Thursday, May 12, 2011

DISA India Ltd - AGM notes

Hello..
DISA India Ltd held its AGM on 6th May, 2011 in Bangalore. Following are some notes from the AGM. This is only a FYI kinda post!

The AGM was attended by the entire Board, the auditor and senior officials. About 20 odd shareholders were present. Other than me, there was only one other professional investor, who had come from Mumbai.
I got a chance to interact with the senior management (they didnt run away asap, as has happened in some AGMs I attended).

Management Perception: Well informed, professional and no-nonsense people. Their answers were plain, to-the-point statements. No beating around the bush, no tall claims.

  • DISA is currently looking at increasing the Wheelabrator range in the country over the next 3 years. The range of machines they plan to introduce will not be limited just to the foundry/casting industries, but will cater to a host of other industries such as railways, defence, construction, ship-building, etc. The management looks at Wheelabrator as a big growth driver. Margins in Wheelabrator products are as high as 30%+. 
  • The management is very clear that all business in India will be done through the listed entity. No Timken-giri here (i.e. no 100% subsidiary of the parent and stuff.) This is beneficial for them too, since they would like to utilise DISA's existing network to promote Wheelabrator products too. DISA Technologies Pvt Ltd will remain a R&D entity only.
  • Currently, the company is working close to full capacity. Capacity, in this case, cannot be measured in usual sense, since what DISA does is mostly assembly. A large number of parts are supplied by its vendors. But the management says that about 20% more turnover is possible with the existing capacity and infra. Due to this, the company is undertaking expansion at both its Hosekote and Tumkur units. Capex in CY11 estimated to be Rs.8-10 cr.
  • Order book as on 30th April 2011 was Rs.103 cr. The company is not at all focusing on exports, since they feel that the opportunity size in India itself is huge. So India would not be made just a low-cost manufacturing hub of the parent or something. Management does not talk about future numbers. (which I think is a good practice.)
  • The management admitted that they were facing problems on the raw material price front (which was evident in the March quarter results, which were declared much after the AGM). There is a 6-9 month lag between the raw material price hike and passing it on to the client. So, in the intermittent period, the company has to take a hit due to increase in raw material price rise. Management considers 18-20% as realistic and achievable operating margins.
  • The company is also keenly looking at inorganic growth (surprising!). No details were given on the same.
  • Company is also looking at increasing filters business and spare parts/after sales service business, which is a higher margin area. 
  • The case with SEBI is pending with the Supreme Court. Currently its in a 'tareekh-pe-tareekh' mode. Until this case is resolved, there are no chances of delisting .Management did not comment or give any clue about delisting or the intention of the promoters.
  • On being quizzed about competitors like Sinto, Koyo, some Indian manufacturers, etc., the management admitted that competition is there and some established competitors are looking at the Indian markets. But the management is quite comfortable, given the headstart and the future plan they have for the company.
Shareholders were extremely vocal (i am putting it mildly!) about non-declaration of dividend. The usual stuff which happens at most AGMs happened. A bit of entertainment.
Do get in touch in case you think i have missed some point or you have any questions.

Cheers and happy investing! 

15 comments:

Jigs said...

Thanks Neeraj.
WAS tracking and researching DISA between 2001 and 2004 when price was around 200. Old name BMD Foundry machineries.I do not track it anymore as I do not track single MNC now.
I suggest you also study "Wendt India" which is in same sector with different products. I guess DISA and Wendt are only pure play listed Auto Capex stocks. Nesco is also there but they are more in to property.

JK said...

Hi Neeraj- One more value investing based blog- http://fundoopupil.blogspot.com/

Do visit & share your feedback. Thanks.

Neeraj Marathe said...

Thnx Jigs,
I agree, Wendt is a very interesting case indeed..
cheers!
Neeraj

Neeraj Marathe said...

Thnx JK..
Wonderful blog. Congrats. The Prof has inspired so many ppl to get into intelligent investing..
cheers!
Neeraj

Abhi said...

Hello Neeraj,

Great blog. Compact Disc India has applied or about to apply for delisting with Sebi at Rs 75/share.

Stock has run up recently and is hanging around 55 Rs mark.

opportunity or risk? thoughts?

Abhijeet

Neeraj Marathe said...

Hi Abhi,
Thnx! glad u liked the blog..
regarding compact disc, with the history that this company has, i am inclined not to believe them at all..i would prefer to let this opportunity go, in case it really does materialise.
Plus, the promoters hold only just bout 25%..i personally have not seen a case whr delisting was announced with sooo low promoter holding..
cheers!
Neeraj

JK said...

Hi Neeraj,

Regarding DISA, what's the size of the market that they are catering to? The machinist article says its only 200crs. Isn't that too low for a business which already has 100cr turnover?

JK said...

Someone has named Nesco here.. what is the problem in that? look at debt, ROCE, P/E numbers for Nesco.

Neeraj Marathe said...

Hi JK,
Yes, the market size for Disa products would be about 250 cr..one point to note here is the growth being seen. the market itself is growing at 18-20%.
new products from Wheelabrator could open up additional markets for the company, to the extent of 200 cr plus, depending on what products they bring in.
I hvnt seen Nesco, so cant really comment on it.
Cheers!
Neeraj

Anonymous said...

pls give your contact details.

09820061286

ansekhri@hotmail.com
anmol sekhri

Neeraj Marathe said...

Hi Anmol,
I have emailed u my contact details.
cheers!
Neeraj

Jatin said...

Hi Neeraj,
also check out Josts Engg. 108 yr old co.
at same space as disa , with better profitability margins rajan raheja seems to show interest in this co. they have bought 10% of outstanding shares from open mkt...

Neeraj Marathe said...

Thnx Jatin,
Didnt know about this one..
cheers!
Neeraj

Pravin said...

Hi Neeraj,
Just stumbled across your blog, very nice, genuine and informative writeups, added to my reading list now and will visit more often.

On a lighter note, so u went to Bangalore from Pune just for the AGM of DISA??, please substract expense incurred whenever you book the profit on DISA ;-)

Neeraj Marathe said...

Thnx Pravin,
Glad to hear that u liked the blog.. and ya, i went to Bangalore just for DISA..when the size of position is bigger, the expenses seem smaller ;-)
cheers!
Neeraj