Balmer lawrie is a diversified company engaged in the following businesses

Industrial packaging
Greases and lubes
Logisitics
Tours and travel
Others

Each business has its own economics which range from the good (logistics) to the terrible (tea).

A few key points
– The company has identified three areas for future expansion – logistics management, travel and tourism and industrial packaging. It is looking for a strategic alliance for its tea marketing operations, leather chemicals business and tourism. It may even be looking at exiting the tea business
– The company plans to invest 200-300 Crs in the good businesses such as Logisitics, travel and tourism etc
– Most of the businesses are cyclical except logistics. The logisitics business is the most profitable and accounts for more than 60% of the profits and total value while utlizing less than 30% of the total capital
– The company has several JV which contribute to around 10% of netprofits
– The capital allocation has improved for the company. The extra capital has been used to retire debt and generate cash
– The correct approach to valuing this company is to do a sum of parts. Each business must be valued separately as it has different economics. The indivual valuation should be summed up to arrive at the final value. I have done a rough back of the envelope analysis and uploaded here

Additional note : I have a position in the stock. This stock has now become a long term holding now. I bought this stock in 2004 time frame at around 160 / share and have added since then. The price has increased since then. However the intrinsic value of the company has grown faster and hence I feel the company is still substanially undervalued. However this stock may require quite a bit of patience and I don’t forsee a quick jump anytime soon (I wont mind if this prediction is wrong 🙂 )

I am however not recommending this stock for anyone and would suggest you to make your own decision. As usual please read disclaimer.

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