Sunday, July 13, 2008

Repro India - Value Added Print Solutions

CMP - Rs 108

Sensex - 13469

My one and a half year old daughter liked the balance sheet. The numbers appeared to seem a lil boring for her but she identified with the animation characters that smiled back at her from the balance sheet :-). Considering the fact that she is one of the key objectives of my savings plan, it is natural for her to have a say in the matter. Well she whole heartedly recommends my decision on Repro India.

I like the company and the simplicity of its business model. Importantly if the management gets it right it has the potential to be a good multibagger.

Lot of us would have over the years unknowingly, experienced a Repro product. The company has been one of the largest designers and printers of balance sheet over the years. Tata Steel, Wipro, Vedanta, Hindustan Unilever, DLF etc

Repro is one of India’s largest integrated print solutions companies. The company has evolved over the years from catering to the domestic market to expanding its capabilities across the world.

Printing process outsourcing is one of the new evolving stories in the outsourcing business. India is emerging as a significant outsourcing option for companies and publishers across the world. Advantages of outsourcing to India beyond the cost is the availability of English speaking talent which is evolved in cutting edge graphic arts technology.

1) Domestic business
Out of a turnover of about 155 crores, nearly 80 crores came out of India. Customer segments that the company addresses.

a) Retails & Childrens Educational books - Educational books covering text books, nursery rhymes, colouring books etc catering to publishers like Orient Longman, Egmont Imagination, Encyclopedia Brittanica, Oxford press, Jeevandeep publishers etc.

b) IT books and Manuals- Repro handles the entire print based fulfilment for Microsoft operating system and other application products. So the next time you buy a Windows Xp or Vista pack, the print material that comes with is printed by Repro. It client base in this segment includes IBM, Sun Microsystem, HP, Compaq, Aptech, NIIT .etc

c) Catalogues & Magazines- The company prints magazines like PC quest, Gladrags, Seventeen, Cine Blitz, Business Barons, Femina Girl etc.

d) Lottery tickets - It is India’s largest solution provider in the area if lottery tickets servicing customers like Playwin Lotto etc.

e) Corporate balance sheets – As discussed before servicing clients like Tata Steel, Wipro, Vedanta, Hindustan Unilever, DLF etc

f) Stationary Products - Makes customised stationary products for corporates.

2) International business
This is where the real traction is coming thru. The company has over the last few years expanded the international business. It has customers base across Africa, USA & UK.
Surprisingly Africa constitutes a lions share of the international business.

The company in the international segment works closely with educational publishers like Mcgraw Hill, Longman, Pearson , Oxford University Press, Heinemann etc. It also works with mass market publishers like Mordern publishing, Igloo, Arctus, Beaver Books etc.

It works closely with the largest publishers in South Africa, Nigeria, Ghana etc.

The company is expanding its relationship with these publishers across geographies. The company is in the process of setting up a facility in a SEZ to cater to the international markets.

The company increased sales from 131 crores in FY 07 to 155 crore in FY 08 largely driven by increase in export revenues. PAT grew from 9.4 crores to 15.5 crores. EPS grew from Rs 9 to Rs 14.24.

Cash EPS went up from Rs 14.35 to Rs 20.08. RONW improved from 11% to 16%.

The stock is currently trading at 108 available at a PE discounting at about 7.5 times last years earning. I would recommend a buy on the stock.

Ps: One of the interesting things about the company is the list of non executive directors
Mr J J Irani - CEO of Tata Steel
Mr Alyque Padamsee – Lintas
Mr U R Bhatt - Ex Head of Jardine Fleming
Mr Sanjay Asher - Partner Crawford & Bailey
P Krishnmurthy - Ex Vice Chairman of J M Morgan Stanley

Well a pretty strong list of corporate chieftains who have agreed to be on the board of a 150 crore company. If not for anything else, I would atleast be assured that the numbers printed on the balance sheet are accurate.

Disclaimer - I m not recommending buying the stock based on my statements. Kindly do u r own analysis to reach that conclusion.


Mahendra Naik said...

Interesting stock. Growth does seem a little slow for a small cap. You're right about the Board of directors, lends a credibility to the figures.

Anonymous said...


Its a nice niche business that you have identified. From what I see on the balance sheet, they have lot of debt on the books. Your views on that.


Ninad Kunder said...

Hi Mahendra

Its a mature business in which the company is opening up the entire outsourcing model. Growth rates wont be rocketing however would be stable.

The key is the over 50% rise in bottomline and the the fact that the stock is available at a 8 PE.



Ninad Kunder said...

Hi Pankaj

You are right about the debt on the balance sheet. However if u read thru the annual report, the company has reduced debt from about 43 crores to 41 crores. And debt equity ratio is about 0.4:1.

More importantly they have constantly repaid back long term loans ( Current year repaid about 4.5 cores). The debt on the books is largely working capital loans and buyers credit.

Though it made a profit of 15 crores, operations generated about 21 crores of cash which went into repaying loans and expanding capacity.


Anonymous said...

Hi Ninad,
I have a doubt over the debt:Equity Ratio of repro. From ICICI Direct I see that equity capital is 10.48 Crores while Debt is 41.41 crores.
You are saying debt:Equity is .4:1 only. Can you please through some light on to it?

Ninad Kunder said...

Hi Anon

You need to add in the 85 cores of reserves and surpluses to 10 crore equity capital.

The debt equity ratio is in the ratio of 41:96 crores. Debt equity retio of 0.42:1.

Trust this answers your query.