In Search of the Miraculous: Capability.......................... Stocks Covered: Prime focus, TTK Healthcare, ABFRL, United Breweries, GHCL, Schneider Electric

Ritual is not spiritual. Salvation is dear and rituals are available so easily. God is never by Rituals; Rituals just represent something very significant. Rituals can’t accomplish anything but they are for the reverence of the accomplishment, the God. Rituals are nothing in itself; path to salvation never runs through rituals but at the feet of the master…the Almighty. We don’t need to follow the rituals for God but we just need to find the right path to God and rituals will uncover their hidden meanings.

Like why Fire (agni) is used for worshipping the God? It is not that one can find God by Agni ritual. But Agni symbolizes something very important…Agni is the purest element, destroyer of impurities.  Agni is the only element of the five elements (Prithvi, Jal, Akash, Vayu, Agni) which cannot get altered or get polluted by the thing it purifies i.e., we can pollute any of the other five elements by the act of purifying with them but fire is not subject to this same constraint (for example, Water gets polluted once it is used to cleanse one's hands). So Agni is the symbol of purity and a reminder that we need to destroy our impurities to find the Ultimate realty. Agni is the only phenomenon which always rises upwards no matter how hard we try to force the flame downwards but it appears to defy gravity all the time. So Agni is a symbol, a reminder of purity, upwardness, and destroyer but just fire will not lead us to anywhere…we need to find the right path first.

Now coming to the investment world, I have seen people using financial ratios like ROE, Debt-equity, ROI etc. to analyze and pick a stock for investment. But these ratios are just RITUALS…they just point towards something very significant but  not towards ultimate reality which is the CAPABILITY…capability to rise like a fire, capability to destroy all the negative factors. Capability is the GOD…GOD has the ultimate CAPABILITY to create. So we need to find the God in the stock market…which is the capability. In investment world, capability is the spirit. Companies can have very poor financial ratios but they might be having great technical capabilities, might have made huge investments in the past with high entry barriers, might be having strong distribution clout, Strong R&D…the list can be very big but one short implication is that these types of companies can make a mockery of historical financial ratios once they find their mojo and purpose.

Market loves rituals…we’ll hear all the time about ROE/DE. But the most decisive factor is not these ratios but the capability of the company to stand and deliver over long time. I often talk about the big opportunity in low cost high quality health care service industry in India and players like Narayana Healthcare and HCG are the front runner here. At present their return ratios are not that impressive but these companies are not farce….they have some unique unmatchable technological prowess which will enable them to capture massive market share in the future. Same is true for Linde India     , laurus Labs, Tata Power, MCX, Max India, Tata comm etc., all these companies have done extreme hard work in the past in their technology, capacity but the same has not been reflected in their results so far but they are on the PATH…rituals are useless here.  Wealth is created through patience and enjoyed through dividends. We are buying these stocks for quite a time quietly and I feel when the time will come these will perform with valor. 

Let me explain it further; Future consumer enterprise has been a stunning stock for us ever since we picked it at the time when it was lying low below Rs. 10. In fact, entire Future group (Future retail etc.) was in bad shape as market was expecting them bleed to death after the onslaught from e-commerce ventures like Flipkart and Amazon. However the matter of the fact at that time was that these e-commerce startups were actually bleeding and bleeding profusely and so I picked both Future retail and Future consumer Enterprise around 2 years back because these two were having stunning retail capabilities and had everything to attract the consumers without offering any discounts. And we proved right as Future Retail which was picked at around 60 (Pre-Demerger) is now trading around 550 and FCEL is at 65. Even we picked Future enterprises again at 19 (the demerged business of Future retail) and it has also crossed 50 in few months.

