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Borosil fine dining – will stock boost shareholders wealth

Published : August 3, 2017

Borosil Fine Dining, Will Stock Boost Shareholders Wealth

Borosil Expansion will add-on to shareholder’s wealth

In 2016 Borosil was in news for two reasons. The company had bought back its share and subsequently reduced its equity by 6.96 lacs. Secondly, it acquired Hopewell Tableware in January 2016. On one hand, equity reduction suggests that management is quite an efficiency in running the business. While on the other, acquisition of a new business vertical is suggesting for the decade-to-decade continuation of business expansion since inception in 1962. Read the article to find out how the company’s historical expansion and its current initiatives have resulted in an addition to its share holders wealth and what are the future prospects.

Borosil in glass business since 1962 and is still expanding

Borosil Glass Works Ltd (BGWL) manufactures laboratory glass-ware and microwavable kitchen-ware in India since 1962. It collaborated with Corning Glass Works USA but the collaboration ended and Corning divested whole of its share to the Indian promoters in 1988. BGWL has two subsidiaries namely Gujarat Borosil, Ltd. (GBL), formerly known as Gujarat Window Glass Ltd. and Swapan Properties, Ltd. (SPL).

GBL is the first and only manufacturer of solar glass in India. It has an installed capacity of 150 ton per day. BGWL exports to Australia, Botswana, Tunisia, Greece, and Denmark. BGWL products is used in Microbiology, Biotechnology, Photo Printing, Process System, and Lighting.

History of expansion and modernization of Borosil Glass

  • 1963 – it started manufacturing Borosilicate tire neutral & heat resistance tubing & rods, scientific apparatus laboratory glassware etc.
  • 1991 – it expanded to manufacture blown and pressed lab-ware, consumer-ware and pharmaceutical tubing.
  • 1995 – it established a cold-top electric glass netting furnace. In this year itself, it started manufacturing heat resistant borosilicate opal tableware using an all-electric furnace.
  • It had a tripartite contract in 2000 with Jenaer Schmelztechnik Jodeit and Ilmenauer Glasmaschinenbau of Germany for the supply of technical know-how and equipment for modernization of furnace at Tamilnadu. In the same year, it has an agreement with Europe-based Bormioli Rocco, to sell their premium tableware glass collection in India. Borosil International Range, transparent, light glassware, that includes Bake and Serves, Cook and Serves, Carafes and Tea Sets were also introduced.
  • The company had acquired 100% holdings in Jaipur based Hopewell Tableware Pvt. Ltd for Rs. 27.03 crore in January 2016. It plans to invest Rs.10.89 crore in the company for its expansion. Hopewell manufacturers Opal Melamine & Bone China products. With this acquisition, the company expanded its presence in opal dinnerware business.

Reduction in equity through buyback positive for Borosil share

Borosil Glass has reduced its issued and subscribed share capital by 6.93 lacs. In December 2015, 30.06 lacs share were issued. It stands reduced to 23.10 lacs in March 2016. In January 2016 the company had announced for buyback of its 6.93 lacs share at a cost of Rs 2500 per share on the proportionate basis through the tender offer route. Due to this equity reduction, the total number of shareholders had also reduced to 5987 from 6160 during the same period. Generally, equity reduction results in rising share prices.

Hopewell acquisition an added advantage over competitor La Opela

Peers group comprises for Borosil are Asahi IndiaLa Opala RGPiramal GlassHind Nat Glass and Binani Ind and Sezal Glass. Borosil NPP (net profit percent) was 24 % while ROA (return on asset) was 7 % as on March 2016. Its competitor, Asahi India has NPP of 4 % and ROA of 7 % and La Opala has 24 % and 30 % respectively for the same period.

Net profit percent is the ratio of net profit to sales turnover. It says that how much profit is remaining after deducting all costs of production from sales. ROA is the return on asset and calculated as a ratio of net profit to the total asset. It gives an idea that how efficient management is at using its assets to generate earnings.

Thus, from the above peer’s comparison, it seems that Borosil had major competition with La Opala. Hopewell acquisition will certainly give Borosil added advantage over La Opala.

Hopewell to stream strong revenue to Borosil consumer-ware segment

Borosil revenue increased by 45.92 per cent to Rs. 8068 lacs in Q3FY16 as compared to same period in the previous fiscal year. Its net profit also boosted by 103.88 percent to Rs.1419 lacs in Q3FY16 as compared to same period in the previous financial year. Operating profit for the company, however, had grown marginally by 9 % to Rs. 266 lacs from the same quarter in previous FY 14-15. Considering revenue from the segment, the company earned 47.94 per cent from scientific ware and 51.54 per cent from consumer ware while remaining 0.52 per cent from others segments in 9MFY16 on yearly basis.

The addition of opal ceramic business is expected to boost consumer ware segment revenue to great extent. Hopewell had Larah range and Oriole range of product in the market. Larah is in opal glass ware while Oriole is in Melamine segment. The company is planning to add Larah premium and Larah porcelain segment to its product portfolio. With an acquisition of Hopewell, Borosil will end the monopoly of La Opela in this segment.

Borosil resistance at 9797 levels is very strong

Borosil share price gave a decent rally post-September 2016 after forming a good base around 4300 levels. The rally took the prices up and tested 8700 levels within a very short span of time and thereafter traded below it for almost 6 months. Again from April 2017 another set of rally began post forming a base around 6330 levels. This second set of the rally is likely to be complete either around 9797 levels or above it around 10380 levels. Please refer to Borosil weekly chart in the link.

Borosil support is at 4590 levels

Borosil declared a dividend of 250% for FY 15-16 on March 16 and at that time the stock was trading around 2700 levels. Since then it moved upside and hit a high of 4989 levels on May 18, 2016. It was then its life time high.

However, during the same period, a shooting star candlestick was formed on the weekly chart. It was then trading at 4200 levels on Bombay Stock Exchange. shooting star candlestick pattern is a bearish reversal pattern which means that prices will correct before the start of any new trend. The bearish signal from this pattern was of mild relevance. This resulted in Borosil share price downside move.

But at the same time, the price was trading above both twenty and seven-period simple moving averages. Also, on the daily chart, triangle pattern along with an evening star pattern was formed on 18 May 16. Evening star pattern gives a pause on the uptrend. This resulted in prices to continue 4355 levels.

Thus, 4590 levels are good support. Fresh buying to continue on every dip till 4590 levels. Stochastic is in the overbought zone on the daily chart and may support for some correction in near future. This will give good fresh entry levels, below 8597 levels.


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