Shakti Met Dor

When I first looked at this company 3-4 years back, I couldn’t believe that selling doors could be a highly profitable and organised business.

Yes, SML is a Hyderabad based company which specializes in Special steel Doors & Windows. The company has quickly scaled up from about 7 Cr turnover in 2002 to 80 Cr in 2010. SML caters to diverse industries like Pharma, IT, Hotels, Construction sector, embassies etc. Do make a visit to their website and one will instantly feel the quality and difference the company has. Visit to their Gallery section, speaks highly about their association with leading architects and contractors like L&T etc. They have experience of handling large prestigious projects like – Hyderabad Airport, Reliance Petroleum, TCS IT Parks etc.

A look at the numbers and other ratios between years 2002 – 2008

  • Was growing rapidly @ 47% CAGR
  • Had excellent operating margins consistently > 25%
  • Has had an track record of excellent ROCE in the range of 40-50%+
  • The business doesn’t involves lot of investment in Fixed Assets, Inventory and debtors.
  • The company has mostly carried moderate debt.

To repeat the above growth the company had carried out an ambitious plan to triple it’s production capacity and introduce new products. The expansion was funded through internal accruals and debt. To scale up, the company also opened offices in every metro. Year 2009 & 2010 were tough years for the company as capital expenditures and opening of new buildings had slowed down…hence the nos of these years don’t look good. Yet the company was profitable in these two years.

If one looks at the last two quarterly numbers of the company, the company has done 23 Cr for Q3 & 34.33 Cr for Q4. The sales seem to be coming back and company seems all set to reap the benefits of the expanded capacities.

In last few months the promoters have increased their stake through an open offer @ 180.

As per a latest announcement on BSE, the company has intended to delist the shares from BSE. Currently the promoters are holding 56% share and would need to buy 44% of additional shares. It won’t be an easy task and if promoters are serious to de-list, lot of value-unlocking may take place.


9 thoughts on “Shakti Met Dor”

  1. Hey Ayush,
    An interesting case..i would differ on one point though..the delisting could be easier than u think. Do look at the 1%+ shareholders' list. They all seem to be 'friendly' parties, holding about 28%. Add 56% promoters' holding and it goes up to 84%. (Undisclosed friendly parties could be even more, we do not know)..They need to cross 90% to delist..

  2. Hey Neeraj,

    Yes, I have seen the public shareholding >1%.

    This is where the value creation can come into play. Look into the various delistings – cos have usually paid more than the fair price when they need to buy-out the remaining minority shares to cross 90% mark. A recet example could be delisting of HSBC Investdirect.

    Lets see how things take shape.


  3. that itself is the biggest risk. the price will be discovered by the friendly parties. the delisting could even happen at the floor price of 195 announced today.

  4. Guys, what do you think is the fair price of this company? Or what is the potential going ahead..if this de-listing doesn't happens?

    I think this company has much much higher fair value and has potential to trade even Rs 1000 down 2-3 years and I think this is the reason why the promoters are desperate to increase their holding.

    This has happened in several delisting cases…and we need to stand up and fight. As the promoters holding is 56% as of June 2010, delisting won't be a cakewalk.

  5. I am with Ayush on this. Feel that this is a very good company with lot of LT potential and that is precisely why the promoters want to delist…

    Dont hold the stock now but feel it can be a buy even at present levels (provided one is ready to wait and play )…

  6. u should be wary of cos like these. the promoters made their intent to delist to the co on the 9th of june & the board took it up on the 18th when it was made public. so from 9 the june onwards the insiders had a field day & when it was mad public they dumped. this is the first instance of delisting i have seen in which the price has fallen after the public announcement.

  7. Hi Ayush

    Can you comment on the results of the latest quarter. The sales have fallen qoq and since then the stock has made 2 down circuits. Seems like the promoters don't want the stock to rise too much and have deliberately declared bad results so that delisting price can be brought down. Before the results the stock had gone to 290+ levels.

Leave a Reply

Your email address will not be published. Required fields are marked *