Gujarat Reclaimed Rubber Products (GRRPL)

Rubber recycling looks like a good business – as it is both profitable and eco-friendly. Given the rising prices and supply limitation of natural rubber, usage of reclaimed rubber is more economical (costs Rs 40/Kg) and bound to increase. Add to it the opportunity to expand this business. There was an article which highlights the opportunity for this sector – thanks to addition of almost 33 million vehicles in last 3 years in India.

GRRPL has established a nice for itself and has become the largest reclaim rubber manufacturer in Asia. GRRPL is one of the most organised and technologically advanced company in this sector. The company has been manufacturing one of the widest range of reclaimed rubber with highest quality parameters and exporting almost 60% of its production. GRRPL has the technical expertise to offer machinery and technical know how to manufacture reclaimed rubber.

Lets look at their track record:

  • Grown sales from 15.5 Cr in 2001 to 130 Cr in 2009. i.e.. at CAGR of 30%
  • Grown Net Profit from 0.68 Cr in 2002 to 13.54 Cr in 2009. i.e.. at CAGR of more than 50%
  • Has been a regular dividend paying company. Has been maintaining a dividend pay-out ratio of close to 18-20%
  • High tax paying company.
  • First to implement customised SAP in the industry.

Company has had good profitability and other ratios:

  • Co has maintained high ROCE – almost 40%.
  • Co enjoys healthy operating margins of 18-22%.
  • Co has good control over inventory, debtors and debts.
  • Cash Flows are positive.
  • Company had a Book Value of about 320 as on 2009. It should be close to 400+ as on 31.3.2010


Promoters seem to be honest, educated and highly capable people who have a strong value system and are there to create value in long run.


The company has a tiny equity of just 1.33 Cr. Till 3 months back, the stock was traded in “Z” group and in lot of 50 hence many investors didn’t had access to buy the stock even though they liked this company. Now the stock is in B group.

At CMP of close to 875, the company trades at 8 times FY2010E earnings and 4 times EBITDA margins.

It would be tough to find quality companies at less than 10 times PE with following advantages:

  • Leadership position in their business segment
  • Consistent high ROCE of 30%+
  • Consistent good dividend pay-outs
  • Consistent growth in past years with CAGR of 30%+

The company is in process of expanding its capacity and should create new records in terms of turnover, profitability and market-share. One may do well by accumulating the stock on declines with 2-3 yr perspective.

Company Website | Snapshot of Financials and Projections