Jolly
Board is the largest fiberboard company in India offering a comprehensive range
of products .
The Company was incorporated on 10th December,1956 in Mumbai The comprehensive product range manufactured includes Bitumen
Impregnated Softboard, Plain Softboard, Laminated Softboard, Painted Softboard
in various thickness and multiple surface textures. The company also offers
exclusive products like non-combustible and acoustical ceiling tiles. This
is basically a coating given under the concrete cement in
bridges/airports/construction to prevent it from cracking.
Nearly 70%
of the production is exported.
The company has four mills for the production of
Softboard, Bitumen Impregnated Softboard and mineral wool board. These four
units produce 100,000 cubic meters of Soft Board annually..
The Company had issued Bonus
Shares in the Ratio of 4:1. In the year 2008
Manufacturing :
Sangli plant: located on a plot
of 100 acres
Aurangabad plant: located on a
plot of 25 acres
Kanjurmarg plant : was located on a plot of 30 acres ( this is in the process of being
co-developed with Lodha developers)
Number of employees: 195
Promoters: 89.89%
Non promoters: 10.11%
Of this 10.11% , 2.13%
stake(97.038 shares) is held by Nansha Trading Pvt ltd. Nansha Trading Pvt Ltd
has no held less than 2% stake post Sept 2004 ( nearly 8 ½ years).
Balance Sheet:
Paid up equity Capital : Rs.4.55
cr
The company also has outstanding
Cumulative redeemable preference shares
worth Rs.2.05 cr
Debt: Rs.4.35 cr ( approx 3.08 cr
sales tax deferement loan & balance cash credit facility)
Cash & cash equivalents
(liquid MF): Rs.17.2 cr ( as of March 31, 2012)
Market price: Rs.330
Market Cap: Rs.150 cr
Financials ( 2011-12)
Revenue : Rs.75 cr
PAT: Rs.10.18 cr
EPS: Rs.17
Dividend: Rs.10 per share
Q1 2012-13
Revenue: Rs.21.95 cr
PAT: Rs.3.17 cr
Promoters:
Mr. Arvind Jolly is at the apex of the Jolly
Group of Companies, a Group with varied interests -
The genesis of the Group can be traced back to post India’s Independence
in the construction field. As builders of repute the Group is responsible
for many landmarks in Mumbai and the prestigious Koyna and Bhatsa dams in India
(Shah, Salzgitter and Jolly were the Contractors appointed to construct the
Koyna Dam. )
Mr. Jolly is one of the earliest
collectors of contemporary Indian art and has a collection of over 400
paintings. As a private collector his must be one of the finest
collections of paintings held by any private collector in Mumbai. In his
bungalow at Malabar Hill every inch of space is occupied by paintings of
leading masters like M.F. Hussian, Brota, Kishen Khanna, Ram Kumar, Manjit
Bawa, Satish Gujral and numerous other artists. Mr. Jolly’s acumen of
collecting art can be gauged for the fact that most of the paintings were
bought 30 years ago when these artists used to sell these paintings for a few
thousand Rupees.
Source :
http://www.excampionites.com/newsandmore/view.asp?ID=115&CID=8
Dividend
record for the last 8 years:
2005:
Rs.1.20
2006:
Rs.2.50
2007:
Rs.5
2008:
Rs.20
2009:
Rs.10
2010:
Rs.13
2011:
Rs.15
2012:
Rs.10
Key
challenges in the core business & the steps taken to address them :
The board business for any company
anywhere in the world is a challenging business and a profit of 10% p.a. is
considered a great performance. Besides
the banning of wood, the company has had to face major challenges like new
environmental and pollution laws.
The company manufactures by the ‘wet’ process and has to treat all the
water they discharge. The re-use of
water has helped them to meet the environment regulations, but has caused quality
problems, as the board does not have the white finish which is required for the
local furniture market and has odour in some seasons. In order to circumvent this problem the
company has invested in a 100 tonne per day evaporator from Praj Industries which
will treat the water and the company will not have to re-use it. This is likely
to result in a board better in looks and also odourless.
In the past 3 years the company has
not been able to increase prices neither in the export market nor in the local
markets. At the same time manufacturing
cost have increased by 10%
p.a. In order to meet the challenges,
the company is trying to produce more and have invested in a new energy
efficient 18 tonne boiler from Thermax at a cost of Rs.7 cr and a pulping
machine at a csot of Rs.3 cr to improve the quality and reduce energy
cost.
The company has two types of customers:
·
The first
type are the ones who use it for furniture and pin boards, and they want the
boards to be as white as possible.
·
The second
type of customers are those who use it for expansion joint fillers and
construction and they want the boards to be as black as possible.
The company has modernized the
Sangli plant with new boiler, pulping equipment, & evaporator with the
intent to improve quality ,reduce the
manufacturing cost and double production.
Kanjurmarg Realty:
The company had entered into a co
development agreement with Lodha Developers
for its land at Kanjurmarg under which the developed area would be shared by
the developer and the company.The cost of construction and development of the
project would be borne by the developer. An IT Business Park which will occupy
an area of 2 million sq.ft has been completed in the first phase. Another 1 million
sq.ft. in the second phase at an adjoining premises at Kanjur Marg is in
progress.
As
per the 2010-11 Annual Report,The total built- up area that will be developed
under Phase-II will be about 10 lakh sq.ft. Of the total developed area, Jollyboard
will get 4.50 lakh sq.ft. area but will
have
to hand over 1.00 lakh sq.ft. area to the Government for amenity blocks as per
the terms of Government approval leaving net developed area of 3.50 lakh
sq.ft. for the Company.
Annual
Report of 2011-12 does not provide much clarity on the above except saying that
the Phase II has been delayed due to various permissions and that Municipal
Corporation of Greater Mumbai has formulated new DCR regulations under which
35% areas which were available as free FSI will now be charges under fungible
FSI. It goes on to say that as property owners in the joint development
agreement, some of these costs will have to be borne by the company. The
capital work in progress include Rs.67.53 cr being expenses incurred towards
FSI premium, TDR purchases and cost of amenity block to be handed to MCGM.
Valuation:
Though
there is not much clarity on the current status of the company’s share of 3.50
lakh sq.ft of developed space in Phase II, one can safely assume the realizable
market price of the same to be not less than Rs.300 cr ( assuming a Rs.3000 psf
discount on the prevailing rate of about Rs.11,000 psf).
From
Phase I, the company has leased out office space from which it has earned annual
lease rent of around Rs.3.75 cr last year. Wearing the conservative hat, even
if one considers a higher rental yield of about 5%, the property price should
be in the range of Rs.75 cr.
Promoters
will have to dilute their stake to 75% in the next 9 months or delist the
company. Considering that they own a little less than 90% ,if they opt for the
delisting option, even if the same were to happen @ 2X current market price,
i.e Rs.660-700, promoters won’t have to shell out more than 30-33 cr. If one
thinks from the promoters point of view, it won’t be such a bad deal for a
company sitting on about 17 cr of cash equivalents, realizable property value
of about 375 cr plus an existing business in which the company is the market
leader domestically and operating out of 100 acres of land at Sangli & 25
acres at Aurangabad.
Should
be interesting to watch the developments here over the next few months.
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
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contained therein has been obtained from sources believed to be reliable, no
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