Indag Rubber Ltd.

Indag Rubber Ltd Auto Tyres & Rubber Products

Market Cap.: ₹ 482.08 Cr.
Current Price: ₹ 183.65
Book Value: ₹ 64.53
Stock P/E: 17.48
Dividend Yield: 0.49%
Face Value: ₹ 2.00

Indag Rubber Ltd. Corporate Film

Business: Retreading of old tyres. In India this business is split almost equally between organized and unorganized players. Midas is another organized player having highest market share. Indag is second largest. In India there is still more scope of retreading as it is less compared to America and Europe. If new tyre is more accessible/cheaper then user will not opt for retreading though. Only reason for retreading is money saving. So drop in rubber price means bad sales by Indag. Retreading doesn’t give you exactly new tyre but new like tyre there is life cycle restriction. There are also tyres stability/accident concern.

Retreading-Wikipedia

In India unorganized sector retreading is more common. Why will someone will go at so much length and get it done from Indag rather than from a local vendor. Can buy new tyre instead and not wait for old types to come back after being retreaded.

The process is rarely used in cars tyres. Mostly in carrier vehicles like truck and also buses where speed is not a concern. Retreading practice overall may increase in India as it is very less compared to outside world.
In my understanding with respect to India market and people mentality it will be very slow or negligible rate of increase.

The company is virtually debt free and has also acquired more than 51% shares or voting rights in five companies – Samyama Jyothi Solar Energy, Poorvaj Solar Energy, SUN Solar KFP Bellari, BG SUN Solar Hiriyur and Arete Elena Energy.

Management also seems capable to me. The company started by collaboration with Bandag US by Khemka group. Management is owner operator which majority stake is attached to business.

If Government impose some rules which ensures retreading as it is beneficial for environment. Retreading reuses most of the raw material from the existing tyre. This will be beneficial.

Share cost: 1.2 times. In past couple of years growth is slow.
Price increase ability: Not much
Replicated business model- yes

Final Verdict: No

Disclaimer
I am very new to value investing and this is me taking random notes just for myself. Please don’t base any of your decision on these write-ups. That will be foolish.

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