Dependable LM
Company is in business of assembling various types of valves and is now backward integrating in to manufacturing
For the last 3 years, long term borrowing are going down while short term borrowings are going up, from Rs 488 lacs to Rs 1124 lacs
YoY inventory has gone up 25% while debtors have gone up 50%
Poor cash flow for last 2 fiscals, mainly due to build up of inventory and receivables. In 22-23 company has paid off creditors which further strained operating cash flow
Exports has been continuously falling, from 10.24% in 20-21 to 1.20% of sales in 22-23. It appears that after the Swedish parent Meson AB exited, the exports have gone down.
Company is using Intellectual Property of Meson AB as per Separation Agreement dated September 27, 2022 till December 31, 2026.
In 22-23, on export of Rs 44 lacs, company has recorded foreign exchange gain of Rs 41 lacs. Wonder how is that possible?
Against 22-23 DSO of 155 days, company is targeting DSO of 100 days in 23-24 and is aiming revenue of Rs 80 cr, a growth of almost 120%
Top 5 suppliers provide 18% of supplies while top 5 customers constitute 27% of sales
Company operating in a highly competitive industry with well established players like L&T Valves, Kirloskar, Brothers Limited, Ampo Valves, Emerson Electric Co., CRI Pumps, VIP Valves Private Limited India, Amco Industrial Valves, Amtech Valves, Hawa Engineers Ltd, Novel Valves etc.
Hawa Engineers, listed on BSE, trades at PE of 46 whereas ATAM Valves is trading at PE of 25.6. Company claims it has not peers for comparison.
Previous years operations were trading and assembling in nature and yet material cost as % of sales is erratic unexplainable. In 22-23 it was 66%, in 21-22 it was 29% and in 20-21 it was 73%
Out of receivable of Rs 15.52 cr, Rs 5.39 cr is outstanding for more than 6 months and Rs 3.62 cr is outstanding for more than 1 year.
Company has paid advance of Rs 10 cr to suppliers against Rs 63 lacs in previous year. Not clarified whether it is capital advance or for regular revenue purchases.
Company has done a write off of Rs 82 lacs in last 2 years. Not sure whether this is customer receivable write off or other advances given written off.
Services charges of Rs 1.8 cr paid in 21-22 have dropp ed to Rs 40 lacs in 22-23.
In Apr-23, company offered 166 cr shares on rights basis to existing shareholders @ Rs 83.35 of which only 189,562 shares were subscribed (page 68 of prospectus), just 0.0114%.
Company had 34 employees as on 31-Mar-23, it deposited PF of 38 employees for Jul-23 and 25 employees for Jul-22
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