Goldstone Infratech – A Multibagger in the making?
Background of Goldstone Infratech
Goldstone Infratech Limited (GIL) is a part of the highly diversified Goldstone Group, with major interests in Composite Insulators, Amorphous core-distribution transformers, Data Analysis and IT Consulting.
GIL is the largest manufacturer and supplier of Composite Insulators in India.
One good thing to look into is that since the last 10 years they have always been in the green. So it speaks of its track record. The company was paying dividend till 2012 after which it was stopped due to the pending open offer. Instead the money was ploughed back into the company. Existing customers are power transmission companies e.g. PGCIL
Company has recently tied up with BYD, a Chinese major, to assemble electric buses in India. More information on BYD can be found on https://en.wikipedia.org/wiki/BYD_Company and https://en.wikipedia.org/wiki/BYD_Auto – Warren buffet is also invested in this company – http://www.cnbc.com/id/26916857
It has already received an order for 6 buses from BEST. http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/93BCE9FD_3569_489B_9E4B_2A1106748D85_131642.pdf
Recently the company bagged an order for 25 buses for the Manali-Rohtang stretch http://www.bseindia.com/corporates/anndet_new.aspx?newsid=036de0e4-f263-4b10-ab52-2caa07425fb4
The combined order will increase the topline by about 60 crores.
Goldstone has concluded trials in New Delhi, Rajkot, Hyderabad and is expected to receive the orders for the same. http://telanganatoday.news/goldstone-to-make-electric-buses
Due to the tie up with BYD, the company holds an added advantage. For example :- Batteries form approximately 60% of the total cost of these Electric Buses. Ashok Leyland imported batteries from USA whereas Goldstone`s trial bus was fitted with one from none other than BYD itself who are the market leaders in Battery segment and originally belong to this segment only. Definitely this 60% cost component would be much lower for these people compared to USA batteries. Battery cost can well be said as raw material for the Electric Buses and BYD / Goldstone have a huge advantage on this count.
The company has an early mover advantage. With the receipt of orders from the government, they will have an upper hand in other state governments too. It is also worth mentioning that going forward they will have to undertake the maintenance of these buses which will help them increase margins and thus increase their bottom line.
Parent company / promoter is TRINITY INFRAVENTURES LIMITED promoted by Ponnapula Sanjeeva Parthasarathy, Indrani Prasad, Sunita Prasad, Mahita Prasad Caddell, Perubhotla Venkatrama Sanjivaraya Sarma are all US citizens and have multiple businesses in India. www.zaubacorp.com/company/TRINITY-INFRAVENTURES-LIMITED/U00063DL1992PLC140198
(This should increase the confidence of the people who are not willing to bet on the company because it’s based out of Hyderabad.)
A bit about the past
Goldstone Infra had two triggers to watch. First the open offer story and academics say the open offer price should be 43/- (Of course, now that the current price is way higher than that price, it just acts as an insurance). The second trigger was about the Electric buses story which is gathering momentum and it might go up significantly.
They also tried to sell the insulator business to a US based company Maclean Power Systems. http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/DBA04988_7B6B_401C_82E4_E4DABAA62294_080853.pdf valued at 108 crores .
In retrospect, it seems that promoters were negotiating with BYD Auto for Electric Bus business. In order to concentrate on the bigger business opportunity they wanted to sell the Insulator business on “lump sale” basis and which is also borne out of their filings on Stock Exchanges. http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/DBA04988_7B6B_401C_82E4_E4DABAA62294_080853.pdf
But this information was not known to Retail Shareholders and public domain until February 13, 2016.
http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/880178A9_8D1C_4650_8237_A4BCF33FD848_191657.pdf
Since the promoters and minority shareholders were at loggerheads in view of a dispute pending over “Open Offer” Price the resolution was defeated as it was a Special Resolution.
And now it is proving to be a boon to minority shareholders. Now even if the “Open Offer” were to be made @ Rs. 43, no shares would be tendered in view of market price ruling much higher and improved business prospects. And Promoters if they want to increase their holding from 51% will have to come out with much higher offer. Alternatively, BYD Auto may also pick up holding in the Company which again will be at a higher price.
Overall a very safe bet with early signs of multibagger opportunity.
Key Developments ( Updated 15-March-2017)
Below are some the key developments that have taken place or have come to my knowledge recently. These developments may or may not be related directly to the Goldstone Stock as such but important from a sector point of view. So sharing them below. I would suggest all the stakeholders to go through it and understand the potential of the overall sector. Goldstone seems to get an early mover advantage. Price has already shown the true potential. Inspite being in T group the stock has show good upmove which shows that the strength is real and not speculative in nature.
Ministers to brainstorm policy for an all-electric vehicle future
Gadkari’s clean car plan: Electricity-run vehicles to replace commercial cars
http://indiatoday.intoday.in/story/nitin-gadkari-electric-vehicles-commercial-vehicles/1/875053.html
Soon, No Permits Will Be Required for Electric Commercial Vehicles
http://trak.in/tags/business/2017/03/01/electric-commercial-vehicles-no-permit
Disclosure: I personally hold the stock so my views may be biased.
Disclaimer: I, am not registered under SEBI (Research Analysts) Regulations, 2014.
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