T & I Global Ltd ..Multibagger

Company Name: T & I Global (BSE code: 522294) CMP -75

           

Industry:  Industrial Machinery - Tea

Investment Horizon: Long term

About the Company:

T & I GLOBAL LIMITED (TIGL) is a leading manufacturer and exporter of Tea Processing Machinery with the expertise to supply Customized processing equipment for CTC, Orthodox & Green Tea.

Two Manufacturing facilities in India

·       At Kolkata the capital city of West Bengal, and

·       At Coimbatore, the industrial city of Tamil Nadu.

Sales and service are facilitated through

·     Domestic offices - in Coimbatore, Kolkata, Coonor ( Nilgiris), Siliguri (North Bengal) and Tinsukia (Assam), and

·     Overseas offices - Colombo, Sri Lanka, Nairobi, Kenya, and Hanoi, Vietnam.

Technical team of over 50 experienced engineers is deployed through these offices to ensure prompt deliveries and commissioning.

R & D unit and Pilot Laboratory

·       Coimbatore  - consistently involved in product development and innovation.

Market Share: (Global Market Share 40%)

TIGL is a Government recognized export house, with a global market share in excess of 40%,

Its domestic market includes blue-chip companies like Tata Tea, Williamson Magor, Harrisons Malayalam Limited, Warren Tea, KDHP, Parry Agro and Goodricke Tea, etc.

History:

The company is a family-run business and was established in 1949 by the industrious Bagaria family hailing from Assam, India. Over the years, the group has launched many innovative products and value additions for the tea industry, as well as Customized Drying Solutions for the food and chemical industries

  

Products/Services:

·       Complete range of tea processing machinery

·       Supply Complete processing lines of all types of tea including following

Other pioneering products from TIG include :

·     KAIZEN CTC Tea Processor

·     MATRIX Automatic Continuous Fermenting Machines

·     EVEREST – Vibratory Fluidized Bed Dryers

·     AXIS & Smart AXIS Automatic Milling & Chasing Machines

·     CONQUEST range of Dryers

·     ROLLOMAX Orthodox & Green Tea Rolling Tables

Consulting Services:

IGL also provides Turnkey Solutions for tea manufacture, including:

·        Design, planning & layout consultancy for new and existing factories

·        Arrangement for steam, electrical, pneumatic, structural and civil works support through channel partners

·        Up gradation of machinery, reconditioning & factory expansions

·        TIGL supports its customers through a comprehensive program of after sales service, AMCs, on-site support, spares parts supply and Hello visits.

Clientele:

Industry:

·       India is the second largest tea producer in the world

·       Out of total production of 1300 mn kg of tea,

o   Domestic market consumption is 1000 mn kg

o   Export are at 300 mn kg – Top buyer is Russia

·       While CTC accounts for 91% of production and orthodox and green tea accounts for balance. Majority of production is in north  - Assam, West Bengal where approx 500 hectares (85%) of tea cultivated land is located

New Location – Margin Play:

Let us discuss on the new entry of some of the Indian players for margin improvement on the products

Tea companies in India are struggling with lower yields and unfavorable cost leading to dip on profitability, shifting their operations to Africa for more cost effective. Let us see how it happens

• Recently after a series of negotiations Assam government has increased the wage rate for workers at Rs. 30/day (total payout of Rs. 350/day), which increased the production cost to 170-180/kg but the output prices remained same.
• Average Employee benefit expense stood at 35-45% across the industry in the production cost.

                                                               Mechanisation

Tea Companies felt that they can reduce the production cost by 40% if they opt to Mechanisation

The Average Auction/sale price in Assam is around Rs. 170/kg, so if you observe the operating margins are very very low. Let us look some numbers for African region

Particulars	India	Africa
Cost of Production	Rs. 160/kg	Less than Rs. 100/kg
Auction Price	Rs. 150-170/kg	Rs. 160/kg

So from the above, if you observe the margins in Africa are pretty high compared to India. Hence many Indian tea estates/ big players like Mcleod Dhunseri, Jayshree tea industries etc are selling their Tea estates in India and acquiring tea estates in Africa. Kenya is the largest producer in Africa

Productivity in Africa: In Malawi the productivity stands at 5-6 kg compared to India where it is 2.5/kg. People cost is 350/day which is triple than in Africa. Going forward if india witnesses for increased pressure of production cost, organized tea players undoubtedly shift their estates to Africa to be cost efficient

Note: So what is it for T&I Global, out of Company’s total revenues 85% are exports. Company is having office at Kenya where all the African operations are carried out. Since conversion to mechanization generates huge scope for Tea processing machines

 Pros:

• The Company has a good past record and operating under Bhagaria group and company is having a tea

• Promoter holding is good at 53% for the year ended March 2018

• DIIs/HNIs are holding at 9% for the year ended March 2018

• Company is having low equity base of Rs. 5 Crs of Rs. 10 face value

• It is trading at a low P/E ratio of 4

• Operating at a good margin of 15% in the recent quarters whereas Competitors like Vikram India Ltd (Unlisted Space) are at less than 10%

Cons:

• Contingent Liabilities stood at Rs. 20 Cr which is a bank guarantee which is been maintained over the period of time for export sales

• Competition in the segment makes tougher for sustainable pricing power

• Government Regulations are stringent

• Low float in the market and liquidity issues

• Related party transactions of Rs. 55 Crs to T&I Projects limited made during the year

Financial Highlights:

• Revenues are grown at 16% for the past three years

• Profit after tax is grown at 43% over the last three years

• Debt for the company is Rs. 14.5 Cr out of which Rs. 12.8 Crs are unsecured loans. Company is trying to reduce the debt over the period

• It is trading at a low P/E of 4.1

• The Company has dividend payout ratio of 8% and it is paying dividend consistently over the time

• It is having ROCE of 14% which is a good sign
• Book value of the company is Rs. 75

Narration	Mar-15	Mar-16	Mar-17	Mar-18
Sales	73.04	101.25	137.89	113.57
Expenses	70.97	98.46	131.11	106.58
Operating Profit	2.07	2.79	6.78	6.99
Net profit	0.92	1.21	2.12	4.07
EPS	1.82	2.39	4.18	8.03
Price to earning	8.45	10.96	15.94	8.73
Price	15.34	26.17	66.67	70.14
OPM	2.83%	2.76%	4.92%	6.15%

Management:

Our Senior management team has an average of 25 years of domestic and international experience

• ·       Mr. O.P. Bagaria – Mechanical Engineer (IIT Kharagpur,) 40 years experience
• ·       Mr. Sajjan Bagaria - Over 50 years varied experience in all aspects of tea.
• ·       Mr. Vineet Bagaria – Managing Director, (BBM degree from John Carroll University USA).
• ·       Mr. Sangeet Bagaria - Director Head of operations
• ·       Mr. Manish Kumar Newar - Director
• ·       Mr. Harish Kumar Mittal - Director (IIM, Bangalore Alumni)
• ·       Mr. Debi Prasad Bagrodia - Director
• ·       Mr Sandeep Singh - Director – IIT Powai alumnus

Rating:

• Technical Rating: 70

• Fundamental Rating: 76

• Overall rating: 73

Horizon: 3-5 years

Note: Some of the information mentioned here is obtained through company website, annual reports and BSE official website