DISA India - An Interesting Case

Before I begin blabbering about the company, a disclosure from my side. (Usually I dont give disclosures, but I feel in this case, it is a must). I have been a constant buyer in this stock below 1330 levels and I intend to do it again if I get the chance! I had presented this as an investment idea at a couple of investor conferences during that time, when I was buying, but could not post it on the blog due to paucity of time and in-general-laziness! So please keep this in mind before taking any 'action' in Disa India. Also, PLEASE do read my introductory post.

Now that I have gotten that out of the way, let us look at this particular case...

On the face of it, Disa India Ltd. looks like this:

Nothing worth jumping up from the chair, it would seem.. Well, if we do a regular excel sheet, it would look even sadder.

Disa is one stock idea you just cant express on the excel sheet!!!
To be honest, in case of a lot of interesting investment opportunities, one has to get out of the excel sheet!

I am looking at Disa from two angles; as a delisting candidate and as a business.

Disa - the delisting candidate

If one goes through the latest shareholding pattern, promoters hold 74.27%. However, if we look at the 1%+ holders, another 12.01% are held in an escrow account, these are basically shares that the parent had acquired through an open offer in 2009. However, SEBI contested the open offer price calculation, hence, the shares are held in escrow till the matter is solved. SEBI has lost the case in SAT and has now appealed in the Supreme Court against Disa. More details can be found here.
So effectively, Disa promoters hold 86.28% shares of the company. So they will have to either bring down their holding to 74% or delist in due course of time. As far as I have searched, there are no other subsidiaries of the Norican Group (the parent), which are listed.
This makes Disa India a prime delisting candidate. Time will tell if at all they will opt for delisting, and when. Delisting is anyway going to be difficult, given the super-scattered shareholding pattern. FYI, Disa had tried delisting in 2007. The 'discovered price' came to Rs.2960 per share. This was rejected by the management and delisting failed.

Disa - the business

Disa India is a subsidiary of the Norican Group, a Denmark based entity formed from the merger of Disa (a forging and moulding machinery and equipments manufacturer) and Wheelabrator (a surface treatment and preparation equipment manufacturer) to form a global leader, renamed as the Norican Group. More info here.

For a number of years, Disa was just floating aimlessly. There was virtually no growth, no innovations, no product launches..nothing. The formation of the Norican Group seems to have changed it all. Disa is now expanding, going in for higher R&D, better innovations, launching new products and basically becoming very much proactive. I urge you to please read and absorb this and this article fully. It will surely give you an idea about the 'change' in the company, which I am talking about and the scope for growth for its products.
The December 2010 quarter results do show the improvement in the business. (Most of the new launches were done in mid 2010, so the December 2010 quarter results were of great interest to me.)

Click to enlarge

Disa seems to be quite on track to improve business and financial performance significantly. The product launches, the R&D, the industry feedback, all suggest so.

If I can get India's largest foundry and surface treatment equipment manufacturer at a market cap of Rs.200 cr and an EV of Rs.150ish cr, I think it is a good deal. The delisting angle adds to the goodyness of the deal!
I intend to attend the company's AGM, where I hope to get more information and feedback on the same.

In order to keep the length of the article to a reasonable level (so that the reader will not fall asleep on the keyboard), I have omitted certain details which I felt weren't absolutely critical. Please do get in touch with me in case of any queries or feedback.

Cheers and happy investing!