FUNDAMENTAL ANALYSIS

Economic Analysis :
India has emerged as the world's fastest growing major economy, and is
expected to become one of the world's top three economic powers over the next
10-15 years, backed by robust democracy and strong partnerships. India's gross
domestic product ( GDP) (at constant prices for 2011-12) was projected at Rs
145.65 lakh crore ( US$ 2.06 trillion) for 2019-20, up 4.2 per cent from the
previous year. India maintained its spot as the world's third largest start-up base
with over 8,900-9,300 start-ups as 1,300 new start-ups joined in 2019 according
to a NASSCOM survey.
Recent changes:
With an improvement in the economic scenario, investments have taken place
across different sectors of the economy. In India, mergers and acquisitions
(M&A) operation stood at US$ 28 billion in 2019, while private equity (PE)
transactions hit US$ 48 billion. The following are some of the important recent
developments in the Indian economy:
• In 2019-20 retail exports and imports (in terms of US$) decreased by 4.8%
and 9.1%,
respectively.
• Nikkei India Manufacturing Purchasing Managers ' Index ( PMI) stood at 30.8
in May 2020, indicating a contraction in the sector due to restrictions associated
with coronavirus.
• In 2019-20, total tax revenue stood at Rs 15.04 lakh crore ( US$ 215.28
billion) – income tax collection contributed Rs 4.80 lakh crore ( US$ 68.14
billion) to this.
• In 2019, India 's companies raised about US$ 2.5 billion through 17 initial
public offerings ( IPOs).
• India 's equity inflow from Foreign Direct Investment ( FDI) reached US$
469.99 billion between April 2000 and March 2020, with maximum
contribution from services, computer software and hardware,
telecommunications, construction, trading, and automobiles.
• India's Industrial Production Index (IIP) for the period 2019-20 was 129.2
• In March 2020, the cumulative index of 8 main industries stood at 137. In
2019-20 their combined growth was 0.6 per cent.
• Consumer Price Index ( CPI) – In March 2020, aggregate inflation stood at 5.9
per cent compared with 6.6 per cent in February 2020. In 2019-20, annual
consumer price inflation rose from 3.4 per cent in 2018-19 to 4.8 per cent.
• Between 2015-19 some 12 million jobs were generated in India in a year.
• India increased its ranking by 14 spots in the World Bank's Doing Business
Report over the last year and was ranked 63 in the report's 2020 edition among
190 countries.

Challenges faced by Indian Economy in 2019:

