@bozo_investor : - Connecting with you after quite some time. Another gem of an analysis from you. Our paths cross again here as I too looked into this as a value pick. Below are my answers\partial explanations to some of ur questions( based on my prelim analysis of the co. and some of its private competitors, which it seems are more than mkt cap of the company )
- What is the brand value of Voltamp to its customers? (scuttlebutt in progress)
- The brand value of anyone in the industry doesnât seem to be an imp factor at all. How I concluded this - none of the players, including Voltamp, market or try to build themselves as a brand. They only mention there manufacturing tech as unique - Cast resin in this case, but that too everyone mentions and probably uses to manufacture eventually. It seems nothing patented in that too, and when thrâs nothing unique, no company tries to invest there
- What is the reason for the bill discounting income to appear in its books?
The co. uses bill discounting owing to its esteemed client base. To fasten the receivables cycle, banks discount payments for its established customers and releases payments early to them. This has improved Cash conversion cycle for the co. which they used to invest extensively. not in business, but in liquid assets
- How is the company able to have such high fixed asset turnover?
This seems to be an industry attribute and the cause of intense competition. The process is less capital intensive and more of a labor assembly thing. So, once the raw materials are in place, its more of controlling employee costs play.
In fact, if u normalize the revenues, the NFAT has been consistently over 10 barring the period where thr capacity investment happened earlier than the business volume growth.
- What kind of advantage does it get on paying its creditors promptly?
The co.'s raw materials are primarily imported or intlâl price linked and they donât hedge the same. So, delayed payments always run a currency risk in case of Rupee devaluation. This situation happened arnd 2010-11 earlier and is a very potent risk in future as well. Yes, settling payments promptly mitigates it to some extent, but doesnât eliminate it.
Iâll quote directly from an ET article on Sumeet Nagarâs investing journey : -
Failures in the early years of an investor are generally due to either oneâs inability to evaluate all the factors affecting a business or in some rare times, due to oneâs eagerness to make an investment. For him, one such example was Voltamp Transformers, a company which he admires.
âWe invested in it in late 2011, during the euro crisis and thought we had managed to buy it cheap. Our stance was vindicated when the price rebounded in early 2012. However, as the year progressed and the rupee continued to depreciate, we found out that many of companyâs raw materials, even when sourced locally in rupee terms, were linked to international prices. This meant their cost was going up as demand position was continuing to weaken, which meant limited ability for it to pass on those higher costs. Once we realised the mistake, we decided to exit at a loss,â he recalls.
I can share the complete article link, if required.
Awaiting urs\other investors views.
Disclosure : - Not invested. But on my watchlist.