I am coming to FCEL. FCEL is the manufacturing arm of Future group manufacturing entire range of FMCG products under its own bouquet of brands covering from Food to hygiene (Brands like Tasty treat, Sunkiest, Caremate, Kosh, Golden Harvest, Karmiq  etc.). But manufacturing a product (especially FMCG) is never the major success factor. Even I can make Maida, Poridge, Besan etc. but this is not the winning formula….distribution and marketing is the biggest factor in FMCG. Nobody will agree to store and sell my product in their shops. And because there is nothing unique about my products so I have to fight a very tough battle to sell my products i.e. from low pricing to longer credits…even still the chances of success are extremely low. So as we can see distribution capability is a big game changer and this is where FCEL scored the home run. FCEL was already having a ready distribution channel in the form of in house retail format Big Bazaar. So it didn’t face any difficulty in placing its products in front of the customers and this is the major factor in the transformation. 

Coming to another example of Tata Chemicals and Acrysil India ltd. Tata chemical is one of our best bet and we are buying it from 250. In fact, most of us have invested in it around 600 recently. Tata chemicals is in reconstruction phase of its life and it is selling its highly regulated fertilizer business and it is focusing and investing big for its new consumer product business of Pulses, Spices and Besan under Tata sampan brand. In the same way, Acrysil India is the only player in the Granite kitchen sinks and premium 3D tiles and Washbasins. It has recently started focusing on Indian market. But I have always taken Tata Chemicals as safe stock and Acrysil India as risky one in spite of its high quality premium products. Many readers have asked me via emails to explain why Acrysil is a risky bet. Well, the reason here again is Distribution strength. Tata Chemicals already has a strong distribution channel courtesy Tata Salt and Tata Tea (although Tata Tea belongs to other group company Tata Global) so it hasn’t and will not face difficulty in making wholesellers/retailers to keep its new range of products.In fact, its new products like Pulses, Spices etc. are available everywhere in India even in remote villages in a very short span of time all because of Tata Salt and Tata tea.

That is why I am investing big in Tata Chemicals and it is already trading at its life time high of 730. But we’ll see one of the biggest surprise from Tata in the shape of Tata chemicals as there is not any branded premium product player in Pulses etc. Acrysil India has great products (So no doubt about the capability and this is the main reason for investing in it) but it has to create the distribution capability which is a tough work. Acrysil will have to offer discounts/commissions, longer credits, marketing and branding to make people aware of its products and all these require meticulous planning, investments, resilience and patience. But Acrysil is debt free and already earning money from overseas markets and this will ensure that there are high chances of it to taste success. 

Our another pick Himadri is also a testimony to the capability principle. When we picked Himadri around 20/- it was in real bad shape incurring losses for long time and so not worthy of any rituals at that time. But it had real capabilities in graphite and nobody was aware its strength in Lithium grade graphite. It is now at 170, it is earning big profits now, debt is falling and market has become aware of its Lithium story and I feel we’ll see it scaling massive targets in 2 years’ time. I think we can also place Venky’s India in the same league. It is one of the best pick of ours in the recent past…from 180 to 2600 in 2 years’ time.

So I have decided to start a new post on companies with compelling capabilities but who are trading low or have not performed at all in the past.

Prime focus ltd: Life of the Pi was a great movie. The VFX house behind the visual beauty of the movie was Rhythm & Hues. Without the crazy visuals and the CGI tiger created by Rhythm & Hues, Life of Pi would have been toothless…nothing. So as we can guess, Rhythm & Hues rightly deserved and won the Oscar of VFX. But let me tell you, R&H winning the Oscar is not the big story but that R&H went bankrupt 13 days before winning the Oscar was. Yes R&H who was having most profitable business went bankrupt as it could not further manage the show. Later on it was bought by India based Prana Studios. Earlier, Digital Domain, the VFX studio founded by James Cameron also went bankrupt.

So this shows the tough industry environment in the global VFX industry where cost overruns have killed many VFX houses. VFX houses bid for a projects on lowest big basis but then they have to continuously change the visual effects as per the instructions of the production house, they have to face the delays caused by production houses but amid all this they have to maintain the crew that too at hefty costs. This is one of the biggest reason of the failure of the VFX houses apart from the fact that VFX industry get its major work from around 6 Hollywood studios, Low costs places like India are trying to the eat the Pie. But still no one can argue that VFX are the back bones of today’s movies and you remove VFX and movie is out of the picture whether it is Avatar, Transformers, Gravity, Interstellar etc. Recent Indian Blockbuster Bahubali would be nothing without its stunning visual effects.

