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Performance Boost

A long history backed by an oustanding recent record holds the company in good stead

In the initial years there was hardly any business that Balmer Lawrie (BLCL) did not delve into.

The company boasts that it is a “multi-activity, multi-technology, multi-location conglomerate, with global footprints”. And why not, as even today it has a presence in as many as eight different segments: industrial packaging, greases & lubricants, logistics services, travel & tours, logistics infrastructure, leather chemicals, refinery & oilfield services and tea.

In the packaging area, the company is the largest manufacturer of industrial containers in India. Though the company is the leader in this segment, it is not a high-growth area. The standout segment for BLCL is logistics services & logistics infrastructure. In the last fiscal this segment contributed the most to the profit.

Fundamental Performance
Over the past 5 years it has been able to log a phenomenal profit growth rate of 40.47 per cent, while top-line has grown at a more sedate 12 per cent. It is clear, that the cost-cutting measures are bearing fruit. Currently, BLCL has close to Rs 150 crore of cash on its books i.e. Rs 94 per share.

Though the company is fundamentally quite strong, it does lack focus in any particular segment.

Stock Performance
Till 2004 BLCL was a typical PSU stock, it did practically nothing. But in the next 5 years, it has enthralled investors with close to 38.14 per cent annualised return. It is a regular dividend paying company, with a payout ratio of 30 per cent.

Even now the stock is trading at a dividend yield of 4 per cent while its median yield over the past 5 years is very close to 2 per cent. Considering the current stock price of Rs 497.75, the stock is trvroading at 7.62 times its trailing earnings, i.e at a discount of 24 per cent to its 5-year median price/earnings (PE) multiple.

Based on the current price and its fundamental attributes, the stock is a value buy.

BLCL was founded by two Scotsmen, George S. Balmer and Alexander Lawrie in 1867. In1972, BLCL became government-owned as a subsidiary of IBP, but in 2001, IBP transferred its holding of 61.8 per cent to Balmer Lawrie Investments.

Back to Story: Profit from PSUs
Alse see: Balmer Lawrie & Co.
This article was previously published in October 2009 issue of Wealth Insight