CANCELLING THE INVESTMENT CALL ON VIKAS ECOTECH

After writing this analysis about the VIKAS ECOTECH on 7th July 2016,   i came to know about a  lot of RED flags in the balance sheet , the trade receivable are approx 50% of the yearly sales and lot of other issues so taking back my investment call of Vikas Ecotech.
If company shows some improvement in nos and corp governance i will review it. 

ANALYSIS OF DEMONETIZATION SCENARIO AS PER “ON GROUND” INPUTS.

MY ANALYSIS ON THE PRESENT DEMONETIZATION SCENARIO AS PER “ON GROUND” INPUTS.

If 50% of 14 lacs crore expected black money in the form of 500 to 1000 notes is converted.
It  may take 8 -10 months for withdrawals to happen approx  7 lac crore cash may come into the system converted in new currency .

At that time people will not keep cash and would like to invest into land , real estate , gold and other avenues. Part of it will go to  luxury items and life style spending too.

So net net after a pain of 3-4 months the consumption may increase with higher pace.

Builder are taking good advantage of this situation and those whose commercial project and land stock was not sold from last so many months  have sold huge inventory in the last 4-5 days.

So for the select  few its blessing in disguise.

As per the discussion with a renowned CA in pune The long term black money generation will reduce atleast by 20-25 % .

As  various action from government and GST will ensure that .

This one  demonitisation step will have a big impact as a manufacturer or trade who was doing 40% sales in cash will be forced to do sales in cheque for the next 3-4 months when cash is not their in the system  .. and his turnover will rise suddenly in these few months ,the catch is once the cash comes in the system ,he cant again drop his turnover to the old levels  , as  Excise / sales tax and Income tax -all departments will be tracking him and he will not be able to  do much adjustment.

SO THEMES OF COMPANIES WHERE CASH SALES WERE MAJOR PART WILL BE A GREAT PLAY IN THE COMING QUARTERS.

About MFI – once the cash come back to system people will start repayment of EMI’s .

MFI cos also understand that and may give 2-3 months break to people from EMIs.

But as their collection system is very strong and people taking loan repay due  to social pressures , chances of large scale defaults are less.

So if the MFI sector corrects much more due to lot of negativity ,there could be a case of buying them.

This is my personal analysis as per the inputs from on ground people and CA’s , may be things will not play out as per the assumption given above , people are requested to analyse on their own . 

CELEBRITY FASHIONS - 

Market cap – 51 crs

Fy 16 sales – 197 crs

Fy 16 profit – 21.40 crs

Dipti Vikram kotak wife of Vikram kotak who is Partner in private equity firm “Crest capital” bought 2.5 lacs shares of celebrity fashion at 11.63 on 8 July 2016

One more seasoned small cap  investor Chetan rasiklal shah bought 5.5 lacs shares on 7^th July 2016

The company is consistently reducing debt, sold land worth 29 crores in last Fy16 year to reduce debt.

Indian terrain Fashions was demerged from celebrity fashions in June 2010 and now it’s a 500 crore market cap company.

This shows the promoters have proven track record and they can execute well.

Due to the tail winds in the textile sector and the reformist 6000 crore textile policy package announced by Modi Govt the textile sector and the stock looks promising.

More can be found out about the revolutionary textile policy 2016 in the links below-

http://economictimes.indiatimes.com/opinion/interviews/new-textile-policy-will-boost-exports-create-employment-rashmi-verma-textile-secretary/articleshow/53071265.cms

http://www.business-standard.com/article/economy-policy/new-textile-policy-to-reap-chinese-slowdown-benefits-116021800451_1.html

VIKAS ECOTECH : VALUE MIGRATION: NEW GENERATION COMPOUNDS

Vikas Ecotech: Value migration : New Generation Compounds

After writing this analysis i came to know about lot of RED flags in the balance sheet ,trade receivable which are approx 50% of the yearly sales are further increasing with growth in sales, the erratic movement in stock price is suspicious.
Due to these reasons am hereby cancelling  my investment call of Vikas Ecotech.
If company shows some improvement in nos and corp governance i will review it. 