But amid all this carnage and huge opportunity, India based Prime focus ltd has still managed to survive. Prime focus is into Visual effects (VFX), animation, 3D and post production and editing business. In fact it has become a big force globally with turnover of more than 2000 cr. I am tracking this industry for long time on the side lines for last 7-8 years mainly because i didn’t want India to become a cheap service provider in VFX industry (just like our main stream IT industry) where Hollywood studios do the main high tech VFX work in Hollywood but outsource cheap laborious post production/editing work to India. But I think India has fared well so far and companies like prime focus are getting main stream work from Hollywood studios.

Prime focus is a tier 1 VFX player (Tier 1 do the major visual graphic work like the creation of Tiger in Life of Pi) and is associated with movies like Avatar, Gravity, Captain America: Civil War, Spectre, Batman v Superman, Transformers, Pirates of the Caribbean etc. It has won 2 Oscars this year for best VFX for Interstellar and Ex Machina and has one for Inception earlier. I think to be able to be recognized at global level in the main stream work was a daunting task and indeed a great achievement by PF for becoming a preferred player for VFX. Even in this year, it has delivered 6 movies out of top 10 global BO hits like Beauty and the Beast, wonder woman, Transformers-Last stand etc. 

India accounts for more than 10 per cent of global animation and VFX outsourcing business today, and the numbers are rapidly rising. According to box office statistics, every one of the 50 highest-grossing films of all time heavily employs visual effects. Of those, 44 are either fully animated or contain enough visual effects shots that they would be completely different movies without them. I think that India now has all the attributes for being a global force in this and prime focus will be the biggest. For Life of PI, Ninety-five percent of the work on the film was done at the Rhythm & Hues’ studio in Bengaluru. PF has very strong execution and technical skills not heard in Indian circles…with 8000 employees, 30% share in 3D, just opened a VFX academy in India, order book of more than 3000 cr.

I bought this one around 30/- few years back but then sold around 55-60 when Reliance capital entered in it with 35% stake. I never invest in reliance group stocks. But now Reliance cap is looking to sell its 35% holding as ADAG group is in trouble. Standard chartered PE holds around 21% and promoter Namit Malhotra also holds 35%.  Chinese strategic buyers such as Dalian Wanda Group, TenCent, or even Alibaba are in talks with Rel cap for the stake sale of 35% and I think Standard chartered will also sell out its stake of 21% and we can see change of management. Although talks are there for Namit to lead the company even after that.

India is also witnessing strong demand growth for VFX particularly after the success of Bahubali and so many studios are focusing on VFX heavy projects like Bahubali. PF is already a big player in Indian market. It has high debt of 1200 cr but the same has been due to acquisition of many high tech companies like VFX heavyweight Double Negative (Dneg) in 2014 which resulted in high growth in top line from 800 cr in 2015 to 2100 cr in 2017. At present high depreciation and amortization (254 cr last year) and int charges (128 cr) are eating the majority of operating profits (550 cr) but I think the benefit of recent expansions will accrue big time in the near future. 

Acquisitions and restructurings have impacted PF badly so far, but It has done all the hard work so far and now it will enter into high growth phase in both foreign and Indian market with unmatchable technical expertise. But so far it is not in the radar of analysts and it is not tracked much in the market. That’s why I feel this is the right time to pick it up. It will see huge re-rating in the future and may emerge out to be a big global giant in VFX arena. I entered in it at 90 few days back but as I was on levae to Punjab so I couldn’t update it at that time and it is already trading at 110. I think at CMP all the negatives are already priced in.

Virtual reality is another big technological breakthrough which is having profound applications in healthcare, entertainment and advertisements. Prime Focus has also entered in VR in India.

