SPISYS LTD
About Company
SPISYS LIMITED is engaged
in production and marketing of natural extracts.
Company claimed to have Super
Critical Fluid Extraction Technology that helps in natural high quality, pure
and concentrated spice extracts, active nutraceutical compounds and decaffeinated
teas. Company is in operations since April 1997, but top-line till last few
years was few crores only.
Company claimed to built
its core competencies in the following areas:
· A technologically
superior SCFE (CO2) extraction facility with a capacity to process 1000 MT per
annum of botanical materials and dry spices. The extraction facility has been
imported from Austria for solid - liquid extraction.
· In house development of
liquid — liquid extraction / fractionation on large scale.
· A research facility,
where over 20 extracts from herbs and spices have been developed.
Company listed on BSE in
Jun, 2015.
Below info from AR 2015
Demand for SCF Spice Extracts, Nutraceuticals and
Decaffeinated tea is increasing and the company is focusing on expanding it
direct customer base.
Company intends to focus on manufacturing and sales of:
1. Ginger Extract’s for
Nutraceutical applications as joint pains management.
2. Lutein Extract for the management
of Age Related Macular Degeneration.
3. Rosemary antioxidants for the
food industry in the management of food oxidation.
4. Chilly, Paprika, Black Pepper Extracts for food flavor
applications.
Company now looks
forward to directly participate in the Spice Extracts, Decaffeinated Tea and
Nutraceutical business which are valued at over US $ 500 Million, US $ 3
Billion and US $ 180 Billion and garner a reasonable market share in these
sectors
Below is the link to a presentation about the Company
Annual report of Company provides
the good understanding of Industry Structure and Developments.
Financials
Company earned 6.5 cr profit on a sale of 41 cr. in last 4 quarters Average Operating margins are 12%. Company earns high ROE of ~40%.
Company was making losses and seems to start making
profit from 2014 (was making losses in 2006 and no records available between
2006 & 2014).
Reserves are negative and reducing – (-) 2.5 cr as of
March 2015. TO BE UPDATED POST RESULTS ON 30-MAY-16
Loans are reducing – currently 5.77 cr., out of this approx
2.5 cr (ECB) is from M/s V Mane Fils S.A (OCB) and 2.5 cr from Yatish Trading
Company Pvt.
Below is from AR 2015
· The company has proposed to offer, issue and allot Equity shares to the
extent of External Commercial borrowing and accrued interest there on payable
M/s V Mane Fils S.A (OCB). Hence, the company has not provided any interest on
said loans.
At today’s
price, it will dilute the share holding by 8-9% - in case Mane accepts the offer. It may be noted that Mane is
in similar business (FLAVOURS, FRAGRANCES & INGREDIENTS).
Also they
have provided 45 lacs for share buy back from IDBI contigent liability. Note
share capital increased from 8.6 cr to 9.05 cr in 2005. It is possible Company
provided shares worth 45 lacs against loan write off, with provision to buy
back at cost. Stressed Assets Stabilization Fund (A govt undertaking handling
bad debt of IDBI) is holding 450,000 shares as per share holding pattern. If
this is the case, it is to the advantage of existing shre holders.
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Buyback of shares held by IDBI
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45,00,000
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45,00,000
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Positives
Company is growing at fast pace –
more than 40% for last 2 years. No insight provided in AR how they are able to
grow that fast. (TO BE CHECKED WITH MANAGEMENT)
They are able to reduce loan and may
be debt free / reserve positive in a year time.
It seems they do not need
much in term of capital investment. With Fixed assets of 2.5 crores, they are
able to do sale of 40 cr (TO BE UPDATED POST RESULTS ON
30-MAY-16)
Targeting to enter into Nutraceuticals
– as per management huge market in US (product derived from food sources with
extra health benefits in addition to the basic nutritional value found in foods).
Some positive commentary from AR
Replacing conventional
organic solvents (Hexane, EDC, MC and Acetone) with SCFE CO2 in extraction
procedures is a major advancement in regards to current Food Safety and
Regulatory requirements. Supercritical fluid extraction allows for clean, pure
and solvent free extracts. Other advantages of supercritical extraction include
high efficiency, faster extraction rates, higher concentration of compounds and
more selectivity.
Over
the years the company has developed several extracts utilizing the SCFE process
and achieved competitiveness in being able to compete with the existing
traditional solvent extract manufacturers by demonstrating the cost
effectiveness and superiority of SCFE products verses the harmful solvent
extracted products.
Over the years from
serving customers on a contractual basis your company now proposes to
directly market the products to the large flavor and fragrance business,
achieving direct higher sales revenues and profitability.
Negatives
The availability of raw materials
from various sources at the right time, quantity and price. Though Company has
established relationships with large suppliers, but this is still a big risk.
Fluctuation in Raw material
price will impact the profitability.
Single vendor concentration
risk - may be - no info is available?
Currency fluctuation risk as
majority of sale is export.
Only AR for 2015 is available - lack of info on management and Company past is a risk.
Usual risks associated with the micro/nano cap companies
Management
J Sobhanadri: An engineering
graduate in Engineering from Georgia Institute of Technology with over 30 years
of experience as the promoter / Managing Director of Spisys and former Managing
Director of Mane India Pvt Ltd a subsidiary of V Mane Fils SA (In Similar business). http://www.mane.com
Dr. Satya S. J was founder
member, who is currently, Director Nutrition - Global, Kerry Ingredients Inc., USA a subsidiary of Kerry Ingredients
Ireland (in Similar business) http://www.kerrygroup.com
Management seems to be
reasonable. They are not getting any salary. Independent directors of Company own
shares in excess of 1% and they are not charging any fee. Hope they are working for the interest of
company and taking care of minority shareholders interest as well.
There are enough details
in the AR – considering the microcap company.
Promoter had 48% share in
March, 15. In Jun, 15 – 42 % and in Sep, 16 – 32%. Why Sobhanadri
sold the shares – to be checked.
Nothing wrong with the
accounting policies.
Valuation
Company is selling for 32
cr with TTM PAT of 6.5 cr. Market is valuing the Company at the multiple of 5.
This seems to be reasonable, considering Nano-microcap company, not much
information available in public domain and associated risks with the business.
Additional information on Company future plan is required to make the investment decision.
Views are invited.
Disclosures
– Holding “itch” position to monitor the company. May decide to dump the
company at slightest indication of negatives about the company /
business. Please note that this is not a recommendation to buy or sell.
Please do your own check before investment. Investing in stock market may
result in loss of capital as it happened with me few times.
Update 17-Oct-19
Open my blog after sometime :-). Updating my previous posts.
This was my mistake and I exist this position after I realize business is worst than commodity.
