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NIFTY 50: 22,023 (-2%)

NIFTY 10Y Benchmark G-Sec Index: 2,285 (0%)

Founder’s Recap

3 Things That Made Your Portfolio Bleed This Week??

In what the media and market newbies call a “crash”, this week saw a 2% decline in the Nifty, giving people a much-needed reality check about their portfolios.

As your holdings bleed, we take a trip back into the week to see what happened in the markets amidst the turbulence in the sea of red.

1. Valuation Scare

• With a multitude of factoids and numbers flowing in, Wednesday truly marked the day when investors got a valuation wake-up call, as the markets fell by more than 1% in a single day. This doesn’t seem like a big deal on a macro level, but a few more numbers might put things into perspective:

• In fact, upon analysing the top 750 stocks in the Nifty (which includes a mix of large, mid and small caps), a whopping 85% of them are down more than 20% from their 1-year highs (essentially, if you invested at the highest price of one of those stocks in the past year, you’d be in deep shit)
• With all 19 sectoral indices in the red this week, caution is strictly advised as every finance guru jumped at the opportunity to say that this is just the beginning - and they are probably not wrong.

2. Petrol Prices Slashed

• Speaking of sectoral indices, the Oil and Gas sector saw the worst fall, not just because of the overall market crash, but a more specific reason - the fuel price cut
• In an attempt to further appease the masses before the elections in April, the state-run oil companies decided to cut the price of petrol and diesel by Rs. 2 per litre
• Since this will impact the margins of the oil companies on the bourses, the Oil and Gas Index fell by 5% almost immediately, with stocks like Hindustan Petroleum, Indian Oil, BPCL, and Oil India being the top losers as markets close on Friday
• While this is good news for us, being the first cut in price after about 2 years, oil companies might see contracted profitability, with fund houses moving their “Buy” ratings to “Neutral” while the market looks at the numbers

3. Electoral Bond Fiasco Continues

• Speaking of elections, the Electoral Bonds (which we covered here) case finally materialised further as SBI launched a list with the names and donation amounts of the largest donor companies - and the country is furious

• With these 5 donors making up 40% of all donations to the BJP in the past 5 years, everyone with an internet connection has been trying to decipher the data dump from SBI, with more granularity set to be released about the number of bonds bought and a few more names
• Several listed entities like Reliance (with supposed links to Qwik Supply), Adani, Vedanta, Bharati Airtel, and Olectra Greentech have seen their shares consistently decline even after the market fall on Wednesday
• Investors are presumably getting spooked by the lack of transparency in these companies as they disguised these donations on their books, hiding facts from the shareholders for years, and with this news gaining further wind as it progresses, faith in the markets might get shakier

Bottom Line - While market falls are normal, this particular week so a culmination of factors resulting in a small bloodbath that could spill over into the coming weeks. Be careful and look out for precautionary exits and timely entries into stocks you’ve been tracking - or just let the experts like us handle this

Market Stories

Ganesh Benzoplast: Strategic Shifts to Profitability ?

Growing up in an Indian household, a nationwide parental fear that still resonates with us into our adulthood is this - “LPG cylinder phat gaya toh?” - and apparently, companies that deal with LPG have the same fear!

Considering almost 65% of India’s LPG needs are met by imports, the key ports in the nation must be equipped with safe storage terminals that ensure our parents don’t get an “I told you so” moment - and today’s company is going to be responsible for it.

Ganesh Benzoplast, a 40-year-old chemical company, has recently entered the LPG industry by partnering with giants in the space, using the Jawaharlal Nehru Port in Navi Mumbai as its base of operations.

This little-known company is one of the largest private players in the Liquid Storage Terminals (LST) industry (leasing out mechanisms to store special liquids like chemicals, petroleum products and edible oils), and has undertaken a silent shift in its business, with the potential to “blast” off from here!

What Is the Shift in Business?

Fun fact (not really): Ganesh Benzoplast started as a chemical company in 1986, and very quickly went on to become the largest producer of Sodium Benzoate and Benzoic Acid in India (these are the preservatives found in packaged food).

Cut to 2024, the company has achieved some semblance of normalcy, making this a good time to look at the choppiness the company experienced over the last 38 years:

Furthermore, after having established a renewed focus on the LST segment (EBITDA margins of the chemical business is around 10% while the LST business is 50%), the company is now entering an even more profitable space - the LPG storage and transportation industry!

But what’s so great about it anyway?

Why Did It Enter the LPG Business?

Fun fact (this actually is one): Out of the top 10 busiest LPG ports in the world, 5 are in India, and those 5 also have the longest wait times in the world to offload the LPG from ships - this is an issue, considering the nation’s dependence on LPG imports.

It doesn’t help that this extremely expensive and skilled industry has seen 3-4 government-backed players managing this entire load. Hence, there are two immediate needs - more ports to accept imports of LPG, and more terminals at those ports to facilitate storage and transport.

While the government is handling the former, the latter is where Ganesh Benzoplast has found itself a new growth driver, becoming the first mover and only private entity to have entered this space.

What does all this entail and what will it lead to?

In addition, Ganesh Benzoplast has also secured a 25-year land lease with the JNPT in Navi Mumbai (the largest port in terms of containerised cargo imports in the country), which is positioned well to take pressure off the nearest and most busy LPG ports - Mumbai and Kandla.

All in all, this new vertical within the LST business is a sure-shot growth driver in itself - but is the company doing anything else?

Other Growth Triggers

Furthermore, despite the unimpressive historical revenue of the company (10Y Revenue CAGR of 5%, with a 50-50 split between LST and chemicals), Ganesh Benzoplast has cleaned up its act nicely since the entry of Mr Pilani in FY12:

• From having almost Rs. 300 crore in debt, to less than Rs. 60 crore now (3x Debt/Equity to 0.03x now)
• From Rs. 1 crore in consolidated profits to registering Rs. 55 crore
• ROCE has gone from 9% to 21%

With the expectation of revenues and profits to 3x from here by FY27, this company is surely one to watch out for, with its past behind and its future ready to “blast” off before our eyes!

We discussed all this and more on the latest episode of Common Cents by Rupeeting so check it out below!

Life @ Rupeeting

Clean Energy Feature Week

With clean energy being all the hype, moneycontrol and tickertape reached out to us to get our view!

Check out the moneycontrol article here for more!

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