India is also at the cusp of seeing big transformation in VFX based movies. Bahubali has started a trend which was not visible in Indian movies which I feel the main reason of the failure of earlier VFX based movies in India (VFX movies like Love Story 2050, Drona, Blue, Aladin, Guzaarish , Bang Bang were a big failure) Bahubali set the trend of successful movie without a star cast. In Indian movies Stars like SRK, Amir, Salman account for the maximum budget of the movie (With minimum value addition…most of the times they look extended) and after paying these STARs nothing is left to invest for high quality VFX  and so you can instantly vouch for the cheap VFX in most of Indian movies. But VFX is cheap in India movies not the Indian VFX players. In fact, Bahubali is created entirely by Indian VFX houses. Hyderabad based Makuta and 16 other studios put their efforts and creativity to create SS Rajamouli’s dream.

As they say, the tragedy of a good visual effect shot is that you cannot recognize it. In the same way I think market so far is unable to recognize the potential of VFX industry and Prime focus. But I think at least we should…

TTK Healthcare Ltd: Powerhouse of products. From Skore Condom, Woodwards Gripe water, EVA/Good Home range of personal care products, manufacturer of India’s low cost TTK Chitra heart valve, orthopedic implants and instruments under the brand name "Altius", newly formed food business with Ready-to-fry Snack Pellets under brand name “Fryums”, animal welfare business. It belongs to TTK group which are renowned for their product quality and superior execution skills. 

TTKH has a turnover of 533 cr in 2017 which could have been higher if not for demonetization. Its Pharma product division including animal welfare contributes 190 cr, Consumer product business including EVA and Skore condom has turnover of 243 cr, Heart valve and Orthopedic contribute around 30 cr and food business scores 70 cr. It is virtually debt free with 22 cr debt but it is having cash of 82 cr which is sufficient to meet its future acquisition or expansion targets. Its NP was lower at 20 cr mainly due to demonetization. Even its June-17 quarter results were bad ( Turnover at 125 cr vs 156 cr, Net loss at 5 cr vs profit of 10 cr) due to destocking pursuant to GST implementation. All these factors have resulted in making its valuation looked stretched at a PE of 64 but I think with good results in Sep-17 quarter it is poised for a big re-rating. It is continuously paying dividends since 2006.

TTK scored big in bringing Skore condom to no. 3 position

TTKH has some real product marketing capabilities. In 2012, it had to break its long standing partnership with Reckitt Benckiser for selling Kohinoor and Durex condoms in India because both couldn’t be able to reconcile their dispute. Due to this, TTK lost the rights to Kohinoor (launched in 1979) and Durex (launched in India in 1997). But TTK launched Skore condom with big heart and within a period of 4 years, it put behind both Kohinoor and Durex with wide margin. It even outpaced the giant Kamasutra brand. It is now at 3^rd place in India behind Manforce and Moods. Aggressive marketing and advertising, is the main reason for this success which is now at 50% of its revenue down from 150% when it started. At present it is selling around 13 cr condoms.

Actually, although TTK lost the brands of Kohinoor and durex but it never lost its technical prowess in manufacturing high quality condoms. TTK was the first to establish condom plant in India in 1963 and it was to first to install electric testing facility and first to introduce subsidy free condoms in India in 1974. So with its decade old marketing and distribution strengths, Skore was always going to make it big and fast in Indian market.

India is going to see high demand for condoms as we are having third largest population of HIV cases and condom penetration is still way lower at 5%. TTK has capacity to manufacture 2 billion condoms a year at its three factories in southern India.

 

TTKH is planning to merge TTK Protective Devices Ltd (TTKPD), the unlisted contraceptive manufacturing firm into itself. TTKPD is owner of the condom manufacturing facilities in Pallavaram and Virudunagar, in Tamil Nadu and it also manufactures condoms for other brands. I think TTKH is the owner of Skore condom brand. As per the scheme, nine fully paid equity shares of Rs 10 each of TTKH for every two fully paid up equity shares of Rs 10 each held by the shareholders in TTKPD. The merger will bring synergies to the company by cutting costs and avoiding conflict of interest. I’ll update more on this merger later on.

