ATS Research Desk

Fundamental Report
Balmer Lawrie & Co. Ltd.
Industry Market Price Recommendation Target Time Horizon
Diversified 176.75 HOLD 213.53 12 Months

Company Profile

Founded by two Scotsmen, Stephen George Balmer and Alexander Lawrie, in Kolkata, Balmer Lawrie &
Co. Ltd. started its corporate journey as a Partnership Firm is 1867. Traversing the 152 years gone by,
today Balmer Lawrie is a Mini-Ratna - I Public Sector Enterprise under the Ministry of Petroleum and
Natural Gas, Govt. of India, with a turnover of Rs. 1800 crores and a profit of Rs. 185 crores. Balmer
Lawrie comprises of six strategic business units across Industrial Packaging, Greases & Lubricants,
Leather Chemicals, Travel & Vacations, Logistics and Refinery & Oil Field Services, with their offices
spread across the country and abroad. Balmer Lawrie has grown steadily in the last 152 years and has
become the market leader in Steel Barrels, Industrial Greases & Specialty Lubricants, Corporate Travel
and Logistics Services. It has very well responded to the demands of an ever changing environment and
has taken full advantage of every opportunity to innovate. Balmer Lawrie also capitalized on growth
inorganically through various JVs over the period of time.

Investment Summary

CMP (Rs) 176.75  Commodity headwinds in the lubricant business

52 Week H/L 233/160 have eroded segment margins sharply in FY19.
Market Cap (Cr) 2,015  Fresh Capex infusion in SBUs has led to delayed
EPS 14.46 realization in the bottom line.
Book Value 132.43  Steady growth in PAT margins from 4.8% in FY15 to
Promoter Holding (%) 0 9.6% in FY19 indicates increased profitability.
InstitutionalHolding (%) 5.73  Improved liquidity ratios are a positive sign.
Non-Institutional Holding (%) 94.27  Stock maintains a healthy dividend payout policy of
50% on Net Income.
Financial Summary
Particulars(Rs. Cr) 14-Mar 15-Mar 16-Mar 17-Mar 18-Mar
Total Assets 1,880 1,911 1,813 2,087 2,238
Total Revenue 3,120 3,254 1,591 1,702 1,722
PAT 156 152 164 155 165
Profit Margins (%) 4.8 4.67 10.37 9.11 9.58
EPS( Rs) 12.87 12.30 14.39 13.58 14.46

Outlook and Valuation

Logistics business to continue to remain a safety moat of profitability with major expansion capex of 400
crores, over the next 2 years. Balmer Lawrie in FY19 set up 3 cold chain facilities in Hyderabad, Delhi
NCR and Mumbai and a multimodal logistics park at Vishakhapatnam Port. The project is yet to turn cash
flow positive. With various policy initiatives for boosting agriculture & the rural economy, considerable
upside potential in cold storage usage and eventual passage of GST, we believe this to be a logical move
which would help augment growth for Balmer Lawrie.
The mobilization of ample cash reserves towards expansion is expected to further improve ROE and
bolster margins. Increasing contributions have been seen from industrial packaging and lubricants
businesses on the back of subdued commodity prices. The industrial packaging and greases & lubricants
businesses have witnessed expansion in margins in spite of a flat growth in sales due to fluctuating steel
and crude oil prices. Balmer Lawrie is also looking to widen its retail presence in automobile lubricants
with its ‘Balmerol’ brand. Other niche businesses too are expected to steadily expand, Travel and
vacations segment is expected to continue to do well with stable demand from government & PSUs for
its ticketing business and a push to grow its value added package tours segment. Leather, chemicals and
refinery & oilfield services division have witnessed a barrage of headwinds which have eventually
trimmed the bottom line performance.

Balmer Lawrie is facing headwinds with increasing competitive & pricing pressure, especially in industrial
packaging & logistics. Government’s directives to PSU oil companies to source drums from the MSME
sector and ongoing sluggishness in economic activity in Indian & global economies have led to a flattish
growth up to Q3FY19. Balmer Lawrie has hence shifted its focus on expansion to cold chain facilities and
strengthening its retail presence in lubricants. This is expected to help build some momentum and
accelerate growth, with the planned expansion to show results from FY18E onwards. Revenues have
fallen by 35 – 40% due to the new Indian Accounting Standards treatment being applicable as the
company would have to account for only commission income & not sales in its ticketing business. This
has had no effect on its bottom-line, as it’s merely a change in accounting treatment.

