INSUBCONTINENT EXCLUSIVE:
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 then
Keep watching) What a story it has been! If our memory serves us right, around 2004, some 26 companies vowed to put up plants of a minimum
1MTPA in Bengal, but 24 of them failed to deliver.
One was able to put up a plant, but after much delay
It was Jai Balaji Industries of the Jajodia family, which pulled off a miracle
It was able to put its 1MTPA capacity in just 42 months, beating its own expectation by six months and at a cost which became a benchmark
then.
What an achievement! Everything looked rosy until it started dreaming of becoming really big
It came up with plans of putting 6-7 times more steel capacities along with cement plants
It was also allocated coal blocks with high grade coal reserves, which ensured its future backward integration
The company, meanwhile, took massive debt and the global demand-supply mismatch hit it hard.
Problems kept compounding with triple whammies
of high debt, minimal capacity utilisation and then the coal scam, which led the state government to de-allocate all coal blocks
The company turned sick with the lenders assigning a NPA tag to it
As of today, Jai Balaji with 1.2mtpa integrated capacity in close proximity to port and possessing own railway sliding would easily be worth
Market cap is hardly Rs 150 crore
So, a positive outcome or a good haircut can take it places
China produces half the steel demand of the entire world
With the government ruling out fresh capacity and ongoing steel cycle tailwinds, there would be serious interest in the company
It has ductile iron of 240,000 TPA, too
That's cream, and easily worth Rs 400-450 crore
We have seen the debt and enterprise value of Bhushan Steel
It hardly left anything in the table, but its capacity and margins enticed global giants, with the Tatas ultimately acquiring the company
We are already seeing how crazy Essar steel scenario is becoming.
All this developments signal the bullish undertone in the sector
Another important aspect about this company is that a capacity of this kind takes time to get commissioned; 1 mtpa can take a good four-odd
Also, there is the red tape on land acquisition etc
So, four-year adjusted inflation cost CAGR should be considered.
The market is looking for a positive outcome, which if happens at all, can
change the course for the company
The stock has, meanwhile, doubled in last few months with good volumes.
