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Paushak: Small Cap Investment



Paushak Limited is a part of the Gujarat based Alembic group of companies which is managed by Mr. Chirayu Amin. Paushak's business revolves around Phosgene which is an industrial reagent and building block in synthesis of pharmaceuticals. Phosgene is a poisonous gas and so licence to manufacture it cannot be procured easily.

The sales of the company have grown at a 5 year CAGR of roughly 14% from Rs. 28.31 Crores in 2009 to Rs. 54.51 Crores in 2014. The year on year growth 2013 vs 2014 stands at just 7.3% (50.80 Crores in 2014 vs 54.51 Crores in 2014). The net profit has increased at a CAGR of around 20% from Rs. 3.5 Crores in 2009 to Rs. 8.8 Crores in 2014. The year on year growth of Net profit stands at around 14% (7.7 Crores in 2013 vs 8.8 Crores in 2014). The company has been able to maintain OPM at 24% for 2014 while NPM stands at around 15%.

The company has a small equity of Rs. 3.21 Crores. The total reserves of the company is Rs. 42.47 Crores in 2014. The debt of the company stands at Rs. 1 Crore which is a very small figure compared to it's healthy amount of reserves. The company also has Rs. 13 Crores of investments. The EPS of the company has gone up from Rs. 10.94 in 2009 to Rs. 27.57 in 2014. (24.34 in 2013 vs 27.57 in 2014) which means at the market price of Rs. 140, the stock trades at a P/E of 5 with a dividend yield of 2.14%. The promoter holding in the company stands at 66.8%.

With good growth figures, healthy margins, low debt, a sound management (Alembic Group) and a regular and good dividend payout, Paushak is a good investment. The market cap of the company is just Rs. 45 Crores. The stock is listed only on the BSE and it is a low volume counter. This stock can turn out to be a good multibagger if the company is able to push growth and maintain it's margins. Being a low volume counter may hamper prospects of gains in this stock as it will be tough to attract interests of institutions. If the stock falls from current levels, it will only be a better opportunity to add more quantity in one's portfolio.
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