Nilkamal Limited

Recently bought some of this stock. This company has 3 key businesses, from the company website here,

• Material handling crates, containers and bins. One will find Nilkamal plastic crates in vegetable markets, dustbins in cities etc
  
• Plastic Moulded furniture - chairs, tables etc. This is where the company started from. At a lot of weddings in India, one will notice that plastic chairs are Nilkamal.
  
• @Home - Home Store retail chain.

The company was initially into moulded plastic items. About 2-3 years back, it started this furniture retail chain called @Home. I have been to a couple of its stores, and my perception is that is amongst the better ones in India. They have put some thought in how the store is laid out. That doesn't mean it will succeed - furniture retailing is a very difficult biz. But there is an option value.

The retail chain is making losses. The moulded plastic items business is very profitable, and the company has done very well over the past decade to become a market leader. On a consolidated basis, the company is trading in mid single-digit PEs. If one does a SOTP and values the plastic biz and @Home separately, then the plastic biz is trading at low single digit PE. It is a levered company - market cap of 130 crore, debt of around 300 crore. Levered companies benefit when interest rates go low - as is the situation today - due to lower interest expense. The potential appreciation in a leveraged company's stock is higher than in an unleveraged one (so are the losses). On an asset value basis, the stock can easily be a double.

Risk with this stock is - it is a small cap. If markets start falling, these stocks just do not find any buyers.

Disclosure: Own Nilkamal. Positions might change at any time.