Industry: Food processing industry is one of the largest industries in India. It is ranked fifth in terms of production, consumption, export and expected growth. It is recognized as 'sunrise industry' having huge potential for uplifting agricultural economy, creation of large scale processed food manufacturing and food chain facilities.This industry is of enormous significance for India's development because of the vital linkages and synergies that it promotes between the two pillars of theeconomy, namely Industry and Agriculture.

Company: Bambino is engaged in the production of Vermicelli, Macaroni and other pasta products. All its products are sold under the brand name "BAMBINO" which has aquired excellent reputation in market, particularly in South it is a house-hold name. Company is a key player in the organised sectorand enjoys a major market share. However, competition from unorganised sector always remains there due to low entry barrier in the food processing sector.

Financial Performance:

IN 2006-07, Company has suffered loss of 77 lakhs but it is after providing 2.77 cr for depreciation. It means company earned CASH PROFIT of 2 cr during the period.There was severe increase in prices of wheat and suji. This apart, hike in cost of packing material also affected the margins. Though there was increase in selling price but full increase in costs could not be passed on. Company could achieve big jump in volumes of sales

RATIONALE FOR RECOMMENDATION:

1. Company is on the verge of finalisation of CDR/OTS scheme with IDBI and IFCI. Total outstanding dues to these 2 institutions are 53.02 crs. Company has proposed to settle the same for 36.19 crs. It means there will be write back of approx 17 crs. Post CDR, interest cost of the company can come down by 50% (interest cost last year was 5.54 crs)

2. It is a widely believed fact that majority of promoters try to suppress (and understate) the profits until CDR is finalized with lenders. Because, companies show in the books actual/good profits, then lenders may not give desired concessions. Hence, company should show higher operating margins post-CDR (apart from savings in interest cost)

3. Company has big demand for its products. However, due to CDR scheme under way, company cannot implement any expansion program. Hence, promoters in their personal capacity have set up a new factory for same products and Bambino will be responsible for marketing the production of this factory which will give further push to topline of Bambino

4. Company holds 1.955 million shares in Spectrum Power Company which is implementing 204 MW power project. This investment as on now should be more than Rs 9-10 crs which works out to roughly Rs15 per share.

5. Land Value-unlocking potential: Its Gurgaon factory is situated on 10 acre plot. Here, land prices are nearly Rs 15-18 crs per acre which means Gurgaon factory land is worth more than Rs 150 crs which works to Rs 250/ per share. Although, at present, this factory is running /producing and management so far has not indicated to relocate this factory, yet it is felt that after CDR, promoters may plan to relocate Gurgaon plant to another location (where land prices will be very very low) and realise/gain huge amount by selling Gurgaon factory's land as for a company of Bambino's size, it will be a huge sum which can be used to payoff its debts, expansion, brand building etc

6. Current market capitalization of Bambino is just Rs 32 crs which is one-fourth of its turnover of 06-07 although market-cap of FMCG companies is always 3-5 times of topline.

7.Finally, Bambino is a very renowned brand now which should be worth Rs 80-100 crs.

8. With advent of organised retailing all over India, it is not far-fetched that big giants like Reliance, Walmart etc may enter into tie-up with Bambino which will give a huge boost to the company

Considering strong brand, impending CDR, potential of land-value unlocking and bright chances of company turning highly profitable in near future. market cap of 32 crs of Bambino appears peanuts. SCRIPS IS GOING DIRT CHEAP. GRAB IT. It should easily give appreciation of 50% in next 2 months(upon announcement of CDR proposal acceptance). Investors are advised to hold the scrip for medium-long term ( 12-18 mnths) as scrip may give 200-250% appreciation. APPEARS AS THE CHEAPEST FMCG SCRIP. A must buy

Hemant K. Gupta
Centre for Development Of financial Treasure