VEL  is in Specialty chemical business with focus on R& D and development of  new generation compounds which can be a game changer for the company's growth.

In 1972  The company, which started as agent for Reliance, srf, gnfc, Nirma and other mncs like Mitsui of Japan, Arkema of France backward-integrated into manufacturing in 2003, has been making high-end products, used in the manufacture of agriculture and infrastructure components, wires & cables, auto parts, textiles, electronic goods, medical, writing instruments, as also organic & inorganic chemicals. 

The company has been exporting its products to 20 countries, including Bangladesh, Pakistan, Sri Lanka, China, the UAE, Turkey, Spain, Singapore, Germany, Vietnam, Turkmenistan, Egypt, Tunisia, and Ukraine, among others.

Impressive client list -

The client list includes lot of consumer companies growing at scorching pace 

so VEL can grow with them .

Client list Includes some renowned names such as RR Kabel, Relaxo Footwear, Liberty Shoes, Escorts, kei Industries, Havells India, Action International, Apollo Pipes and srf.”

Game changer Compound - MTM - Methly tin mercaptide

Lead contamination due to pvc pipes is one of the major contributing factors to ground water pollution in India”. To solve the problem, Mr Vikas Garg MD of VEL advocates a ban on the use of toxic materials like lead, barium and cadmium-based heat stabilisers in pvc processing. Garg recommends pushing for toxin-free stabilisers, such as organotin, which means use of methyl tin mercaptide (mtm) stabilisers, which are lead-free, non-toxic, safe and ecofriendly. 

This material is sanctioned by most international legislations, as in the US and European countries, for potable water pipes and fittings. 

Even China’s pvc pipe-makers are under pressure to give up lead stabilisers. In India, while there is no legislative mandate to phase out lead-based heat stabilisers, the National Green Tribunal is pushing for one. 

MOU with Nafigate Corporation-

Vikas Ecotech Ltd  has signed an MoU with Czech Republic based Nafigate Corporation for technology to convert waste cooking oil in to biopolymerPHA (polyhydroxyalkanoate). As per the agreement, Nafigate will transfer Hydal technology, which is a process to convert waste cooking oil into PHA biopolymer by means of fermentation and subsequent PHA polymer isolation, to Vikas Ecotech.

VEL  even have a tie-up with Haldiram Ethnic Foods for supply of their used oil.

More details about his can be found here - 

http://www.business-standard.com/content/b2b-plastics-polymers/vikas-ecotech-to-produce-bio-plastics-from-waste-cooking-oil-116060700138_1.html#

Commencement of New Manufacturing plant at Dahej- 

Vikas EcoTech Ltd,  has commenced the construction of phase I of its manufacturing plant and innovation center at Dahej, Gujarat. To be built with an investment of Rs 30 crores, the plant will produce 6,000 MT of organotin stabilisers (methyl tin mercaptide or MTM) and 5,000 MT of specialty polymer compounds annually.

Imp Triggers-

1. Long term customer of the company and owner of 1100 crore turnover PVC pipe manufacturer Prince pipes and fittings pvt ltd Mr jayant chhedda bougth 2.5 % stake in the company for 8.5 crores. 

To felicitate the transaction the promoters of VEL have sold their stake to Mr chheda .

Mr chheda is another success story and is a very dyanamic person he has taken his business from 400 crores to 1100 crores turnover in the last 4 years . Mr chheda buying the stake in Vikas Ecotech validates the story in the long term.

2. Promoters have increased thier stake in the company by 6% in Jan -March 2016 and have committed to further increase the stake. 

3. Merrill Lynch Capital bought 1.9m shares at Rs. 20.25 in Feb-16.

4. Company is growing at scorching pace, revenue growth this year is 47%. Net profit 

    grew at 574%

5.In a Recent management guidance Mr vikas Garg have said that the company will grow    at CAGR of 35-40% for next 3 years and maintain the margin of 22% 

Conclusion-

Presence in high growth sector with margin expansion, Supplying to Customers in high growth consumption sector, Coming up of New plant at Dahej in next 12 months and the expected Growth due to entry into new Generation compounds can fuel the growth for the company in next 2-3 years. 

Vikas Ecotech can be a high potential medium to long term BET.