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Sunday, March 04, 2018

Williamson Magor: Hidden Hidden Hidden Gem..

Williamson Magor:
MCap: 113.78Cr
Consolidated Sales March 2017: 64.37Cr
Consolidated Net profit: -ve 13.99Cr

The Company came into existence as a Corporate Entity on 10th March, 1949 when it was incorporated under the name 'MACNEILL & BARRY LIMITED' to do business inter alia as General Merchants, Agency Business and Manufacture of all kind of articles.

The Company became a Multidivisional Company with interests among other things in Manufacture of Tea, Jute, Engineering and Reprographic Items. The Company also had Agency and Trading Divisions.

The year 1975 was a land mark year for the Company when the then Williamson Magor & Co. Limited who were primarily engaged in the business of Growing and Manufacturing of  Tea was amalgamated with the Company whereupon the name of the Company was changed to 'Macneill & Magor Limited'.

Williamson Magor & Co. Limited, had a long history in tea business dating back to the year 1868 and is considered to be one of the pioneers of tea business in India. As a result of the amalgamation, the Company became a major tea Company in the country while having various other business in its fold. Later, the Company changed its business strategy and decided to hive off all divisions other than tea to a few newly set up companies within the group.

In lieu of transfer of the said business the Company was allotted substantial number of shares by the Transferee Companies as consideration for the business so transferred. On completion of the process the Company again changed its name to Williamson Magor & Co. Limited in 1992 having principal business of growing and manufacture of tea and investments in group companies. Later the tea business was also hived off in favour of certain group companies as a result of which the Company became a pure Investment and Group Shareholding Company.

The Company accordingly made an application to the Reserve Bank of India for registering itself as a Non-Banking Financial Company (NBFC). The Company was granted the required licence to act as an NBFC by the Reserve Bank of India on 31st March, 2003 and since then the Company is in the said business with substantial investments in the group companies like McLeod Russel India Limited, Eveready Industries India Limited, Kilburn Engineering Limited, McNally Bharat Engineering Company Limited etc.,

The Company is listed on the Bombay Stock Exchange, The National Stock Exchange of India, The Calcutta Stock Exchange and the Gauhati Stock Exchange.

The Company owns a ten storey building at Four Mangoe Lane, Surendra Mohan Ghosh Sarani, Kolkata 700001 where the Registered Office of the Company is situated. The Company being the major Group Shareholding Company, the Group is popularly known as Williamson magor group.

History of WM group:

The history of the Williamson Magor Group dates back to 1866. In that year, Captain J H Williamson, who was already involved in the management of tea estates in Assam, met R B Magor, an assistant with the Great Eastern Hotel in Calcutta. Their subsequent meetings and association led to the signing of the First Partnership Deed of the company in 1869. This was valid for a period of two years.

The agreement was renewed in 1871 and by 1875, its term was increased to five year periods. The company had its first office premises at 7 China Bazar Street. J H Williamson died in 1898. George Williamson, who had already withdrawn his capital from the business in 1879, died in 1903. In 1904, the Partnership Deed was renewed with R B Magor and J H Williamson's brother - in - law, Robert Lyell, enjoying an equal share. Williamson Magor & Co. worked closely with its  London partnership, George Williamson & Co., the firm which a few years earlier had been started by James Williamson's brother, George.

The fortunes of the Williamson Magor Group grew along with the boom in the Indian tea industry. By the turn of the century, the company was handling the affairs of 44 tea estates. The Group also became involved in other businesses, including coal. Although the Indian tea industry continued to prosper during the First World War, there was an immediate post - war slump around 1920. The situation became worse with the Wall Street crash of 1929 and the ensuing depression. The production levels of tea far outstripped consumption. George Williamson, the London end of the partnership and Williamson Magor, the Indian end of the partnership, consolidated their position in the tea industry through the twenties and the thirties.

