AGM Notes: Young blood at top in Kisan Mouldings promises to deliver

By Soumya Malini and Arun Mukherjee

(Kolkata’s Arun Mukherjee, a college dropout by choice, and Soumya Malani, a London School of Economics passout, have come to be known as smallcap aficionados in India’s investor community. They would show up at most AGMs, visit the remotest factories of a company and go chasing end-users to understand their experiences with a product in their passionate hunt for good smallcaps. Soumya and Arun would be sharing their experiences with companies and from the ground in this space every now and and then. Keep watching...)

Kisan Mouldings is one of India’s largest plastics companies, processing around 50,000 tonnes of polymer each year. The company claims to have the widest, most comprehensive and cost–effective range of PVC products, manufactured at its facilities. Kisan has shaped its niche in the field of pipes and fittings for water management, irrigation, water distribution and sewage disposal systems. It also manufactures custom moulded articles and moulded furniture.


Here are the key notes from the company’s recent AGM.

1) Tarapur plant automation is done. Remaining 4/5 factories to be automated too over time. 50-55% factory utilization is enough for profits (45-50%currently). 5 different factories produce 5 different products.

2) Entry barriers are high. Takes time to make a brand. Only big players like Birla and Hindware entering which is good news because market is becoming more organised and this competition also helps to expand the size of the market.

3) Niche: Engagement with end users (plumber) via programmes and training. Average engagement is 20 plumbers a day. Higher Rm cost is a non-issue. They are able to pass on always.

4) Credit cycle: Not long. 30-60 days generally. High only in case of micro enterprises/irrigation (1-2 years). It is actively looking to check debtor days. The company said previously agri pipes would have 40 debtor days. Now it’s set to be just a week. Water tanks business will also grow to Rs 30 crore this year.

5) Father and son duo are now handling business. Sanjeev’s sister’s husband and his two brothers were partners earlier. Sanjeev is gradually acquiring other’s shareholding and others have exited the management.

8) Main markets are west and north. Rajasthan is the biggest. East is doing and growing well/fast - states of West Bengal, Jharkhand, Chhattisgarh and eastern part of Bihar. Capex cycle done. Only maintenance capex worth Rs 5-7 crore is required.

9) Company achieves breakeven at a monthly net sales of Rs 45 crores. The company doesn’t require any capex till monthly net revenues of Rs 80-85 crore. Current cost is fixed at Rs 10 crore a month. Business above Rs 50 crore would led to Ebitda of 9-10 per cent. Above Rs 60 crore, it would start moving towards 12-13 per cent.

10) This year, the company is targeting Rs 570-600 crore sales vs Rs 470 crore last year. PAT this year would be around 1.5-2% of net sales. The company has 3% market share as of now, targeting Rs 1,000 crore (2020-2021) means it will need to add 1.5 per cent market share . Not difficult looking at industry growth rate.

Our view: Dipendu Nandi, hailing from Silchar, has large following all over the country, including his home land in the northeast. He has been instrumental in unearthing several megabaggers over last few years. This young investor has studied the company thoroughly, did a lot of scuttlebutt and was even kind enough to forward his crisp AGM coverage for the retail fraternity. We are positive on the PVC pipes segment. Kisan presents the widest, most comprehensive and coast-effective range of PVC products, which are manufactured at its five modern production facilities located across India.

Kisan has been successfully manufacturing and marketing its products under the brand named KISAN and CLASSIC with a strong distributors network. It has dealers spread across the length and breadth of India. With young blood taking full control and old lazy management out of the company, shareholders seem to have better days ahead. At Rs 250 crore market-cap and being among the top eight largest players by capacity, this stock seems to have some way to go.