• Population Growth : India ranks second after China in its total population. Its
population has grown 20% per decade, leading to problems that include food
deficits, sanitation deterioration, and pollution. Although economic growth
numbers look promising, the living standards of most citizens are not changing.
Malnutrition is a severe problem in India that is causing childhood stunting,
anemia in women of reproductive age, and overweight adult women, according
to The Hindu Business Line. Only 6% of India's poor have access to tap water
versus 33% of the non-poor. Sanitation is a massive ongoing problem that the
government has been unable to address. India uses coal for 75% of its power
requirements, and it has been slow to transition to cleaner energy sources. New
Delhi and other cities in India are among the most polluted in the world, and car
emissions in these urban areas are creating breathing and other health problems.
• Deteriorating Infrastructure : India has struggled to improve its deteriorating
infrastructure in business, education, and healthcare. India's power grid is
overstressed, and power failures have been daily occurrences in the most
developed areas of Delhi, Mumbai, and Bangalore. The need for generators to
provide power and air conditioning during power failures results in additional
costs that businesses must subsume. Public transportation and roadways have
not kept pace with population growth, and the education infrastructure is
backward with a literacy rate of 72%.
• Corruption : The Corruption Perceptions Index (CPI) ranks 180 countries and
territories by their perceived levels of public sector corruption among experts
and businesspeople. It rendered India the 78th most corrupt country in the world
in 2018. The CPI states that efforts to curb corruption in the Asia-Pacific are
having little effect, and countries in the region are experiencing decreasing press
freedoms and shrinking civil society. Transparency International found India to
be one of the worst offenders. Doing business in a corrupt country is difficult
because there is little respect for the rule of law, there are competing
government bureaucracies, and there are often unclear and unfair regulatory and
taxation systems.
Prospective :
It is expected that GDP growth will slow down in 2019 due to tighter financial
conditions, a negative fiscal impulse, softer global growth and election
uncertainty
• Financial conditions have tightened significantly: The cost of capital has risen
in 2018 due to the persistent liquidity deficit and the Reserve Bank of India’s
(RBI) cumulative 50bp of rate hikes. Now, the availability of credit is becoming
constrained. Over the last 3-4 years, shadow banks have played an important
role in credit intermediation and supporting growth against a backdrop of
elevated non-performing assets among public sector banks. We estimate that the
credit crunch will slow GDP growth by 0.2-0.3 percentage points (pp) over the
next year, and this would likely worsen if the liquidity crisis descends into a
solvency crisis.
• A negative fiscal impulse : Central government revenues are under strain from
lowerthan-budgeted GST collections, lower direct tax receipts and a potential
shortfall in disinvestment proceeds. We estimate that overall revenue collections
will undershoot budgeted targets by 0.5% of GDP. Moreover, with lower house
elections scheduled in Q2 2019, we expect full government operations to be in
limbo until the new government is in place, which would pose a drag to
government spending growth in H1 2019.
• A global slowdown : The cyclical global growth impulse appears set to
become less supportive. We estimate that global GDP growth will slow in 2019,
led by a slowing China and the US and euro area moderating towards their long-
term trends. As cyclical impulses become less favorable, we expect exports,
manufacturing and the investment cycle to weaken.
• Inflation within target : Headline inflation undershot RBI’s projections for a
consecutive year. This reflected a growing divergence between food and core
inflation. We expect headline CPI inflation to average 4% y-o-y in 2019, below
consensus, and within the mandated target, due to weak demand and easing
input cost pressures.
• Monetary policy to resume its dovish skew : Given our expectations of a low
growthlow inflation environment, we expect the policy stance to change to
‘neutral’ in either the February or April 2019 policy reviews, thereby putting a
rate cut back on the table. We believe a 2.5pp real rate spread is too high and
expect a 25bp rate cut in Q3 2019, followed by unchanged policy rates through
2020, in contrast to the consensus forecast for 25-50bp of rate hikes.
• External imbalances to improve at the margin : Unlike in 2018, when rising oil
prices resulted in a sharp worsening of the current account deficit, we expect
India’s macro imbalances to improve at the margin in 2019. Specifically, we
expect a combination of lower oil prices, lagged effects from real effective
exchange rate depreciation and weaker domestic demand to improve the current
account deficit from 2.3% of GDP in 2018 to 1.9% of GDP in 2019.
INDUSTRY ANALYSIS
History of industry
In India the tradition of chewing tobacco has been from many centuries. Around
48% of the total production tobacco is uded in the form of chewing, 38% as
bidis and 14%as cigaeratte. In India tobacco ia an important commercial cash
crop. Tobacco produ
PRESENT SCENARIO
In India, tobacco is harvested mainly in two forms?cigarette tobacco and non-
cigarette tobacco. During 2017-2018, non-cigarette tobacco alone had a ~69%
market share. Manufacture of cigarette tobacco has significantly reduced,
globally, leading to an increase in the sale of non-cigarette tobacco.
Based on consumption, khaini constituted ~11%, and beedi and cigarette had a
market share of ~8%. Usage of smoking mediums like hookah, hookli, chhutta,
dhumti and chillum, along with edible tobacco like mawa, snuff, gutka, and pan
masala have led to the growth of this market.
Considering the consumption-tax revenue ratio of the overall segment of
smoked tobacco, legal cigarettes account for ~10% of consumption and ~86%
of tax revenues. This implies that even though smokeless tobacco has the
highest rate of consumption, more revenue is earned from legal cigarettes.
Tobacco, despite it triggering addiction and intoxication, is consumed
significantly by Indians, especially in the form of smokeless tobacco.
Among the major cigarette producers in India, ITC Ltd. currently enjoys the
highest market share (~84.27%), based on sale. Rest of the share is distributed
among minor companies like Kothari Products Ltd., Godfrey Phillips India Ltd.,
VST Industries Ltd., and others.
.
CHALLENGES

