Himalaya International - 'MODI' fying Business. ?

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As you are aware ,we all are interested to get penny stocks which can give multi bagger returns.But in practice it is not an easy task and it is not possible to decide in advance that a stock will become multibagger. This will happens when many positives comes together and only over a period of time.If we take 10 penny stocks ,hardly one or two may turn as multibagger and even our capital may loose in the rest. ne more important point – never buy this stock if you have no patience to wait for long time and you are not ready to loose even your capital. 
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The Sector

In a country like India ,food processing a is a sector with huge potential.Weather and atmosphere conditions suitable to produce wide variety of food items like  fruits,vegetables,pulses ..etc makes India as one of the most futuristic country in this segment.Large domestic population and comparatively cheap labor offering good scope for this sector for many more years.We have already discussed many stocks from this sector like Tasty Bite Eatables ,DFM Foods,Heritage Foods,Britannia ..etc and most of them already turned as multibaggers.

                                                      

  

The Company 

In this week ,we are looking into BSE listed Himalaya International Limited (HIL) .Company is jointly promoted by Mr. Man Mohan Malik and Mr.Sanjiv Kakkar. Based on the installed capacity HIL is one of the largest food processing company in India.HIL producing,processing and selling Mushroom , Vegetables,Cheese,various types of sweets and appetisers,yogurts...etc.Company selling products under the brand ‘Himalaya Fresh’ and also doing private label business.For sourcing raw materials including vegetables and mushrooms company made contract farming arrangements with local farmers in addition to own cultivation.Company’s main production facilities are located at Ponta Sahib ( Himachal Pradesh ) and Vadnagr ( Gujarat) – the home town of Shri Narendra Modi.In last financial year Shri Narendra Modi Inaugurated Himalaya’s new factory at Vadnagar which costs around Rs.160 Cr and the single largest provider of job for the locals.  

           Narendra Modi Inaugurating Company's new plant at Vadnagar
https://www.youtube.com/watch?v=oHX9ZHO2zTg#t=266 

Financial Performance

In FY 2012-13 ,Company reported a turnover of Rs.112 Cr , net profit of Rs.20 Cr and an EPS of Rs.3.90.Out of its 51 Cr equity promoters holding around.35.44 % and other large share holders ( > 1 %) holding around 23 % stake in this company .Promoters recently subscribed  896100 shares at a price of Rs.11 on a preferential basis.Company targeting massive increase in top line with increased capacity utilisation in its Gujarat plant.

Conclusion

There is lot of skepticism around this company for the past many years. Its never ending capacity expansion ,relatively large equity base ,non payment of dividend ..etc may be the major reason for that.In addition to this ,since company supplying products to overseas markets  and concentrating in private label business , brand visibility in India is less which is also a reason for commanding lower P/E.Company’s failure to maintain relationship with global food and agribusiness conglomerate, JR Simplot Company with whom Himalaya earlier formed a 50:50 joint venture and later called off may be another reason for investors apathy.In 2013 company decided to  allot 12.5 million warrants to Trydin America LDC but the same not materialised ( Read it HERE)  .Instead of this , in last few months the company allotted 896100 shares to Himalya International Inc. NJ, USA (Promoter Group). As per company version, non payment of dividend is for conserving resources for recent massive capacity expansion.

   

  

Click on the above image to read MD’s  explanation for some of the negative events related with the company.

Even if company may  not be a great success in marketing side ,it has built a fully integrated sizable capacity for production of mushrooms, french fries, onion rings, appetisers, mozzarella sticks , fruit yogurts and cans of soups.Now it is the time to concentrate in marketing efforts and brand building.Since company claiming its major sales from overseas ,that itself through private label and online stores selling Indian ethnic food items,
there is practical difficulties to check the genuinity of sales figures provided by the company .
  
 Check product listing in Amazon.com HERE 

Check product listing in another selling point HERE 

But I believe ,Its production facilities itself deserves much valuation compared with the current market cap of just Rs.66 Cr. The sector in which company operating is one with huge potential and the reported numbers are very good.A possible change in power equations post election may augur well for Himalaya International.Even without this  factor stock of a food processing company below 3 P/E seems very cheap where the average industry P/E is close to 15.

If everything is correct and company can materialize its future plans ,stock may turn as a dark horse from current level of just Rs.13 in next few years.Stock listed only in BSE with scrip code 526899

uggested readings

1 ) In pictures: Narendra Modi opens the largest chilled & Frozen food Project of India at Vadnagar

2) CM inaugurates India’s biggest food processing plant in Vadnagar

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Notes : 

1) As I mentioned at the beginning ,investing in penny kind stocks always risky and advisable only for high risk takers.

2) Many of the information provided above taken from publicly available sources,company claims and projection which is prone to higher degree of errors and I have no guarantee about its accuracy .Assumptions arrived on such factors  may result in wrong judgements and hence requesting self study before acting on this recommendation.

3) I have vested interest in HIL

https://www.youtube.com/watch?v=LslS45Rjr7k#t=134

News on  Inauguration of plant 

This stock recommended earlier around @ Rs.12 declared its result today . More than the published result ,company decided to write off an amount of Rs.16 Cr  on account of  expired goods due to termination of its joint venture with Simplot . ( Read the details of Board decision HERE ) .Frankly speaking , quantum of  this amount is beyond my expectation . Stock is currently trading around Rs 15.80 .Recommending to book Profit /Loss and considering this factor, a  re-entry may consider only  at a lower level