Trading November 6, 2012 CMP Rs. 9.4 BSE Code 519483 BSE ID TAIIND High/Low 1Y (Rs.) 11.3 / 6.2 Average Volume (3M) 9178 Market Cap (Rs. Cr.) 6 Shareholding % Sep-12 Jun-12 Promoters 20.27 20.27 DIIs # - - FIIs # 20.00 20.00 Public & Others 59.73 59.73 Stock Chart ( Relative to Sensex) Stock Performance (%) 1M 6M 1Yr Tai Industries Ltd. 12.9 3.3-11.0 Sensex 0.6 14.2 9.9 Financials FY10 FY11 FY12 Revenue 60.5 78.1 65.9 Y-o-Y -12.9% 29.0% -15.7% EBITDA -1.0 2.6-2.5 Y-o-Y - LP PL Net Profit 0.2 0.9 0.5 Y-o-Y LP 257.9% -46.2% EPS (Dil.) 0.41 1.45 0.78 EBITDA Margin -1.7% -3.3% -3.7% Net Profit Margin 0.4% 1.1% 0.7% P/E(x) 22.8x 6.4x 12.0x Financial year ends at March 31. All figures in Rs. crore except for per share data # FIIs- Foreign Institutional Investors # DIIs- Domestic Institutional Investors PL - Profit to Loss LP - Loss to Profit Tai Industries Ltd. Company Overview Tai Industries Limited, having its registered office in Kolkata, was initially known as Tashi Agro Industries Private Limited and was engaged in marketing of agricultural products. On August 6, 1992, it became a public company. The present name of the company, Tai Industries Limited, was given on March 29, 1994. It is the flagship company of the Tashi Group. The company has three divisions Fruit Product, Industrial and Retail. Tai launched its fruit brand DRUK in 1986, which is manufactured by its group company, Bhutan Fruit Products Private Limited. The company is also engaged in the marketing of mineral products. It added another vertical by promoting JAMIPOL Limited for the production of desulphurisation compounds, in association with the TATA Group and SKW Metalchemie GmBH, Germany. Tai Industries also diversified into large format retailing with its chain of supermarkets C3 -The Marketplace. It set up its first C3 store in Kolkata in 2004. Company Fundamentals Lower net sales resulted in a decline in the company s total revenue in FY12: For the financial year ended March 2012, the total revenue of the company registered a decline of 15.7% at Rs. 65.9 crore against Rs. 78.1 crore reported in the previous financial year. The decline in total revenue was largely attributed to the fall in revenue of Druk segment, where revenues came down from Rs. 76.1 crore in the previous fiscal year to Rs. 61.1 crore in FY12. EBITDA margin declined marginally on the back of higher employee cost: Fall in consumption of materials and a rise in inventory dragged the Cost of Goods Sold (COGS) lower by around 14% against the previous year s figures of Rs. 58.5 crore. A lower COGS, along with a lower other expenditure, helped in improvement of the operating margin. However, a rise in employee cost affected the operating margin. The margin declined by around 40 bps to 3.7% compared to 3.3% recorded in FY11. Net Profit Margin (NPM) declined largely due to lower other income: Due to a fall in other income from Rs. 3.8 crore in the previous year to Rs 3.2 crore in FY12, the company witnessed a drop of around 40 bps in its net NPM. Key Strengths - Diversified business profile. - DRUK has been a prominent brand, particularly in the Eastern and North Eastern parts of the country. - Association with TATA Group and SKW Metalchemie GMBH, Germany. - Diversified Product base. Initiative of the BSE Investors Protection Fund -1-
Company Business Tai Industries Limited, having its registered office in Kolkata, was initially known as Tashi Agro Industries Private Limited and was engaged in marketing of agricultural products. On August 6, 1992, it became a public company. The present name of the company, Tai Industries Limited, was given on March 29, 1994. The company has three divisions Fruit Product, Industrial and Retail. The company launched its fruit brand DRUK in 1986. This brand of fruits products is manufactured by its group company Bhutan Fruit Products Private Limited and each single process of it has been acquired from the mountain slopes of Bhutan. DRUK products that have made their presence felt in international markets include fruits, vegetables, jams, squashes, pickles, honey, fruit slices, corn flakes and processed foods and tropical delights like mango pulp, panna and juices. DRUK has carved a niche for its own products in the market where its competing brands are KISSAN processed fruit products from the stable of Unilever Limited and the SIL brand of jams, marketed by Marico Industries Limited. A vast product line up, state-of-the-art processing techniques and resolute quality control parameters have fetched for the Tashi Group of Companies a trusted brand name DRUK. The company has a large base of clientele across hotels, clubs, hospitals, nursing homes, bakeries and confectioneries. The company has also forayed into marketing of mineral products. Calcium carbide, ferro silicon, charcoal etc are mined/ processed by its group companies in Bhutan. The company added another line of business by promoting JAMIPOL Limited for the production of Desulphurisation compounds, in association with the TATA Group and SKW Metalchemie GmBH, Germany. Bhutan Carbide and Chemicals Limited markets its DRUK brand Calcium Carbide through Tai s efficient network and also procures charcoal from South India and sells it to Bhutan Ferro Alloys