 Cigarette taxes (64% excise duty, 28% GST, and 5% cess) in India are
among the highest in the world. Therefore, high tax rates make cigarettes
unaffordable to a large section of consumers. As a result, they shift
towards the consumption of beedi and other forms of smokeless tobacco.
Hence, the overall tobacco market experiences slow growth.
 The Cigarettes and Other Tobacco Products (Prohibition of
Advertisement and Regulation of Trade and Commerce, Production,
Supply and Distribution) Act of 2003 (COTPA, 2003) imposes a blanket
ban on tobacco advertising. This prevents companies from directly
advertising their products, because of which they resort to surrogate
advertising. Hence, it becomes difficult for manufacturers to promote
their brands, limiting the growth of the domestic market.

COMPANY ANALYSUS

GOLDEN TOBACCO
HISTORY
Golden Tobacco (GTL) incorporated in 1955, is engaged in manufacturing of
cigarettes and tobacco–related products. The company?óÔé¼Ôäós
manufacturing units is located in Mumbai and Vadodara. The company
converted into a public limited company in 1971 and became a part of the
Dalmia Group in 1979.
The company offers cigarette brands like Panama, Taj, Golden`s Goldflake in
plain and filters and Chancellor, Flair, Esquire, and Style in the filter segment.
Clove cigarettes and Ms Special Filter (for women) are recent inclusions. It is
working on developing products consisting of a mix of tobacco and other plant–
based ingredients. GTL has two cigarette–manufacturing units in Baroda and
Mumbai. Apart from cigarettes, the company also manufactures processed
tobacco. The company is ISO 9001:2000 certified by the accreditation agency
RWTUV. It has its own fully equipped printing press to produce all its
packaging material under one roof. Subsidiaries of the company include Golden
Investment (Sikkim), Western Express Industries and GTC INC. B.V.
The company currently sells about 900 million cigarettes per month through a
wide network in India. It exports cigarettes like Chancellor, Panama, Style,
Esquire, Flair, Little Cigars, Slim etc, to USA, Central America, Africa and the
Middle East. In July, 2007, the company came out of the purview of the Board
for Industrial and Financial Reconstruction (BIFR) and had reported a positive
net worth of Rs 388.2 million for the financial year 2006–2007.
Company's first manufacturing zone is a primary manufacturing division which
is a tobacco processing plant located at Vadodara. This unit caters to the needs
of the factory, as well as the requirements of Mumbai unit.
Company?óÔé¼Ôäós second unit located in Mumbai is a secondary
manufacturing division which is engaged in making and packing of cigarettes.
The company imports various material required in manufacturing and
packaging  from countries like Germany, Italy, China, Japan, France, Malaysia,
Indonesia; U.S, Netherlands, Singapore, U.K, Pakistan and Switzerland.

CAPITALIZATION
MANAGEMENT

TURNOVER
The sales turnover pattern of Golden tobacco
YEAR RS in Crores
2016 101.02
2017 90.14
2018 81.89
2019 76.08
2020 23.43

