Unlisted Shares

Rydak Syndicate Limited is involved in the manufacturing of black tea. The company has also commenced operations commercially as a Tea Tourism operation in Dooars Region in the name of Baradighi. The company has been around for over 100 years and is led by Mr. Rajvinder Singh, who has 25 years of experience in the tea industry.

Financials: In FY24, the company experienced a meager increase in revenue by Rs. 2 cr.. Additionally, the operating profit declined by 43.1% in FY24 compared to FY23. This drop was attributed to a 24.2% increase in cost of goods sold expenses and a 5.8% rise in employee benefit expenses. The combination of higher operating costs and almost stagnant revenue resulted in a significant 57.1% decrease in net profit for FY24 compared to FY23.

Ratio Analysis: With a Debt-to-Equity (D/E) ratio of 0.12, the company relies minimally on external debt. 

Expansion Plan: The company plans to set up four new irrigation units in the Dooars region, spanning approximately 300 hectares across three estates. This initiative aims to boost crop production, particularly during unusual weather conditions.

Investment Thesis:

• The company experienced a significant decline in net income in FY24 due to a loss of production and an increase in operating expenses.
• The company might appear undervalued with a P/E ratio (9.8x) below the industry median (10.9x) and is currently trading at Rs.495/share. 
• However, the intrinsic value through relative valuation came to Rs.400/- Rs.470/share due to increased debt and lower cash reserves in FY24 which signifies a downside in the stock.
• A modest 5-year compound annual growth rate (CAGR) of only 9.3% of revenue and a 7.8% hike in labor costs has drastically impacted the margins of the company. The labor cost is expected to rise further in the future which can keep the company's margins under pressure.