Friday, February 24, 2012

Voith Paper Fabrics India Ltd- Slow but Sure

The company’s primary business is supplying the Paper Industry  Paper Machine Clothing or Felt.
Paper Machine Clothing is used to produce all grades of paper from light weight tissue to heavy weight container board. These tailor made engineered fabrics are made up of synthetic.

The company was incorporated in 1968 with major shareholding being with Porritts & SpencerUK which later became a part of Scapa Group of  U.K. In 1999 the majority of shares were acquisitioned by  VF Auslandsbeteiligungen  GmbH, Germany . The company got name of  Voith Paper Fabrics India Ltd. (VPFI) under the Voith Group in 2007.
The business commenced initially with the manufacture of woollen and cotton dryers for pulp, paper and board industry with technological support of Scapa earlier and now with Voith Group, while extending the range of clothing for use on paper machines as the main business, VPFI also started manufacturing textile felts, geo-textiles and filter fabrics.
Keeping the area of core competence in view, VPFI has continued to upgrade its products. Today the focus is on paper machine clothing (PMC), fibre-cement sheet making felts and hi-tech textile processing felts.
With the satisfactory entry into forming fabric business, VPFI is the only Indian manufacturer in a position to supply the entire range of machine clothing to paper manufacturers.
VPFI. has its registered office and the manufacturing facility on a 30 acre site in  Faridabad,  Haryana near New Delhi.
Number of employees: 124
Promoter holding: 74.04 % (VP Auslandsbeteiligungen GmbH Germany- a step down subsidiary of Voith Gmbh, Germany)

Promoter profile:
Founded in 1867, Voith, Gmbh and its group companies employ more than 40,000 people, generate  €5.6 billion in sales, operates in over 50 countries around the world and is today one of the biggest family-owned companies in Europe.
In 2010-11,Voith Group grew sales by 8% to €5. 594 billion (approx Rs.36,300 cr) & PAT of € 200 million ( approx Rs.1300 cr)

VPFI Financial snapshot:
Equity : Rs.4.39 cr
Debt : Nil
Investments ( Fixed Deposits in banks): Rs.67.13 cr ( approx Rs.153 per share)
Current Share price: Rs.282
Market Cap: Rs.123.7  cr
EV: Rs.56.57 cr

Year ended Sept 30, 2011:
Revenue: Rs.55.86 cr
Other income: Rs.5.64 cr ( income from FD’s)
Total income: Rs.71.50 cr
PBT: Rs.16.6 cr
PAT: Rs.11.5 cr
EPS: Rs.26.26
Dividend per share: Rs.3

1st quarter ended Dec 31, 2011:
Revenue: Rs.14.67 cr ( 3.5% growth yoy)
Other income: Rs.1.59 cr ( income from FD’s) ( 60%growth yoy)
Total income: Rs.16.26 cr
PBT: Rs.5 cr ( 26% growth yoy)
PAT: Rs.3.45 cr ( 34% growth yoy)

Some key negatives
Contingent liabilities NOT provided for  are at manageable level of Rs.16.5 lakhs
Current capacity utilization is close to 90% and some capex may be required in the not too distant future.
Average ROCE & RONW for the past 4 years have been a not too impressive 14% and 10% respectively mainly due to the huge cash component in the balance sheet which earns sub optimal returns.

Key information points:
The 20 year high & low of the stock price is Rs.350 ( in 2006 ) & Rs.21.90 ( in 2001) respectively.
This company is a virtual monopoly in the paper fabric industry in India
Operating margins have hovered between 28% & 32%  over the past 4 years.
VPF’s Faridabad property is worth about 120 cr at current market rates. Though there is absolutely no possibility of land monetization here, I’m mentioning this purely for information sake only.

Business prospects:

China and India have emerged as the largest drivers of demand growth for the paper industry. Asia accounts for
 about 40% consumption currently.  Estimates suggest that these two countries will contribute  to  59 % of global
 incremental demand from 2009 to 2020.  
India  is  the  fastest growing market for paper across the  globe  and  it presents  an exciting scenario; paper consumption estimated to touch  :
 14  million  tons by 2015/16
 20 million tons by 2020
Industry  view is that growth  in  paper consumption  would  be  in  multiples  of GDP  and  hence  an  increase  in consumption  by  one kg per capita would lead to an increase in  demand  of over  1 million tons.