Company Profile:
BL is a diversified conglomerate with a rich history spread over one and a half centuries of its existence.
This Mini-Ratna I company has a significant presence in industrial packaging, logistics, travel & vacations,
greases & lubricants, leather chemicals and refinery & oilfield services. BL was the erstwhile subsidiary
of IBP Company Ltd which was nationalized in the 1970s and subsequently merged with Indian Oil
Corporation Ltd. The central government effectively holds ~ 36.9% of BL through Balmer Lawrie
Investments. BL operates in a SBU structure with every SBU headed by an independent CEO. It is the
largest manufacturer and the market leader in the 200 liter capacity steel drums market with ~ 35.0%
market share and over 6 manufacturing facilities in India. It also holds leadership position in the Indian
greases market and is looking to step up its retail presence in lubricant oils with its Balmerol brand. Its
logistics division, the profit driver of the company, has 3 CFS in Nhava Sheva, Chennai & Kolkata and
offers a wide range of logistic solutions for air, road & ocean freight. It is looking to ramp up this division
with significant capex plans over the next 2 years. It is also one of the oldest IATA accredited travel
agencies in the country and made a foray in package tours in FY14 through its acquisition of Vacations
Exotica. It is a niche player in the manufacture of specialty chemicals for the leather industry with its
Balmol brand and offers certain oil field & refinery services as well. GL has taken the JV route to explore
& exploit several opportunities across different product & geographical segments.

Sectors that the Company is engaged in (industrial activity code-wise):

• Industrial Packaging

• Greases & Lubricants

• Travel & Vacations

• Logistics
• Leather Chemicals

• Refinery & Oil Field Services

Key products/services that the Company manufactures/provides

I. Greases & Lubricating Oils.

II. Industrial Packaging (Steel Drums)

III. Logistics Infrastructure & Services

IV. Travel & Vacations

Business activities contributing 10% or more of the total turnover of the company are given below:-

Sl. Name and Description of main % to total turnover of

No. products / services the company

1 Industrial Packaging (Steel Drums) 32.95 %

2 Greases & Lubricating Oils 22.87 %

3 Logistics Infrastructure & Services 29.63 %

4 Travel, Vacation and Others 14.55%

% of Sales contributed by
product/service

14%
33%
Industrial Packaging (Steel Drums)
30%
Greases & Lubricating Oils
23% Logistics Infrastructure & Services
Travel, Vacation and Others
1. INDUSTRIAL PACKAGING

The Industrial Packaging SBU has shown consistent growth in volume, turnover, profitability and profits.
Despite the shrinking of almost 15% of the addressable market due to MSME/Government regulations,
the SBU has managed to increase its volumes over the last few years. Lubricants, Chemicals and Fruit
Pulp are the major segments contributing to approx. 80% of SBU sales, and commissioning of the
Vadodara plant is expected to provide a significant edge to the SBU for further growth.

The MS drum market is expected to grow at a rate of approx. 5% with a higher contribution from the
Western Region. The SBU is well placed to take advantage of this growth with its already existing plants
at new Mumbai and the upcoming plant at Gujarat, Vadodara. The SBU anticipates a significant growth
in the coming years with the biggest drivers being Chemicals and Agrochemicals, Transformer Oils and
Additives segments. The SBU have plans to aggressively expand its existing exports.

Large number of unorganized players with relatively low overheads, increasing presence of cheaper
substitute products, low entry barriers etc. continue to pose a severe challenge for the SBU. The rising
trends of steel prices have put the entire industry at risk, with customers seeking cheaper alternatives
like HDPE drums.

2. GREASES & LUBRICANTS

The business of SBU Grease and lubricants may be divided into Contract Manufacturing and Processing,
Direct Sales and Channel Sales. The SBU continues to remain strong in this segment despite low margins
in order to improve its capacity utilization. However, the volumes have dropped significantly. Direct
Sales SBU have registered a marginal drop in sales volume in this segment. The negative growth is the
result of the SBU’s shift towards focus to non-tender businesses with better margins from volume-
driving tender businesses. The company continues to focus on

 Profitable and sustainable business.

 Greater focus on non-tender business.
 Shifting from conventional products to value added products for better margins in Steel, Mining,
Infrastructure, Fleet and Auto OEM Segment.
 Business development and adding new customers.
 Increased level of engagement with customers and end-users.