TTK has some great consumer brands like Woodwards, Skore, EVA and Good Home and it has been consistently spending on advertising to build brands. Untill now in food business it is mainly into wholesale but now it is gearing for retail part of the game with Fryums brand and I think its previous experience and strength in establishing brands and its wide distribution reach covering entire India will prove a decisive factor.

TTK Chitra heart Valve: a testimony to the strength of TTK

For decades, India relied on imports of expensive artificial valve replacements to meet domestic need, but many families whose children developed Rheumatic Heart Disease (RHD) were also among the poorest in India, and could not afford even the heavily discounted price tags of imported valves, which hovered around $1,200 each. And so our children died, or lived drastically shortened and unhealthy lives.

Then TTK Chitra Heart Valve came to their rescue, it was developed painstakingly over 12 years at the Sree Chitra Tirunal Institute for Medical Sciences and Technology in Trivandrum, India, the device is now licensed for manufacture and marketing to TTK Healthcare. TTK valve uses the highest quality materials, features genuine design and material, blood flow resistance reduction, and durability. But in spite of high quality product with 12 year product development cycle with extensive clinical trials, TTK Healthcare still sells each valve for just $315-$400, a price range it has maintained since 1995, even when inflation is high in India. Due to TTK Chitra heart valve, all the MNCs had to lower their prices in order to stay in the Indian market.

Now TTK Healthcare Ltd has joined hands with PSG Institute of Medical Sciences and Research (PSG IMSR), Coimbatore as an industrial partner for developing low cost prosthetic heart valves for India. The research partners aims to develop low-cost replacement heart valves that promise to be superior to current mechanical and tissue-based heart valves and reduce patients need for medication to prevent blood clots.

Patients who receive mechanical heart valves must remain on lifelong medication to prevent blood clotting, the bio-prosthestic valves, usually made from animal tissue, are prone to hardening over time and do not last more than 10-15 years, which is not suitable for young patients with rheumatic valve disease for various reasons. The artificial heart valves to be developed in this project will be made from flexible plastic materials containing hyaluronan, a molecule found throughout the body and in the natural heart valve tissues. The entire pre-clinical trials will take place in India with involvement from TTK Healthcare.

Its heart valve and orthopedic implants are a testimony to its high technical strengths as not many Indian companies are present in the medical equipment industry as the same is owned by MNC giants like GE, Philips and Siemens. 

At present not much is reflected in the current valuation from these medical equipment business but I am sure that these two will bring pleasant surprise in the future and may contribute big into the future valuation growth. At present its Food business is growing fastest. It has invested big in food business in the recent past along with its consumer business under EVA and Skore but the result of these investments is not fully accrue to the company so far. But I feel strong distribution strength and marketing prowess will take care of this.

I am also sure that the company is going to make some acquisitions in consumer space as they have the cash of 82 cr in their books. It is cheap at market value of 600 cr if we consider the kind of products it has and technical expertise required for producing these products.

I have entered at 745 few days back. Good buy at CMP of 770.

Aditya Birla fashion and Retail Ltd: My favorite in fashion. India is getting rich and people are spending more on branded clothes. And there is nothing better than the ABFRL, the owner of some of the biggest Indian fashion brands Van Heusen, Allen Solly, Peter England and Louis Phillippe. It also owns Pantaloons now. 

It is the only company in india with brands having annual sales of more than 1000 cr...None has done it so far...be it Arrow, USPA, Raymond, Killer, Lawman. In fact ABFRL has 4 brands Louis Philippe, Van Heusen, Peter England, Allen Solly with annual turnover of 1000 cr. However for me the most heartening fact is that ABFRL is the owner of all these brands while others like Arvind are having branding rights for US Polo and Arrow. Allen Solly was born in 1744 and then Madura acquired the global rights. Then Van Heusen born in 1881 acquired by Madura in 2013, Peter England belongs to 1889. These will remain the top selling brands in India. It took Madura 15 years to make these brands 500 cr annually but they became 1000 cr in just 5 years. I am seeing it growing fast from here on.