Since,  a number of European and US paper mills are shutting down owing  to cost  and other factors, an
attractive export opportunity also  exists  for Indian   paper  mills.  This is likely to result  in enhanced demand 
for products of VPFI. 
Since,  Paper Industry in India is primarily dominated by small and  medium size  units; and less than a 
dozen mills account for almost 90%  production of  newsprint  in  the country, there is a growing need  to 
 modernize  the Indian mills, improve productivity and build new capacities, which would in turn result in 
demand for the products of VPFI. 
Further, due to enhanced awareness & consciousness, more and more items are now coming in market in 
 tetra-packs and paper-wraps. This would also give a boost to the packaging industry and is  likely to create
 additional demand in packaging & board paper, indirectly helping VPFI. 
Delisting play? 
Voith Gmbh’s Annual report says “ As a family owned company, Voith has the freedom to focus fully on
 implementing its medium to long term strategy.” 
Currently 11.40 lakh shares of VPFI are held by non promoter shareholders. Hypothetically speaking, lets look at
 various price points scenarios for delisting
Delisting Price
Resultant Outflow
Cash on books
Net cash impact on Voith gmbh
( Rs.)
( positive / (negative)
It is clear from the above that, delisting ( if and when it ever happens – remember, we’re talking of a hypothetical
 scenario !) is unlikely to happen at a price less than Rs.600 per share.  
Voith paper fabrics India ltd has been largely a consistent performer and if one relies on past history, the net cash
 position in 2 years should not be less than Rs.72-75 cr ( assuming that the company will spend 12 to 15 cr
 towards capex in the coming 2 years)
All in all, an investment in the stock @ current price of about Rs.282 offers a good proxy to a growing market
 while parking one in the lap of a promoter with excellent pedigree.
Delisting, if it ever happens will be the proverbial cherry on top.
At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments. 


  1. Dear Sir,
    What are your views on Titan Ind. If someone holding from very long (10 years+), is it a time/price for investment sell. OR titan can still give reasonable return for couple of more years from here onward. ( From CMP)


  2. i'd take half the money off the table and let the rest ride.

    Work from home theory is fast gaining popularity because of the freedom and flexibility that comes with it. Since one is not bound by fixed working hours, they can schedule their work at the time when they feel most productive and convenient to them. Women & Men benefit a lot from this concept of work since they can balance their home and work perfectly. People mostly find that in this situation, their productivity is higher and stress levels lower. Those who like isolation and a tranquil work environment also tend to prefer this way of working. Today, with the kind of communication networks available, millions of people worldwide are considering this option.

    Women & Men who want to be independent but cannot afford to leave their responsibilities at home aside will benefit a lot from this concept of work. It makes it easier to maintain a healthy balance between home and work. The family doesn't get neglected and you can get your work done too. You can thus effectively juggle home responsibilities with your career. Working from home is definitely a viable option but it also needs a lot of hard work and discipline. You have to make a time schedule for yourself and stick to it. There will be a time frame of course for any job you take up and you have to fulfill that project within that time frame.

    There are many things that can be done working from home. A few of them is listed below that will give you a general idea about the benefits of this concept.

    This is the most common and highly preferred job that Women & Men like doing. Since in today's competitive world both the parents have to work they need a secure place to leave behind their children who will take care of them and parents can also relax without being worried all the time. In this job you don't require any degree or qualifications. You only have to know how to take care of children. Parents are happy to pay handsome salary and you can also earn a lot without putting too much of an effort.

    For those who have a garden or an open space at your disposal and are also interested in gardening can go for this method of earning money. If given proper time and efforts nursery business can flourish very well and you will earn handsomely. But just as all jobs establishing it will be a bit difficult but the end results are outstanding.

    Freelance can be in different wings. Either you can be a freelance reporter or a freelance photographer. You can also do designing or be in the advertising field doing project on your own. Being independent and working independently will depend on your field of work and the availability of its worth in the market. If you like doing jewellery designing you can do that at home totally independently. You can also work on freelancing as a marketing executive working from home. Wanna know more, email us on and we will send you information on how you can actually work as a marketing freelancer.

    Internet related work
    This is a very vast field and here sky is the limit. All you need is a computer and Internet facility. Whatever field you are into work at home is perfect match in the software field. You can match your time according to your convenience and complete whatever projects you get. To learn more about how to work from home, contact us today on workfromhome.otr214426@gmail.comand our team will get you started on some excellent work from home projects.

    Diet food
    Since now a days Women & Men are more conscious of the food that they eat hence they prefer to have homemade low cal food and if you can start supplying low cal food to various offices then it will be a very good source of income and not too much of efforts. You can hire a few ladies who will help you out and this can be a good business.

    Thus think over this concept and go ahead.

  4. Welspun Corp receives an order for the supply of 1.24 lakh MT pipes.
    Share Market Company