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Thursday, November 03, 2016

Rasandik Engineering: Deep Discounted stock.

Rasandik Engineering India Limited.
Market Cap: 31.09Cr
Equity:47.3 Lakh Shares. 4.73Cr (Face Value:10/-)
Sales (March 2016): 214.55Cr
Net Profit: 1.14Cr

Rasandik established in 1986 as manufacturers of Fuel Tanks & Sheet Metal Components has been pioneering new frontiers in Tailor Welded Blanks(TWB), Engineering Solutions, Tooling and Product Design. The use of high level of automation, robotics, softwares like Catia, Unigraphics, Hyperform and Rasandik’s passion for innovation and latest technology have triggered a chain reaction catapulting it to its ‘pioneering market leader’ status today. Company caters to the following Product Sectors:
- Sheet Metal components for Cars, Trucks, Tractors, Two Wheelers
- Three Wheelers,
- Die and Tools,
- TWB (Tailored Welding Blanks)

Rasandik Engineering Industries India Limited (Rasandik) is engaged in the manufacture of sheet metal components for automobiles. The company offers tailor welded blanks, body-in-white parts and subassemblies, tools and dies, suspension parts and sub-assemblies, fuel tanks, exhaust line and CNC bending products, and scissor jacks. It also provides white goods, such as air-conditioner body stampings and assemblies, refrigerator body stampings, and washing machine body stampings. In addition, the company offers engineering solutions in the areas of hyperform draw analysis, tractor body parts, point cloud data, surface model, and MUV wire frame.

TWB’s is a technology that is futuristic & helps OEM’s manufacture light weight and cost effective vehicles. We provide a single point responsibility from product design to product delivery. Rasandik is rapidly moving up the value addition chain and becoming an integrated component manufacturer.

Customer List:
Cars/SUV/MUV: Maruti, Honda, General Motors, Tata, Mahindra, Renault-Nissan, FIAT,Hindustan Motors.
Motor Cycle: TVS, Honda Motor Cycles
LCV,HCV: Swaraj Mazda,AMW, Force Motors, Ashok Leyland,
Tractors: NewHolland, Mahindra Swaraj, Renault Agriculture, CLAAS.
WhiteGoods: LG
Press Tools & Dies: Maruti Suzuki, Tata, General Motors, Gindustan Motors, Hero Motor Corp, Honda Motorcycles, TVS.

Rasandik Engineering was started by Shri. Rajeev Kapoor (IIT-Delhi 1977 batch) worked with F.L.Smidth & Company, Denmark and subsequently started Rasandik Engineering in 1986. .

Our Mission for 2015 - 16... to build capabilities for Aluminum & Titanium, metal working for Aerospace Sector, Stainless Steel and Special Steels heavy fabrication. Feasibility study to build capabilities for GI & SGI castings. To achieve this, my message to the Rasandik team is to continue providing quality as a way of life and inculcate an attitude of ‘Do it right the first time and every time’.

Our Vision 2020... to Build Capabilities for Design to manufacture of components and aggregates for to Build for Design to manufacture of components and aggregates for Automotive Sector, Aerospace Industry and to carry out Heavy Fabrication.

Rasandik Engineering had taken a 10 Million USD 3%  (45.79Cr) Foreign Currency Convertible Bonds  which matured in April 2009 company has paid 80% of the bonds and 2 million worth (9.158Cr) are unpaid Company has stated that its been provided for in their books. So it could be a case of identity of bond holder or other issue not in control of the company.

Rasandik is reporting losses and does have 117Cr worth of borrowings. and Capital expenditure is also consistently close to 35Cr every year which is quite high for a 225Cr sales company.Could be due to vision of entering into Aluminium/Titanium Welding space and entry into aerospace/defense engineering or the fact that technology is the differentiating factor in the auto component space to survive.

Conclusion: With forcasted lower interest rate regime(I expect the rates to be low going forward for a long time - new trend) companies which have debt in their books and who are well established should be able to take advantage of the lower rates. Already Automobile companies are reporting higher sales number. All said and done @ 30Cr market cap..low equity base.. I'm expecting the management to turnaround the company.Good value buy for the long term investor.

Wednesday, November 02, 2016

How Are We Doing Diwali 2016

Wishing All Investors. Readers & Visitors A Very Happy, Healthy and Prosperous New Year...
Let us start with a review of performance of stocks recommended in this blog.

Its been around 7 years since the blog was started.. A total of 30 stocks have been suggested as good investment ideas.10,000 invested in each of the 30 stocks ie 3,00,000/- lakh invested over the 7 years would have been worth 9,64,764.70 (Including dividends) would have given a return of 38.64% per year.
without including dividends the return would have been 36.41%

This is hypothetical case, because there have been rights issued and I have assumed that rights shares have been bought.  Also the total invested days is 2093 days as the stocks were introduced over the period of 7 yrs (2 of them in 2016)

The Recommended Best Buy stocks have turned around in 2016-17 Last year the Best Buy stocks had a 6 yrs absolute return of 50.51%  and this year 7 yrs absolute return is 271.67% an increase of 220% in one year..
In past 1 year
GAEL has increased from 45.20 to 95.4
Jayant Agro has increased from 109.90 to 551.40
NHPC has increased from 17.70 to 26.90
Tata Comm has increased from 431.30 to 634.55

The point being made is its very difficult to know when the stock becomes active and starts to be valued by investors increasing demand and increasing stock price. I also feel management suppport is important and management is in a position to project the right image to investors..

The question is.. is there still value left in these recommended businesses? The answer is yes!! These companies will still continue to perform well and with passage of time the value of their business will grow..

One of the most important things about a business/company is its ability to pay taxes after all expenses are considered. An individual gets a salary.. which is first taxed .. and then we pay for our expenses and finally we save the remaining income.
For example
A company earning 1000 having 500 as expenses  paying 30% tax has following savings
1000 - 500 = 500 which is then Taxed @ 30% (150/-)
Savings : 1000-500-150 = 350.00

An Individual earning 1000 and having 500 as expenses and paying 30% tax has following savings
1000 income is Taxed @ 30% ( 300/- ) & 500 Expense,
Savings = 1000-300-500 = 200.00

As you can see All things equal.. Individual saves 200/- while corporate saves 350/- A corporation can save 75% more than an individual just because in case of corporates you pay taxes  after all expenses are paid.. while in case of an individual you pay taxes before your expenses are paid. (BIG Difference!!)

So one of the important functions of a corporation is the tax benefit and hence corporates have an incentive to invest and grow. Over a period of time the effect of compounding increases the wealth of corporates. Management is always an important factor as they can make or break a corporation.

Outlook: BASEL-III implementation is just being rolled out.. so banks are going to have a tough time growing their books. due to lower leverage than normal.(due to basel -III restrictions) . what is the need of the hour is "excessive printing of paper currencies" and all the central bankers are busy doing it..

Excessive printing is required to replace the lower leverage in the balance sheet of the banks.. now the Goverment balance sheets are expanding... and till the bank leverage stays low we are all good.. the problem will be when the banks return to their old ways and leverage their books.. that is when the problem will start.

India is one of the few countries where the level of leverage in the system is very low. A large portion of the Indian population is still unbanked.. NBFC with no basel-III restrictions can really eat the cake of the banking industry.. and a NBFC owned by a bank would be able to somehow have the best of both worlds..