Fresh additions / Add backs
Vadilal Industries (3%), Allcargo Logistics (2%) and Affordable Robotics (2%). Added back Indiabulls Real Estate (2%) and Equitas Holdings (4%).
Vadilal Industries (Buy price about 2215): I happened to meet the management of the international business last month in the US and understood the business well. They have an amazing distribution network in the US and have great relations with the largest Indian retailers. I saw the prominence that their products enjoy on the shelf and the extensions and new categories they have gotten into, from frozen foods and vegetables to RTEs to Indian sweets. The US business should continue to grow fast, and the growth may spill over to other international geographies as well.
The stock has been on a tear for the past few months though, but I bit the bullet and got in. It is still not expensive though, considering the growth I see in the international business over the next few years - trades at under 2 rimes overall sales.
I would like to buy more than 3% of the PF but will do that on consolidation or when future numbers continue improving. Also Ice-cream sales in India is seasonal so may get opportunities to add in the winter.
Allcargo logistics (buy price 305): A special situation play. They will demerge into three businesses. The real estate business carries most of the debt and has the lowest contribution to sales, so post demerger the main business should be nearly debt free, asset light and fast growing. Presently trading under 10 times FY22 earnings. Even if earnings taper with reducing global freight costs, it is still easily the cheapest listed logistics company in India. I regret not taking a larger position - this seemed like quite a full toss and looked great on charts as well. It is already up 25%from my buy price in less than a month. I may add some on consolidation or post the demerger if it has not run up a lot.
Affordable Robotics and Automation(buy price 133): This is a micro-cap startup in the robotics and automation space. Vijay Kedia owns 15% of the business. This alone is enough for me to take a small position as a boom or bust start-up like position. Bought it after weeks of consolidation.
These guys have been in the parking automation space for a while. ARAPL has various solutions to incorporate tens to hundreds of cars in very limited space. Check out their website for videos - they’re pretty cool. They have been selling these solutions to residential and commercial establishments. The potential demand in the land and parking starved cities in India is huge.
Off late they have also developed a warehouse automation and management solution. They claim this will help ecomm companies in better service operations by automating their warehouses for faster and more accurate deliveries. I guess this can be extended to FMCG, pharma and other industries in the future. Why I find this interesting is that it is much more scalable and asset light. If they can crack this for a couple of warehouses of say a Big basket, they can scale across the chain very quickly.
Lastly they also have a Ed tech solution which claims to use AI augment learning methods. They say the capital deployed for this is very small. I am not a big fan of Ed Tech in general, and treat it as an optionality, so long as they stick to not deploying too much money here.
In summary, ARAPL is in a whitespace with huge runway for growth. If their solutions click with a few customers, they can click with many very fast. If not, the small position size will protect me.
Indiabulls Real Estate (buy price 72) and Equitas Holdings (buy price 84): I bought both back last month, at about 30-40% lower than what I had sold them at. Indiabulls is a clean special situation play. The merger should go through and value will be unlocked. I may add closer to the event materializing. Equitas still trades at a slim discount to Equitas SFB and the reverse merger will happen soon. Equitas SFB traded at about 1.2 times book when I bought, and had improving RoAs. Very favourable risk-reward.