A NBFC you would have never heard about

In past we had come across one company named Dhanvarsha Finvest back in 2018 when the stock was trading around 60-70 Rs (Before Split/bonus) or around 12 Rs (Ex Split/Bonus) and since then the stock hit 52 Week high of 188 Rs thereby delivering almost 1400%+ returns before falling to current levels.

Despite quite intriguing financials as well as equipped with meaningful information about the company from a credible source, an employee of the company, we did not consider Dhanvarsha Finvest for presenting on darkhorsestocks due to insufficient information about its business model as well as the company. However, this time we are presenting the company today purely based on its financials rather than focussing on the company information. Very little information is available about the company presented today.

Therefore users need to understand the risk while investing in this type of companies as well as that, this type of companies are not meant for investing rather they are for exploring/educational purpose only. Despite amazing financials and high book value of the company, it may so happen that over a period company may fail to deliver any meaningful return for the shareholders thereby leaving Kiran Vyapar as dead investment.

KIRAN VYAPAR COMPANY

Market Price at the time of Publishing this report-: 120 Rs

We are expecting that the market volatility would continue in the near future as a result we advice users to not jump into buying the stock. That is why instead of providing with a hard coded value of the stock we are providing a range of the current price.

Kiran Vyapar Limited is a Private Limited Company that was founded in 1995. In 2012, the company was turned to a public limited company.

The Company is a Reserve Bank of India-registered Non-Banking Financial (Non-Deposit Accepting or Holding) Company. Investments, trading and dealing in shares and securities, mutual funds, financing, and carrying on business in line with the regulatory framework prescribed by the laws of land are all part of the Company’s operation.

LNB GROUP

LNB Group is a significant diversified corporate group in India. Mr. Ramcoowar and Mr. Mugneeram Bangur created the LNB Group in 1918. For over 50 years, starting in 1930, the LNB Group was routinely listed among the top five corporate houses in India.

Textiles, Corporate, Farming, Agriculture Supply Chain Management Solutions, Renewable Energy, Tea, Health & Wellness, Financial Services, and Private Equity are some of the industries in which LNB Group has an interest today.

‘The Andhra Pradesh Paper Mills Ltd.’ was one of India’s top pulp and paper production companies till 2011. APPM, founded in 1964, employed over 2500 employees and specialised in the production of copier, writing, and printing papers.

In 2011, APPM was sold to International Paper, USA, the world’s largest pulp and paper company, for around USD 300 million. It is now one of India’s largest integrated pulp and paper manufacturers, with a yearly revenue of more than USD 250 million.

The group’s focus in all of its companies has been on being environmentally friendly over the years. Under the leadership of its Chairman, the Group has started and fostered a highly successful agricultural forestry initiative since the 1980s. Almost 900 million saplings were planted in an area encompassing more than 115,000 hectares as part of this programme, resulting in over 5 million man-hours of employment for the local population. In the same vein, its Chairman began a one-of-a-kind land-based waste water treatment project, the first of its type.

Financials

As said earlier since very less information is available about the company in public domain lets focus on what numbers have to say.

Investment in Venture Capital Funds stands at 218 Crores.

For the year Ended March 2021

Consolidated Financials for Dec 2021 – Q3FY 22

• Net Sales at Rs 47.88 crore in December 2021 up 52.47% from Rs. 31.40 crore in December 2020.
• Quarterly Net Profit at Rs. 26.66 crore in December 2021 up 69.84% from Rs. 15.70 crore in December 2020.
• EBITDA stands at Rs. 36.20 crore in December 2021 up 81.27% from Rs. 19.97 crore in December 2020.
• Kiran Vyapar EPS has increased to Rs. 9.90 in December 2021 from Rs. 5.88 in December 2020.

Roce can be very small in companies with large investments on balance sheet. One of the reason is that these investments are carried on at historical cost or even when they are carried at Fair value , the FV of those investments do not actually reflect the Market Value or the Realisable value of those investments. As a result unrealised gain or loss do not hit the profit & loss statement thereby the Net Profit is not affected. Thus as a result income statements figures do not represent any of the unrealised gains. 

Thereby when taking the ratio of of EBITA to Capital Employed it would be always very small since a large portion of investments in present in capital employed in the other Equities/ reserves while EBITA does not contain any income component of those unrealised gains.

Conclusion

Considering large assets base and significant amount of investments company has Book value of close to 506 Rs calculated as March 21. Additionally company has around 218 crores investment in various *Venture Capital funds. Apart from that company has solid operating margins of 72% as of March 21. For over past 7 quarters company has constantly reported profits as well. Given sound financials of the company based on the information provided in this report we strongly believe going forward this company could perform very well given that the management is eager to take this company ahead. However it could also be the case that over the long term despite amazing fundamentals company may fail to deliver any meaningful returns since the management is in a very strong position to control the company as well as the liquidity of the shares traded on the exchange since management holds 75%* shares of the company.

Previously we had suggested Riddhi Siddhi Gluco, SteL Holdings , Haryana Capfin, Tata Investments, Bajaj Holdings where the book value of the assets were significantly higher then the market price of the company. In the long run over 3-4 years most of these companies had delivered solid returns. Despite that users need to be aware of the risk while investing in such companies which is as mentioned above.

*Venture Capital investments are Alternative Investments , valuation of which is very difficult and often carried on at very long intervals. Therefore there can be drastic change in the value of those investments but it would be very long time before they would be reflected on the balance sheet as or those investments would be realised.

*Management/Promoters hold 74.96% shares of the company.