Rossell India

Rossell India

Extremely undervalued tea, aviation & defence stock

Rossell India Ltd was incorporated in 1994 by Mr. H.M. Gupta # as Rossell Tea Ltd. It added Aviation and Defence manufacturing and service capabilities for its growth. On 19th April 2011, the company named itself Rossell India Ltd to represent its diverse business. The company has two divisions, namely Tea and Aerospace Defence (Engineering, Manufacturing, and Services). It has spent 27 years in the Tea division and 9 years in the A&D division. # The company’s promoter has around three decades of experience in the tea industry.

KEY POINTS

Business Segments

The Company is engaged in the following businesses:

  • Rossell Tea Division: Cultivation, Manufacture, and Sale of Black Tea. (primarily the orthodox variety of tea). Segment contributed 46% of Revenue in FY20 # which used to be 75% in FY16.
  • Rossell Techsys Division: Started in 2011, this division undertakes Build to Specifications (BTS) and Build to Print (BTP) services for leading global OEMs. This segment contributed 52% in FY20 # which used to be 18% in FY16

Manufacturing base

The company cultivates tea across seven tea estates and operates seven factories, one associated with each tea estate. All located in Upper Assam, with a total mature area under tea of around 3,000 hectares.

For Aerotech Division, the company’s manufacturing facility is located at Aerospace Park, Bangaluru. The first phase has 1.75 sq ft area and in final phase of expansion, it will increase to 4.25 sq ft.

Customers

The company’s tea production is exported to many countries such as the USA, UK, Germany, Japan, Iran, and UAE.

Its A&D sector clients include Boeing and Lockheed Martin, Indian Defence Forces, Defence Public Sector Undertakings, etc.

Co has been winning supplier of the year award

Future Plans

For A&D Division

The company has signed up teaming agreements in the US and Israel, aimed at making inroads with (a) the US government and (b) exploring opportunities with Israeli Defense.

The co is seeing nature of the RFPs received expand into areas such as complex consoles, box builds, ATE’s and electrical panel assemblies

A new facility has been set up in Bangalore with an investment of over 90 Cr with enhanced capabilities to meet the needs for quality and timely production by Rossell Techsys Division.

 

For Tea Division:

The Company continues to explore new markets and customers in Canada and the USA.

Emphasis is given to sell the produce at the quality-conscious segment of the market for better realization and higher Exports. The Company proposes to continue its policy to produce and market “a quality product through prudent cost management.”

Key Financials:

P/E ratio: 11

Sales growth 3 years: 24%

Profit growth 3 years: 95%

ROIC: 9.67%

ROCE: 13.1%

Promoter holding: 74.9%

Recommendation:

Very low PE ratio for a stock with such strong performance and well positioned in very high industries. Buy at current Rs 103.60 (date 20 April, 2021). Hold for at least 2 years. 

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