Recently Arvind sold 10% stake in its branded clothing business for 740 cr valuing these at 7400 cr when it is not the owner of these brands and these are nowhere near the size of ABFRL's brands. Arvind clocked 2300 cr revenue from these and so Arvind got valuation of almost 4 times of revenue. ABFRL is currently valued at 11000 cr with turnover of around 4000-4500 cr with some Marquee owned brand which i think should be valued much more than Arvind and I think this should value ABFRL around 25000 to 30000 cr without adding anything for Pantaloons with turnover of 2500 cr.

Its recent results are marred by demonetization and GST issues but I think it is poised for strong growth. It has launched innerwear and Athleisure business under Van Heusen brand and this business is growing very fast. Last year, it has acquired the rights for global fashion chain Forever 21 in the country for $26 million dollar. Forever 21 is a very strong player in women fashion and hence it is a strategic fit for male heavy ABFRL.

At present market is giving astronomical valuations to retailers like Avenues and Future retail although ABFRL is having massive retail strength…double of the next biggest player Raymond. Avenues is just into retail part of the game while ABFRL owns 4 of the India’s greatest brands that too from high growth fashion sector. Page industries which has the franchises rights of Jockey (not the owner) trades at 8 times of its turnover while ABFRL is trading around 2 times of its turnover although I feel its brands like Van Heusen has same brand recall like that of jockey.  All this just shows the massive undervaluation of the ABFRL and once its reconstruction post Pantaloons acquisition is over, it’ll see huge topline and bottom-line growth. 

Som Distilleries and United Breweries Ltd:  Som Distilleries is the latest one and is under study. But as shared earlier in post related to United Breweries, I see great future for Beer consumption in India and if Indian Govt has some wisdom then it should lower the tax incidence on Beer due to its very low level of Alcohol (5%) as compared to 40% of whiskey. Moreover Beer is more like a social drink and India with young population is witnessing a boom in beer demand. All our the world, Governments keep the taxes low on Beer in order to make people choose Beer than other hard liquor due to health reasons. And due to this, all our the world Beer consumption is way higher than Hard ones like in countries like USA/UK/Russia/Germany share of beer in the liquor market is around 85%-90%, even in China it is 87%. Only in India share of Beer is around 50% which shows the hollowness of the claims of our Govt to save people from drinking otherwise govt should have kept the taxes lower on beer but as i have shared many times Govt is just a Tax collection system. But i really hope that one day our Govt will shed the greediness and reduce the taxes on Beer.

Although the sector is recovering from the slump of past few years, including the recent one of Demoney/GST and i think we'll soon see the re-rating of the sector as a whole.  So I am continuously buying United Breweries around 800 levels.

Som is the owner of highly successful Hunter beer brand of MP/Chhattisgarh commanding more than 40% of beer market in these states. It also has a famous Vodka brand "Fox". Hunter is a strong beer brand. It is having a topline of 250 cr (Net of excise) and NP of 14 cr, its market value is 450 cr. But in Sep-17 quarter it has shown strong performance with topline at 70 cr vs 47 cr (net of excise) and Profit before tax at 9 cr vs 4 cr. 

It has just opened a new plant in Karnatka which will double their Beer capacity (Beer is around 85% of their topline). It has strong brand recall. Only negative is low promoter holding of 23% which required further study but still they are paying dividends continuously (around 20% of their NP). Promoters are increasing their holdings through open market purchase and they have raised their stake from 20% to 23% in past 2-3 years (Promoter holding was 13% in 2010). But still, I feel it requires more study as promoters don't look like of high quality.

Moreover, Foreign Alcohol giants are eyeing Indian market as the next growth area. Indian market is highly regulated with each state has its own rules making Indian market look like a market comprising some 30 countries. So the best way for Foreign players is to buy stakes in India companies just like Diageo and Heineken now owns United Spirits and United Breweries. Our other pick from alcohol sector, Radico Khaitan is also a prime candidate for stake sale. Radico was advised around 90 and at present running at 230...but it has still long way to go. Hence, on the same lines, i feel Som Distilleries can be an acquisition target due to its low promoter holdings although i am yet to check the details of its share holdings in order to find out if there is some institutional holdings or some big strategic investor is sitting in the company.