Channel Sales (Automotive and Industrial) - Due to increased thrust in this segment, the SBU achieved
high growth in sales volume during 2017-18. The company continues to focus on:

 Increasing distribution network in various states

 Launch of long life greases targeted to get higher volumes.
 Increase visibility – Retail display of new packaging at the dealer outlets
 Extensive mechanic contact programs

3. LEATHER CHEMICALS

US and Europe accounts for a major share of India’s leather export and with the recovery of the US
economy and strengthening of the European economy over the last year, the overall outlook of the
leather industry is encouraging. The SBU has launched a series of new fat liquors and Syntans which
have received good response from the market. A range of finishing chemicals is under development and
would be launched after extensive testing and in-house trials. New distributors have been appointed in
the domestic and overseas markets. The SBU is optimistic about their business scenario and with the
concerted market development activity, is hopeful of improved performance in the coming years.

4. LOGISTICS

Considering the potential in the cold chain logistics, the Company ventured into setting up Temperature
Controlled Warehouses (TCW). The second Temperature Controlled Warehouses at Rai, Haryana
commenced operation in FY18 after the first one at Hyderabad was commissioned in Q4FY17. The third
one at Patalganga is expected to be ready for its commercial operation by end of FY19. The Company is
also exploring the potential possibility of setting up of a cold storage in the Eastern part of India.
Through these facilities, the Company will not only provide reliable temperature controlled solutions but
also act as a product differentiator in the Temperature Controlled Warehouses domain.

Balmer Lawrie is coming up with its new Multi Modal Logistics Hub project at Vizag in partnership with
Visakhapatnam Port Trust (VPT). In this Multi Modal Logistics Hub, new facilities are created for handling
Exim and domestic cargo. The commercial operation is expected to start by next quarter. The Company
also manages the Integrated Check Post (ICP) operations at Jogbani in Bihar bordering Nepal. The ICP at
Raxaul has been operational from March 2018 which is also managed by Balmer Lawrie.

5. TRAVEL & VACATIONS

The Vacations vertical is laying its thrust on the retail sector through strategic focus and expansion of its
3 level distribution channels through Franchisee, Preferred Partner Agents and Travel Agents. The
vertical also works towards further strengthening its MICE capabilities for both domestic and outbound
sales to drive revenue growth. ‘Vacations Exotica’ is being repositioned with a new theme and tag line
of ‘Collect Stories’ and the website is strategically being revamped to give the brand a younger and new
age look to target wider customer segments. Effort are being made to drive sales growth by planning
and executing innovative marketing campaigning, attractive merchant, competitive pricing,
participations in various events and exhibitions, introduction to newer products as with current market
trends, revitalizing sales effort etc. The Vacations vertical is also building a strong supplier base for riding
cost effectiveness and is all geared up to meet future expectations in the coming years.

Contribution of different Strategic Business Units (SBUs) of Balmer Lawrie to the top-line
Contribution of different Strategic Business Units (SBUs) of Balmer Lawrie to the bottom-line

Segmental Revenue
Particulars 31 March 2018 31 March 2017

Total Segment Inter Segment Revenue from Total Segment Inter Segment Revenue from
Revenue Revenue external Revenue Revenue external
customers customers

Industrial Packaging 59,492 1,528 57,964 56,635 1,739 54,897

Logistics Infrastructure 19,244 187 19,057 19,887 100 19,787

Logistic Services 33,136 59 33,077 36,733 148 36,585

Travel & Vacations 15,893 162 15,731 16,304 83 16,221

Greases & Lubricants 40,374 140 40,234 44,897 112 44,785

Others 9,782 81 9,701 10,646 112 10,533

Total Segment Revenue 177,922 2,158 175,764 185,101 2,293 182,808

Segment Profit/(Loss) before Interest & Income Tax

Particulars 31 March 2018 31 March 2017

Industrial Packaging 5,842 5,944

Logistics Infrastructure 4,474 4,949

Logistic Services 8,483 8,946

Travel & Vacations 5,294 3,517

Greases & Lubricants 3,096 3,178

Others (3,360) (2,930)

Total Segment Profit/(Loss) before Interest & Income Tax 23,830 23,604
Management Profile
Sl Name Qualification Designation Date of Experience
No joining in BL (Years)