Limited and Bhutan Carbide and Chemicals Limited. The company acts as an indenting agent of Bhutan Ferro Alloys Limited for the sale of Ferro Silicon. Tai Industries Limited has also diversified into large format retailing with its chain of supermarkets C3 -The Marketplace. These stores cater to daily needs in an ambience of comfort. In 2004, the company put up its first C3 store at Lee Road in Kolkata and followed it up by many more properties across the city which attracted significant footfall and success. C3 has its presence in City Centre Mall, Salt Lake, Kolkata - a supermarket that approximately covers an area of 8600 sq ft. Under one roof, C3 houses over 25,000 product SKUs across the verticals of food & grocery, spices, ready-to-eat and ready-to-cook food items, low alcoholic beverages assorted variety of imported health and specialty food, frozen meat, vegetables and fruits. It also sells non-food items such as FMCG products, home care, personal care and home décor. The store at City Centre also has a liquor licence to sell beer, wine and low alcoholic beverages off site and also operates a flower counter. Initiative of the BSE Investors Protection Fund -2-
Industry Overview Food Processing Industry: The food processing industry in India is one of the largest in terms of production, consumption, export and growth prospects and provides vital linkages and synergies between industry and agriculture. Of all the retailing segments, the contribution of food & grocery' is estimated to have remained the highest at 58% of the total retail sales during FY12 (p). It is widely recognized as a sunrise industry having huge potential for uplifting the agricultural economy, creation of processed food manufacturing and food chain facilities and the resultant generation of employment and export earnings. The key growth drivers in the processed fruit product segment are increased spending on health and nutritional foods, changing lifestyle, preference for fresh or processed functional foods, organized retail and private label penetration and changing demographics and rising disposable income**. Calcium Carbide, Charcoal and Manganese ore: Charcoal and Manganese ore find their usage in the ferro-alloys industry, which are some of the most important inputs for manufacturing alloys and special steel. Established as an ancillary industry to cater to the needs of the domestic steel industry, its growth is linked to the development of the iron and steel industry. The product series consists mainly of ferro manganese, silico manganese and ferro silicon. Calcium carbide also finds its usage in the industry for welding metallic steel**. Retail Industry: During the last few years, the Indian retail market has seen considerable growth in the organised segment. The Indian retail industry has grown at a CAGR of 14.6% for the period FY07-12(p). Growth has been primarily due to buoyancy in the Indian economy, an increase in private final consumption expenditure and changes in consumption pattern of the Indian population*. Major domestic players have entered the retail arena and have ambitious plans to expand in future across verticals, formats, and cities. For example, several Indian companies have been investing considerably in the booming Indian retail sector. Besides, a number of multi-national corporations have also set up retail chains in collaboration with big Indian companies**. * Source: India Brand Equity Foundation (IBEF) ** Source: Company s Annual Report Competitor Analysis We have compared Tai Industries Ltd. with its close peers in the domestic trading industry. Company Year End CMP M Cap Revenue EBIT Margin EPS P/E Tai Industries Ltd.* Mar-12 9.4 5.0 65.9-4.2% 0.78 12..1 Alchemist Corporation Ltd. Mar-12 10.3 4.0 - - -0.24 - Sita Shree Food. Mar-12 5.4 12.0 144.3 3.4% 0.45 12.0 Source: BSE, Capitaline, Market cap and Revenue in Rs. crore. CMP and M Cap as of 6 th Nov 12 Initiative of the BSE Investors Protection Fund -3-
Summary Financials Particulars (Rs crore) FY10 FY11 FY12 Net Sales 60.5 78.1 65.9 Other Op. Revenue 0.0 0.0 0.0 Total Revenue 60.5 78.1 65.9 Growth (%) -12.9% 29.0% -15.7% Cost of Goods Sold -51.1-68.3-58.5 Gross Profit 9.4 9.8 7.3 Employee Costs -1.9-2.4-2.6 Other Expenditure -8.5-10.0-7.2 EBITDA -1.0-2.6-2.5 Growth (%) 1.1% 156.8% -5.5% Depreciation -0.4-0.3-0.3 EBIT Profit -1.4-2.9-2.7 Finance cost 0.0 0.0 0.0 Other Income 1.7 3.8 3.2 Exceptional Items 0.0 0.0 0.0 PBT 0.2 0.9 0.5 Growth (%) LP 271.4% -43.5% Income Tax 0.0 0.0 0.0 Profit after Tax 0.2 0.9 0.5 Extra Ordinary Items 0.0 0.0 0.0 Net Profit 0.2 0.9 0.5 Growth (%) LP 257.9% -46.2% Rep. Basic EPS 0.41 1.45 0.78 Rep. Diluted EPS 0.41 1.45 0.78 Equity Capital 6.0 6.0 6.0 Face value 10 10 10 Ratio Analysis FY10 FY11 FY12 Margins EBITDA Margin (%) - - - Net Profit Margin (%) 0.4% 1.1% 0.7% Valuation P/E (x) 22.8 6.4 12.0 P/BV (x) 0.4 0.4 0.3 Profitability ROCE (%)* - -18.5% -16.9% RONW(%) 1.6% 5.6% 2.9% Solvency Ratio Debt/ Equity Ratio (x) 0.0 0.0 0.0 Interest Cover (x) -40.4-220.8-129.7 *Bifurcation between Long Term and Short Term Debt is not available for FY10 PL - Profit to Loss; LP - Loss to Profit Initiative of the BSE Investors Protection Fund -4-
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