R B Magor died in 1933. His grandson, Richard Magor introduced B M Khaitan to the Group. Initially, Briju Khaitan supplied tea chests and fertilisers to the company and had become a friend of Pat Williamson, a grandson of J H Williamson. Williamson Magor & Co. was converted into a Limited Company in 1954. In 1961, a crisis loomed over the company when B Bajoria, an investor, acquired nearly 25% stake in the Bishnauth Tea Company, the flagship in the Williamson Magor Tea Estates. The Khaitan family provided the money to buy out Bajoria's stake. B M Khaitan was invited to join the board of the company and later, in the face of stiff resistance, went on to become Managing Director of the Group.

The Guthrie family was the majority shareholder in the McLeod Russel Group. In 1987, they decided to sell their tea plantations in India. B M Khaitan negotiated with them and bought out the estates. This meant the Williamson Group became the largest private tea producer in the world. George Williamson went on to acquire and manage tea estates in East Africa. This effort was pioneered by Richard Magor. In April 2001, George Williamson & Company, Kolkata and Williamson Magor & Company, Kolkata mutually decided to separate and work independently. As a result, George Williamson & Company, London ceased to be the overseas partners and selling agents for Williamson Magor & Company, who forged their own links and have now developed a competent overseas sales network.

 The offices of the Williamson Magor Group were shifted from 7 China Bazar Street to 4 Mangoe Lane in 1894. Originally known as Hampton Court, the premises was redeveloped through the mid 1960s.

Mangoe Lane tells its own story. It was lined with mango trees on both sides and presumably took its name from these, though why the 'e', which normally appears only in the plural from 'mangoes', should have been tagged on is not known.

The foundation stone of the splendid new building was laid on the 24th January, 1966 by Mrs. O. J. Roy.
Rising nine floors from street level, with an attractive penthouse on top of the ninth storey, the building, with its somewhat severe lines, is in keeping with modern trends of architecture.

One of the most important features of the eighth floor is the very well-equipped tea tasting room, which is situated on the north side or front of the building in order to provide optimum working conditions for the "spitting" staff.

The ten storey block - which stands to the present day - was officially opened in 1968. This asset proved to be a valuable investment as a number of floors were let out...

Williamson magor as such does not have much sales or profits to show.. it does however have number of listed companies where Williamson magor has large shareholding. As already mentioned It has shareholding in:

Eveready Industries (Indias largest battery maker and worlds one of the top 5 battery makers) Sales:1418Cr 
Shareholding: 23.40%

Mcleod Russell India Limited is worlds largest bulk tea producer in tea estates in India, Srilanka, Vietnam, Africa. 39,770 hectares of tea estate and 100 million Kg of tea sold every year.
Sales: 1485Cr

Mcnally Bharat Engineering Company  is an engineering company providing tunrkey solutions in power, Steel, coal mining, ports, Aluminium, material handling, mineral processing,Cement, Water, Oil & Gas and Infrastructure sectors such as Buildings & Townships, High Rises, Roads, Metro, Rail etc. Over 350 plants have been constructed on a turnkey basis by MBE till date. Sales :1924Cr Shareholding: 23.26%

Kilburn Engineering: Specialized for nearly four decades in Process Design, Manufacture, Supply, Installation and Commissioning of various critically customized process equipment for diverse applications
Sales: 136cr
Shareholding: 32.58%

Majerhat Estate & developers limited:
Sales: not listed
Shareholding: 49%

D1 Williamson magor Biofuels
Shareholding: 15.70%
Sales : not listed

Company has invested in preference shares issued by Mcnally Bharat Engineering worth 500Cr and Williamson magor has taken loan for the same.. this has increased its debt burden.

Financially the company looks like its in doldrums with losses .. but its all because of the re-capitalization of Mcnally bharat engineering.

What really caught my eye if this:
No of shareholders decreasing every year..
Dec 2015: 8449
Dec 2016: 8191
Dec 2017: 6926

As can be seen there has been a major decrease in the no of shareholders which means accumulation has happened by strong hands...