1 SHRI PRABAL BASU B.COM [HONS], ACA, CHAIRMAN & MANAGING DIRECTOR 04.04.1988 32
ACMA, ACS, EPGM (MIT)

2 SHRI D SOTHI SELVAM B.TECH., MBA, PG DIRECTOR [MANUFACTURING 02.01.2015 35

DIPLOMA IN JOURNALISM BUSINESSES]
& MASSCOMMUNICATION

3 SHRI KALYAN B.COM, ACMA, ACS DIRECTOR [SERVICE BUSINESSES] 02.11.2009 35

SWAMINATHAN

4 SHRI SHYAM SUNDAR B.Sc., CA, CMA DIRECTOR [FINANCE] & CHIEF 28.03.2016 33
KHUNTIA FINANCIAL OFFICER

5 SHRI A. RATNA SEKHAR B.A., MSW DIRECTOR [HUMAN RESOURCE & 27.01.2014 30
CORPORATE AFFAIRS]

6 SHRI MANOJ LAKHANPAL B.COM, CA EXECUTIVE DIRECTOR [NEW 15.04.1988 37

INITIATIVES& PROGRAMME
DELIVERY]

7 SHRI R M UTHAYARAJA BE CHIEF OPERATING OFFICER [LEATHER 31.12.2014 27

CHEMICALS]

8 SHRI ABHISHEK AGARWAL BE (CS), MS (SOFTWARE CHIEF INFORMATION OFFICER 09.02.2015 23

SYSTEMS)

9 SHRI MANAS KUMAR B.COM [HONS], CHIEF OPERATING OFFICER 16.03.2015 27

GANGULY [LOGISTICS]
CMA [Inter]

10 SHRI SREEJIT BANERJEE B.Sc., B.TECH CHIEF OPERATING OFFICER [GREASES 01.04.2016 25
& LUBRICANTS]

11 SHRI SANDIP DAS B.COM, ACA SENIOR VICE PRESIDENT [FINANCE] 24.05.1993 29

12 SHRI ROMON SEBASTIAN B.COM, PGDMM, HEAD [LOGISTICS INFRASTRUCTURE] 02.11.1998 19

LOUIS PGDMSM

13 SHRI SUNDAR SHERIGAR B.COM HEAD [INDUSTRIAL PACKAGING] 23.01.1984 34

14 MS KAVITA BHAVSAR B.COM [HONS], FCS, LL.B, COMPANY SECRETARY 08.12.2014 28

PGDFM
Business Structure

Shareholding Pattern

Shareholding Pattern

0% 20% 40% 60% 80% 100%

Balmer Lawrie Investments Insurance FII/FPI MF Other

 Consolidated Key Financial Ratios
Mar 18 Mar 17 Mar 16 Mar 15 Mar 14
Per Share Ratios
Cash EPS (Rs.) 16.82 15.85 65.98 69.59 67.00
PBT/Share (Rs.) 20.90 20.70 84.18 76.54 77.93
Net Profit/Share (Rs.) 14.46 13.58 57.55 53.38 54.63
Profitability Ratios
PBDIT Margin (%) 15.62 15.61 16.83 8.80 9.00
PBIT Margin (%) 14.06 14.09 15.33 7.39 7.87
PBT Margin (%) 13.81 13.83 15.04 6.69 7.10
Net Profit Margin (%) 9.55 9.07 10.28 4.66 4.98
Return on Networth/Equity (%) 11.34 11.37 13.24 14.58 15.86
Return on Capital Employed (%) 14.94 16.59 12.28 12.80 13.88
Return on Assets (%) 7.52 7.62 9.12 7.99 8.31
Asset Turnover Ratio (%) 78.54 84.06 88.67 171.28 166.79
Liquidity Ratios
Current Ratio (X) 2.20 2.16 2.38 1.82 1.75
Quick Ratio (X) 1.96 1.90 2.12 1.37 1.34
Inventory Turnover Ratio (X) 12.62 11.25 13.31 10.29 10.13
Dividend Payout Ratio (NP) (%) 48.29 36.82 31.27 43.33 27.55
Earnings Retention Ratio (%) 51.71 63.18 68.73 56.67 72.45
Coverage Ratios
Interest Coverage Ratios (%) 57.37 53.02 53.73 10.61 10.23
Interest Coverage Ratios (Post Tax) (%) 57.37 53.02 53.73 10.61 10.23
Valuation Ratios
Enterprise Value (Cr.) 2,039.07 2,155.49 1,168.83 1,398.77 662.48
EV/Net Operating Revenue (X) 1.18 1.26 0.73 0.43 0.21
EV/EBITDA (X) 7.57 8.09 4.35 4.87 2.35
MarketCap/Net Operating Revenue (X) 1.44 1.57 1.02 0.49 0.28
Price/BV (X) 1.70 1.97 1.32 1.54 0.88
Price/Net Operating Revenue 1.44 1.57 1.02 0.49 0.28

Per Share Ratios:

A consistent drop is seen due to declining net profit margins and a slowdown in sales. Cause of concern
as it indicates that the management has been unable to efficiently convert growth expansion to top and
bottom line performance.