So, right now can't make up my mind for SOM Dist. Let's wait for some time for the things to happen and then we will decide.

GHCL: One of the big three players in India producing soda ash which finds application in Glass and detergent production. Nirma is the biggest player with some 28%-30% share and Tata chemicals and GHCL have shares around 25%. GHCL is trading at a pe of Just 5 mainly due to promoter issues in the past. Its promoter Sanjay Dalmia was the center of a lot of SEBI enquiries. But off late company is trying to shed its past under its able MD RS Jalan. It has taken some important steps to demonstrate its willingness to improve upon corporate governance standards like declaration of Dividend policy, assigning of Earnest & Young as statutory auditors and arranging conference calls after results.

Promoter holding it low at 18% although it has strong institutional holding. NP of 500 cr is huge and market value is low at 2500 cr, dividend yield at 2%. Soda ash market is generally a regional market due to high associated costs linked to logistics of raw material as around 5 MT of raw material is required for producing 1 MT of final product. That’s why world over, Soda ash prices are stable for quite a time.

Current production capacity after this expansion stands at 950,000 MTPA. In the next phase, which is likely to be completed by FY19, GHCL plans to invest Rs 575 crores to increase soda ash capacity by another 150,000 tonnes. Domestic soda ash industry has a capacity of around 3.1 million tonne (compared to global soda ash capacity of 67 million tonnes).

While capacity utilization in soda ash industry is around 80 percent, GHCL claims to be working at an utilization of 87 percent mainly due to their own captive lignite mines and briquetting plant which gives them a major cost advantage. Half the global capacity is present in China (capacity 32 million tonnes, production 26 million tonnes), followed by America and Europe. The US, which produces natural soda ash, has a capacity of about 12.7 MT and produced 12.2 MT of it. Synthetic soda ash accounts for around three quarters of global capacity. India Still imports good quantity of soda ash generally in southern India due to their proximity to chinese production facilities. So still Indian players like GHCL can expand their capacity to substitute the imports.

I also feel low promoter holding can be a boon if more able player like Nirma acquires it although company is looking to leave behind its past for the good.

I invested at 237 few days back, CMP is 258. But a risky bet and suitable only for those whose portfolios have space for risky bets.

Schneider Electric Infrastructure Ltd: Schneider Electric is a potent force in power T&D business in India offering products like Transformers, Switchgears and offering electric infrastructure related services. It belongs to global giant Schneider Electric SA, a pound 27 billion group. 

I think we are going to see big activity in Power sector....especially in Power T&D. Power transmission loss in India is very high at 25% which is nonsense. Project UDAY's main emphasis is on reducing this to 15%...which requires better transformers and smart grid. Also Smart cities will require smart grids equipped with IOT where Schneider is one of the biggest in India.

Also major factor in setting up renewable solar/wind power is smart grids where Schneider is  already a big player as it controls around 60-70% of power evacuation from solar plants. This will be another big area.

People are at mistake when they think that Indian power story is over as power is in over supply. But this is not the case...still 30 cr people are without power. Our mistake was that we have created the supply but left the power demand factor. SEB's are major culprits due to their mismanagement which UDAY is trying to correct. We need huge power supplies for coming infra, Cold chains, Automation, Railway logistics. We have enough capacity just need better transmission and distribution.

Further, there is going to huge growth in Electric Vehicle market in India as Govt is looking serious for this. Apart from generic products like vehicle, Batteries etc., I think most important segment will be the charging infrastructure. E-vehicle will require fast charging infrastructure and without it people will not find it worthy. I have shared earlier also, most of the times most of the benefit is not enjoyed by main product producers but by supporting producers like Hospitals in case of new therapy/Drugs, Lubricants in case of car sale growth. Same is true for charging infrastructure and we’ll be needing high capacity chargers and charging products like capacitors, high voltage smart grids etc. Schneider is already a global force in EV charging infrastructure and I see no reason why it will not replicate the same story in India.

Great Buy at CMP of 124.

This is the first part of the series and will be updating more such stocks in the future.

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post)