FINANCIAL AND RECENT DEVELOPMENTS

VST INDUSTRIES Ltd.
COMPANY HISTORY
VST (the erstwhile Vazir Sultan Tobacco Company) was incorporated in
November 10th 1930 at Hyderabad AP. The Company has a factory in
Secunderabad AP. Its plant location is at Azamabad in Hyderabad. The
Company is engaged in manufacture and trading of cigarettes containing
tobacco and tobacco products. In 1990 the company entered the United Arab
Emirates market launching Kingston Mini Kings. To develop the export
business it introduced fire-cured light-soil Burley and other non-traditional
varieties of tobacco followed by another brand Kingston Dual Filter in 1991. In
the same year it was accorded the status of an export house. It also acquired an
import license for two sophisticated high-speed precision Log Max cigarette
manufacturing machines from France. The company also exports agricultural
products.VST's subsidiaries are Hallmark Tobacco Company Pvt Ltd VST
Distribution Storage & Leasing Company Pvt Ltd (VDSL) and Tobacco
Diversification Investments Pvt Ltd (TDIL). During the year 2004-05 Tobacco
Diversification Investments Pvt Ltd amalgamated with VST Distribution
Storage & Leasing Company which came into effect on 1st April 2004. The
company has allotted 3030000 1% Unsecured Optionally Convertible
Debentures of Rs 10 each in lieu of VST's holding in the TDIL in the ratio of
1:1.VST introduced Gold Premium Filter in Jul.'93. In 1992-93 it entered into a
technical collaboration agreement with High Value Horticulture UK. It has
signed an agreement with Science and Technology Ventures Israel. In 1994 the
company incorporated VST Natural Products (formerly VST Agro Tech) to
establish manufacturing facilities to process high value horticultural crops for
export. In 1994-95 the company had launched two brands - Vijay Deluxe and
Charminar Standard. VST is the largest exporter of cigarettes to the Middle East
from India.SEBI cleared the open offer of Brightstar Investment to acquire 20%
equity stake in the company. The Open Offer made by Bright Star Investments
Ltd at Rs.112 per share was revised to Rs.151 per share and the counter offer
made by Russell Credit Ltd at Rs.115 per share was also revised to Rs.125 per
share respectively. Both these offers were closed in during June
2001.Processing lines of the company have been modernized during the year
2003-04 by inducting Hauni KT2 Stem Cutter to improve filling values and
reduce tobacco wastage and New Design spillage free Cut Stem and Cut
Lamina Auto feeds to reduce tobacco wastage in the year 2004-05.It also
installed a new humidification system with auto controls on Relative Humidity
to improve stored cut tobacco moisture consistency and freshness.In the year
2003-04 the secondary manufacturing department has also modernized by
incorporated new Auto Feed Systems on individual making machines to ensure
consistency of the product in. The secondary department have been modernized
by inducting two Molmac MK9 MTF (one for filter and one for micros) New
weight control systems (TEWS and MRK3) IPMs (individual parcellers) and
installed new quality test modules to improve and maintain consistent product
quality in the converted year 2004-05.During FY 2013-14 the Company
successfully converted the cigarette making and packing machines by deploying
in-house expertise subject to rapid growth in the value filter 64mm segments. In
continuance with its tradition 143 workmen were trained during the year to
improve their technical skills. Moreover world-class high-speed makers and
packers were inducted in the shop floor as part of the Company's upgradation
plan.

CAPITALIZATION
TURNOVER
YEAR RS in Crores
2016 2062.99
2017 2261.3
2018 1358.34
2019 1184.11
2020 1370.42

MANAGEMENT
The Indian Woods Ltd.
COMPANY HISTORY
The Indian Wood Products Company Limited is a public Company domiciled in
India and was incorporated on 23rd December 1919. The Company was listed
with The Calcutta Stock Exchange Ltd upto 11th August 2018 as voluntary
delisting permission was granted by the exchange and at present the Company is
listed only with BSE Ltd. The registered office of the Company is in Mumbai
working at Izzatnagar Bareily (U.P).It is primarily engaged in the
manufacturing of Katha in India. The Company has one overseas joint venture
Agro Spice and Trading Pte Limited Singapore as on 31 March 2017 which is
engaged in trading of spices.During FY2017 the Authorised Share capital of the
Company has been increased from Rs.5 Crores divided into 5000000 Equity
shares of Rs.10/-each to Rs.10 Crores divided into 10000000 Equity Shares of
Rs.10/-each pursuant to the shareholders approval at their AGM held on 28
September 2016. Further the Authorised Share Capital of the Company has been
increased from Rs.10 Crores divided into 10000000 Equity Shares of Rs.10/-
each to Rs.15 Crores divided into 10000000 Equity Shares of Rs. 10/-each and
500000 Preference Shares of Rs. 100/- each.During FY2017 the Company has
issued and allotted 4797954 fully paid-up equity shares of face value of Rs.10/-
each as Bonus Shares on 21 October 2016 in the Ratio of 3 Equity shares for
every 1 Equity share held as on Record Date. The said Bonus Shares has been
listed and admitted for dealing on the Calcutta Stock Exchange Limited w.e.f. 2
January 2017. The Paid-up Share Capital of the Company as on 31 March 2017
comprises of 6397272 Equity shares of Rs.10/-each.During FY2017 investment
in joint venture PT Sumatra International Indonesia was liquidated.
MANAGEMENT
CAPITALIZATION