Profitability Ratio:

It indicates the margin of bottom line with respect to sales. Operating Profit margins, PBDIT margins
have shown a steady growth from 9% in FY15 to 15.62 in FY19. Net Profit margins have more than
doubled from 4.98% in FY15 to 9.55% in FY19, and are still lower compared to industry average of 12%.
Liquidity Ratios:

Indicate the ease of clearing the short term dues and debts with liquid assets. The Liquidity Ratios have
increased consistently on an absolute basis but are still poor on a relative metric. Company must focus
on increasing higher liquidity to meet short term obligations to avoid risk during adverse market
conditions. Dividend payout has increased and stands at around 50% of the net income. Consistent and
regular payments of dividend are a positive.

SWOT Analysis segment wise

1. INDUSTRIAL PACKAGING

The Indian Packaging industry is estimated at Rs. 220,000 crore, which can be broadly segmented into
Industrial and Consumer Packaging consisting of Rigid and Flexible sub-segments. Rigid Industrial
Packaging can be further segmented based on size, type, material etc. The 210L Mild Steel (MS) Drum
industry, a part of the Rigid Industrial Packaging segment, has over 70 players across India. The industry
has higher capacity compared to the market demand leading to intense competition in the market
place.

Opportunities

 Introduction of new products thereby enhancing the product portfolio

 Accessing new markets through exports
 Tapping new customers in Gujarat through the upcoming plant at Vadodara

Threats

 Substitute products and alternate packaging, (IBCs, RIBCs, HDPE and Reconditioned drums)
 Competition from smaller players having location advantage

2. GREASES & LUBRICANTS

With an estimated finished lubricant market of 1750 million liters, India is the third largest lubricant
market after USA and China. Valued at USD 5 billion the lube market in India is expected to grow at a
CAGR of 2-4% over the next five years, with the Automotive segment accounting for 60-65% and the
Industrial segment accounting for 35 to 40% of the market. The competition in the market is intense
with global players and local manufacturers putting up aggressive strategies for increasing their share in
the market place. BP Castrol, Exxon Mobil, Shell, Gulf, Total and Petronas are some of the major global
players while the local manufacturers consist of IOCL, BPCL, HPCL, Tide Water, etc.

Opportunities

 Fast growing market

 With small market share, there is an excellent opportunity to grow
 Pan India operation with three manufacturing plants in Kolkata, Silvassa and Chennai
 Positive brand image in greases and specialties due to long presence in the domain
 Industry recognition in core sectors like Railways, Defense, Steel and Mining
 Excellent state-of-the-art R&D facility
Threats

 Supply security of base oils

 Aggressive pricing by competitors
 Higher marketing spends by competitors

3. LOGISTICS

There are opportunities for growth as India’s containerization level is still much lower than most of the
developed countries which offers a glimmer of hope to this industry. The traffic at non-major ports has
been increasing significantly year on year. With the implementation of GST and the increase in volume
of containers getting cleared through DPD, the handling of LCL consolidators’ cargo and venturing into
warehousing and its affiliated activities can be seen as opportunities in the long term.

Risks & Concerns

Direct Port Delivery is the major concern at this point of time for this vertical. Merger of shipping lines is
being witnessed in the industry. This may lead to hardening of freight and may push customers to go for
reduction in other logistics services costs. Modernization and expansion of ports may allow more
containers to be handled at the port itself reducing the scope of business for CFSs. Dwell time of the
containers at the CFS have been falling drastically over the years. This is due to the implementation of
technology driven policies by the Government, to get the clearance of the containers with minimum
documentation work. Opportunities for earnings are going down year after year and per TEU
profitability is continuously under pressure. However, the Government has taken a step of not issuing
fresh licenses for setting up CFSs at major ports such as JNPT, Chennai, Vizag and Mundra. Expansion of
the existing CFSs continues to be difficult as acquiring contiguous land with clear title in proximity is time
consuming and a long drawn process.

