Indian Equities: Tirupati Starch and Chemicals
Maize Starch finds applications in basic industries such as textiles, paints, detergents, paper, ceramics, pharmaceuticals etc. and Dextrose is used primarily in the food processing and pharmaceutical industries. It has two plants located at Indore that is currently running at full capacity.
The company reported steady performance in the last five years – reporting about 6cr in operating profits on revenues of about 50cr in the last financial year. It employed a moderate debt load to finance its operations.
Management haven’t discussed the business and its prospects in any intelligent manner to the company’s shareholders, which is a definite negative in their appraisal.
The business is exposed to increases in maize and raw starch price as well as power costs arising from power shortages.
The audit report contains several qualifications – a lot of which question the accuracy of the inventory records. This coincides with a large increase in inventory balances in the last financial year to about 9cr – perhaps a figure that investors ought to view with sceptical eyes. The report also gives a damning conclusion on the company’s internal audit system citing it as “weak”. This is unlikely to help investor confidence in relying on the financial statements.