If you see the annual report March 2017.. the company has conveniently left out its significant asset heavy companies from its consolidated results because: (Unavailability of IGAAP compliant financial statement)

if you include these associates in consolidated results..

Books Value should be up by: 6774.96(lakhs Eveready industries) + 2381.12 (lakhs Mcnally bharat)
Increase in book value: 91.56Cr

Profits not consolidated: 9191.65 (lakhs Eveready industries) + (-ve) 5875.19 (Lakhs Mcnally Bharat) Increase in Profits: 33.16Cr

Current Market Cap of Williamson Magor is: 113.78Cr
Book Value is 92Cr

so include the associates not included (according to annual report march 2017) and book value doubles and loss becomes a profit..
Now if you look at the books company has taken close to 500-600Cr in loans to invest in Mcnally bharat engineering which means Williamson has assets now.. worth atleast 1000-1200Cr worth at current valuations..

Now 500-600Cr is on loan so Im sure the management would like to turn this around ASAP as it is incurring interest payout.. so we could see a turnaround in Mcnally bharat engineering .. (which is also attractively priced)

This will increase WM(Williamson magor)  consolidated profits and it will also reduce its debt (loaned money will be returned.. )

 If you see the charts.. we can see that Williamson magor is breaking out and setting new long term highs.. even when its reporting losses..

Conclusion:  Williamson Magor is about 100yrs old company..it broke itself into multiple parts and became an asset/holding company. over the years these associates have entrenched themselves into heavy engineering, tea business and battery business. They have other unlisted associates in the real estate business. As the parent holding company Willaimson magor has substantial holdings in all these associates which should be more than its current market cap of 110Cr. With the new understanding that being rich is good .. these closet asset rich companies could easily unlock their hidden wealth.. listed companies have sales worth 3500Cr which means we can expect 35x return for long term investors.. 

PN: this blog is for my own investment though process.. and not a recommendation for investors to buy/sell shares.. please do your own deep dive before investing and take advise from registered investment advisors.. I am not an Investment advisor..!!


Anonymous said...

Excellent Post - have been following your blog for 7+ years. Invested in Jayant and NHPC. Thank you!

Am looking at Tata Power, Manugraph and Williamson Magor.

If I dont need the money for 20 years, what would be an ideal allocation between the three.

Thank you again.

What'sUp Prahalad said...

Anonymous ji,

All three have deep value..
Im invested in the following order
2. Williamson magor,
3. Tata Power

you can make your own choice..

=happy investing

ashirbad parida said...

Dear Prahlad,
I am a big fan of your insightful posts. Here, I have one query (being a layman in financial world, please forgive me if the question is foolish).
Question: The company has deep value, however, it's negative balance sheet is due to the loan taken for investing in one company and increasing its share holding in the same. What will happen, if this company wish to delist itself from the exchanges just before replying the loan. In such scenario, shall the retail investors will have to part away with their shares may be at some profits, rather than 35x returns. Is it possible?
I look forward to your insights on this.

What'sUp Prahalad said...

Ashirbad ji,

the reason the management is stating that its not compliant (associates results have not been consolidated) and has mentioned it in the annual report.. is because the new IAS (Indian accounting standard) requires these to be consolidated..
I'm not a finance person myself..
With regards to if the company gets delisted.. before we get 35x .. yes quite possible.. but the shareholders should be willing to sell.. and from the shareholding data .. it looks like there are investors invested with the intention of price appreciation...

I dont know if I have the strength/foresight to hold it for 35x.. but its definitely looks like williamson could be a multibagger.. from current levels..

=happy investing

ashirbad parida said...

Thank you Prahlad ji for sharing your thoughts.

Divyanshi Sharma said...

Decent article of share market and trading. I like to read this blog everyday. Free Stock Tips

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