4. TRAVEL & VACATIONS

Opportunities and Threats

2017 was another record breaking year for the global tourism industry. Increase in disposable income
has energized the sector. The Vacations vertical continues to make efforts towards capturing the
growing consumer demand and increased corporate requirements. Vacations Exotica is amongst the
leading holiday brands in India and enjoys high level of customer satisfaction, which not only retains its
existing customers for repeat purchase but has also helped the brand grow by positive word of mouth.
Opportunities in this business lie in quick introduction to new and innovative products in line with the
rapidly changing consumer taste and preferences and leisure market trends and focus on the high
growth MICE business especially from Pharma, Cement, and BFSI, FMCG, Telecom and IT space. Sheer
market size and growth in the potential domestic travel market offer tremendous opportunities to BL.

Risks and Concerns

The Vacations vertical has predominantly been an offline, brick and mortar travel and holiday business
with the following concerns:

 Travel and holiday clients are becoming increasingly internet savvy and also have access to all
the required information on a real time basis. Online portals therefore may pose risk for offline
players in the long term and will continue to put pressure on margins.
  Highly fragmented market and stiff competitions are eroding margins.
 Lower brand equity as compared to dominant players in the business due to reduced sales
promotion spends.
 With aggressive market expansion and growth, acquiring and retaining high quality manpower
at a reasonable remuneration is becoming increasingly difficult.

Valuations and Projections

Top Line Projection and Estimates (FY19 & 20 are Estimates)

Top Line Revenue from Operations

2,500.00

2,000.00

1,500.00

1,000.00

500.00

0.00
FY16 FY17 FY18 FY19 FY20

Top Line Revenue from Operations

Top Line Projection and Estimates (FY19 &20are Estimates)

PAT from Operations

165

160

155

150

145

140

135

130

125
FY16 FY17 FY18 FY19 FY20

PAT from Operations

Balmer Lawrie & Co. Ltd. Valuation

SHARE PRICE ESTIMATES

Best Case Expected Case Worst Case

277.27

235.3 228.14 233.5

213.26 208.6
198.38
168.06 159.25

Gordon Growth DDM Relative EV Multiplier Technical

Metrics and Assumptions used

Balmer Lawrie Beta regressed against benchmark=0.85. Equity Risk Premium (According to Aswath
Damadoran’s research papers) =8.60%. Risk Free Rate (10 year Indian Bond) =7.50%. Required Rate
calculated through CAPM (Discount Rate) =14.8, Best Case= 14.8, Normal and Worse 15.45%. ROE
(Average 5 years) is taken as 15% as it is expected to be mean reverting from the current average of
14%. Dividend Retention Ratio (Avg 5 years) =65%. Payout ratio has been consistent at 35%.

Sustainable Growth Rate (ROE*DRR) =9.7500%, BL is expected to grow at this rate in the long term.

Assumption is that BL registers a consistent Depreciation recognition as the past. EV multiplier considers
an x10 of projected EBITDA numbers of 226.16cr for the worse case in FY20, 243.12 as the normal case,
260.08 as the Best case scenario. EBITDA numbers are influenced by the variable COGS as BL is
predominantly uses commodities like crude and steal as raw material. The projected EBITDA assumes
historical growth rates and fluctuations in COGS.

Dividend used in the GG DDM model uses D1 estimates of 14/- as the Historical values have been 18, 18,
and 20,7,10 during the last 5 years in relation and in line with PAT. The payout ratio has been 35%. D1 is
14/- in Best and normal Case scenario and 10/- in worst case scenario. Long term Support and
Resistance levels are used to assume worst and best case stock price.

Scenario analysis is the best estimator of stock range during different market conditions and Best Case
indicates the most favorable condition and Worst Case the least. Expected case is the product of
expected top and bottom line projections.
An average of the following models under an average scenario yields - GG DDM 246.30/-, Relative EV
Multiplier 219.05, Technical/- 175.23/-

