Most Indians would have heard of the Sintex name and recall the product it manufactures. They would have encountered its products at sometime or the other. Plastics contribute to about90 % of the company’s revenues.
There is also a textile unit and a subsidary which supplies to both the auto industry and the electrical fixture industry.The company is profitable and is paying dividend every year including the current year.The book value of the company is 88 rupees.The net profit the company is around 250crores.The problem in the company is that it has a debt of Rs 2584 Crores.
A major portion is in US dollars this is 100 crores less than last year when a major foreign exchange debt was closed by diluting equity at Rs 65 and floating an FCCB for $140 million to be converted to equity at Rs 75 a share or repaid. If the price is less the promoters have bought 1.56 Crore shares at Rs 65 a piece and have the option to buy another 1.44 Crore shares at the same value.
There has been dilution of equity by 25%. A possibility of further dilution of equity on conversion of FCCB at Rs 75 a share in 2017.The other negative point is promoter owns only 36% of the company and 12% of that is pledged. The share is trading at 25% of book value and in its category has a strong moat.
Further the second largest brand RETUFF is also owned by this company.The company has remained profitable and consistently paid dividend. With the monsoon being good the company should do well in the second half of the current year. Even assuming no growth book value will grow by Rs 8 a year. One can comfortably expect a price of Rs 75 in a couple of years. This is an exponential growth of five times!
So be patient and let us see how Sintex performs!
thinkrichadvice 