Hooghly printing which was a huge overhead. I see them doing the same with many other side businesses and concentrating on only 3-4.
Threats: Tea is the major business and cyclical in nature, Mcleod Russell had to sell of many gardens to bring down their debt. Also, the company has regularly argued how they have a problem expanding due to the bureaucracy of GOVT of India. (Govt of India recently killed ONGC’s finances for its own benefit). Majority of their businesses lie in Kolkata where strikes are as regular as Durga Puja.
Strengths: Tidewateroil has a collaboration with Nippon UX Japan, and holds the historic Veedol Brand name. Andrew Yule tea is regularly awarded at various shows and is one of the most premium tea exported to various countries. Collaboration with M/s. Togliati Transformer Co. Ltd., Russia. The management is regularly trying to outdo their PSU mentality and try something new.
Only 5-6% of shares are available to retail investors with the rest held by Govt of India and Bank of Baroda.
financials (as per screener)
Market cap 911 cr.
current price: 18.65
ROE : 9.18
Price to book value: 4.55
peak sales in 2017 at 421 cr (consolidated)
profit in 2017 45.43 cr (42.12cr other income from TWO)
debtor days : 75
Inventory turnover : 7.36
5 year sales growth : 2.88
5 year profit growth : 5.04
average 5 year roe : 14.03
With recent market trends affecting many companies adversely, Andrew Yule is ripe for the picking for long term investment. The biggest risk remains in how they steer through loss making divisions and grow within the boundaries of GOVT of India’s stringent cash strapping rules. Shutting Down Hooghly printing and turnaround of other businesses should boost profitability to a comfortable level. Andrew Yule also recently declared that they wanted to setup boutique resorts at tea gardens.
Disc: invested tracking quantity. I don’t see this as stock being among my top 5 but holding at the CMP (only 5-6% in open market), not much can go wrong.
Andrew Yule Annual report