The average of the three models = (246.30+219.05+175.23)/3=213.53

Target price = 213.53 Time Horizon 12 Months

Financials
Consolidated Profit & Loss Rs. Crores
account
Mar 18 Mar 17 Mar 16 Mar 15 Mar 14
INCOME
Revenue From Operations [Gross] 1,702.32 1,780.07 1,687.23 3,345.98 3,224.74
Less: Excise/Sevice Tax/Other Levies 33.04 121.72 121.05 145.22 152.15
Revenue From Operations [Net] 1,669.29 1,658.35 1,566.18 3,200.76 3,072.59
Other Operating Revenues 55.31 48.02 28.37 57.49 52.18
Total Operating Revenues 1,724.60 1,706.36 1,594.55 3,258.25 3,124.77
Other Income 50.64 55.64 63.04 64.57 70.70
Total Revenue 1,775.24 1,762.00 1,657.59 3,322.82 3,195.47
EXPENSES
Cost Of Materials Consumed 1,057.50 1,069.41 977.22 2,487.92 2,413.39
Purchase Of Stock-In Trade 7.12 11.49 3.58 7.69 0.37
Operating And Direct Expenses 14.94 14.37 0.00 14.84 18.33
Changes In Inventories Of FG,WIP And Stock-In
11.99 -0.38 -0.78 2.73 -18.15
Trade
Employee Benefit Expenses 198.20 199.53 199.19 229.18 224.42
Finance Costs 4.23 4.54 4.55 22.70 24.06
Depreciation And Amortisation Expenses 26.90 25.87 24.02 46.21 35.27
Other Expenses 216.06 201.15 209.89 293.42 275.69
Total Expenses 1,536.94 1,525.96 1,417.67 3,104.68 2,973.38
Profit/Loss Before Exceptional, Extraordinary
238.30 236.04 239.92 218.14 222.09
Items And Tax
Profit/Loss Before Tax 238.30 236.04 239.92 218.14 222.09
Total Tax Expenses 73.49 81.23 75.90 66.01 66.41
Profit/Loss After Tax And Before
164.81 154.81 164.02 152.13 155.69
Extraordinary Items
Profit/Loss From Continuing Operations 164.81 154.81 164.02 152.13 155.69
Profit/Loss For The Period 164.81 154.81 164.02 152.13 155.69
Consolidated Profit/Loss After MI And
165.22 154.81 164.02 152.13 155.69
Associates
OTHER ADDITIONAL INFORMATION
Basic EPS (Rs.) 14.00 14.00 14.00 53.00 55.00
Equity Share Dividend 79.80 57.00 51.30 65.93 42.91
Standalone Quarterly Results Rs. Crores
Dec'18 Sep '18 Jun '18 Mar '18 Dec '17
Net Sales/Income from operations 394.71 417.11 488.89 478.01 411.54
Total Income From Operations 394.71 417.11 488.89 478.01 411.54
EXPENDITURE
Consumption of Raw Materials 250.21 263.46 319.55 285.47 248.13
Increase/Decrease in Stocks -0.15 3.68 -3.42 -6.57 2.11
Employees Cost 50.71 53.73 56.12 45.85 45.52
Depreciation 6.73 6.58 6.63 7.56 6.10
Other Expenses 48.38 55.85 60.13 66.02 49.02
P/L before Other Inc. Int. Excpt. Items & Tax 38.83 33.81 49.88 77.77 55.71
Other Income 7.68 17.87 11.63 39.30 7.25
P/L Before Int., Excpt. Items & Tax 46.51 51.68 61.51 117.07 62.96
Interest 2.13 1.04 1.39 0.85 1.23
P/L Before Exceptional Items & Tax 44.38 50.64 60.12 116.22 61.73
P/L Before Tax 44.38 50.64 60.12 116.22 61.73
Tax 17.47 16.22 21.23 28.27 20.90
P/L After Tax from Ordinary Activities 26.91 34.42 38.89 87.95 40.83
Net Profit/(Loss) For the Period 26.91 34.42 38.89 87.95 40.83
Equity Share Capital 114.00 114.00 114.00 114.00 114.00
Basic EPS 2.36 3.02 3.41 7.71 3.58
Diluted EPS 2.36 3.02 3.41 7.71 3.58

Consolidated Balance Sheet Rs. Crores

Mar 18 Mar 17 Mar 16 Mar 15 Mar 14
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 114.00 114.00 28.50 28.50 28.50
Total Share Capital 114.00 114.00 28.50 28.50 28.50
Reserves and Surplus 1,341.72 1,247.36 1,210.24 1,014.79 952.82
Total Reserves and Surplus 1,341.72 1,247.36 1,210.24 1,014.79 952.82
Total Shareholders Funds 1,455.73 1,361.36 1,238.74 1,043.29 981.32
NON-CURRENT LIABILITIES
Long Term Borrowings 11.16 0.00 0.00 89.41 94.48
Deferred Tax Liabilities [Net] 63.15 32.02 30.76 0.12 0.00
Other Long Term Liabilities 0.57 0.26 0.27 43.17 35.21
Long Term Provisions 37.77 55.79 65.42 12.29 10.35
Total Non-Current Liabilities 112.65 88.07 96.45 144.99 140.03
CURRENT LIABILITIES
Short Term Borrowings 3.74 0.00 0.00 86.43 71.97
Trade Payables 323.19 307.12 224.29 303.54 346.51
Other Current Liabilities 241.35 253.46 230.77 203.19 211.83
Short Term Provisions 5.04 19.91 7.93 120.77 121.75
Total Current Liabilities 573.32 580.48 462.99 713.93 752.06
Total Capital And Liabilities 2,195.73 2,029.92 1,798.19 1,902.21 1,873.42
ASSETS
NON-CURRENT ASSETS
Tangible Assets 404.89 383.55 380.27 563.39 446.82
Capital Work-In-Progress 138.07 62.66 10.99 11.45 77.19
Fixed Assets 548.22 452.50 398.47 588.75 541.21
Non-Current Investments 292.60 271.34 247.25 0.15 0.15
Long Term Loans And Advances 4.28 4.85 5.07 16.66 17.84
Other Non-Current Assets 87.43 42.16 39.52 0.10 0.01
Total Non-Current Assets 932.54 777.75 697.21 605.66 559.84
CURRENT ASSETS
Inventories 136.63 151.70 119.76 316.53 308.58
Trade Receivables 269.78 281.61 230.33 469.03 525.75
Cash And Cash Equivalents 505.99 529.84 464.97 387.79 372.10
Other Current Assets 346.46 285.16 282.23 27.69 28.85
Total Current Assets 1,263.19 1,252.17 1,100.98 1,296.55 1,313.58
Total Assets 2,195.73 2,029.92 1,798.19 1,902.21 1,873.42
OTHER ADDITIONAL INFORMATION
Contingent Liabilities 62.77 60.22 18.08 270.84 408.06
NON-CURRENT INVESTMENTS
Non-Current Investments Unquoted Book 292.60 271.34 247.25 0.15 0.15
Value

Cash Flow Statement Rs. Crores

Mar 18 Mar 17 Mar 16 Mar 15
12 mths 12 mths 12 mths 12 mths
Net Profit/Loss Before Extraordinary Items And 261.12 254.11 240.21 210.23
Tax
Net CashFlow From Operating Activities 109.19 172.25 132.47 107.27
Net Cash Used In Investing Activities 16.13 -108.19 -53.71 -28.99
Net Cash Used From Financing Activities -105.79 -73.23 -66.35 -63.85
Net Inc/Dec In Cash And Cash Equivalents 19.53 -9.17 12.41 14.43
Cash And Cash Equivalents Begin of Year 31.06 40.23 27.82 346.86
Cash And Cash Equivalents End Of Year 50.59 31.06 40.23 361.29

Risks & Concerns

 Profitability of BL is significantly exposed to volatility in commodity prices, especially crude oil &
steel, which impact the industrial packaging and oil & lubricants divisions.

 With the government’s directives to PSU Oil companies for sourcing drums from the MSME
sector, there has been an absence of orders from the public sector. This along with the presence
of excess manufacturing capacity in the industry is leading to depressed pricing power &
subdued margins.

 There is competitive pressure for Balmerol with established brands such as Castrol, Veedol &
Gulf enjoying a lion’s share in the retail lubricants business.

 Competition for its Container Freight Station continues to be acute with over 31 registered
Container Freight Station in Jawaharlal Nehru Port and Chennai respectively.

 The travel business continue to face low entry barriers, threat from government & PSUs
withdrawing their support for Balmer Lawrie as one of their preferred travel agencies and
increasing efforts from airlines for direct sale of tickets. The company is looking to mitigating
this by consolidating its offerings in its online portals and focusing on value added segments of
leisure travel.
Outlook and Valuation
Balmer Lawrie is a FCF positive entity with good capital efficiency & a stable dividend yield which is
currently trading at 6.89X EV/EBITDA. While the ROE is expected to remain flat due to a cyclic nature of
commodity prices and as the company is going through an investment phase, we are optimistic about its
prospects from a long term stand point by virtue of its pre-eminent positions in key business verticals
and as its new investments start delivering results. Given its robust market share in key segments and
geographies, we recommend a HOLD on Balmer Lawrie with a 12 month horizon and a target price of Rs.
213.53/share where the stock would be valued at 9.36X its FY20EEBITDA.

Stock Performance Chart

1 Year Stock Performance of Balmer Lawrie & Co. Ltd. Vs Balmer Lawrie Investment Ltd and NIFTY 50

Balmer Lawrie & Co. Ltd. Balmer Lawrie Investment Ltd NIFTY 50

Mohammed Aiman Ahmed

Equity Research Analyst
Email: aimanahmed@adityatrading.com

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