IVP Limited

 

IVP Limited was initially a part of Shapoorji Pallonji Group. It was owned by Forbes Campbell. This is 80 year old company which started its vanaspati division in Mumbai in early 30's. In the mid 80's this company was acquired by the Allana Group from Shapoorji Pallonji Group. Allana group incidentally is the largest producer and exporter of meat and meat products from the country.

IVP Limited had three business divisions. The company closed its vanaspati division which has its manufacturing plant at Reay Road in Mumbai few years back. There was an ceramic division which was sold to the Murugappa Group about two years back and the company is now left with a business called foundry chemical business which does a revenue close to Rs 75-80 crore and generates a profit of about Rs 5 crore for the company.

Last month a very important development has happened in this company. The vanaspati oil division, which was close down for sometime, had a dispute on with the workers of that division over payment of compensation. Last month company announced that they have settled with all the workers. They have paid Rs 7 crore to the permanent workers and Rs 3 crore to the temporary workers and have settled the dispute.

This settlement of dispute will pave way for the company to utilize the land which is available at Reay Road for more productive purposes. Company has indicated that it wants to lease out or rent out the oil storage terminals which are already constructed there on that land to various companies. There are a few unknowns here. We do not have the size of the land bank which is available at Reay Road. The plans of the company as to what it wants to do with that land bank. I have assumed that since it is a vanaspati oil division thate generally requires large parts of land. Since this was started in 1930 that time land was not such a scare commodity in Mumbai. So I believe that the land area would be a few acres., If you see the valuation of the company it is a debt free company currently available at a market cap of just about Rs 40 crore which means an enterprise value of Rs 40 crore.
 
The enterprise value of Rs 40 crore indicates the valuation of its residual business which is the foundry chemical business which does revenue of about Rs 75-80 crore and makes a profit of Rs 5 crore. So the valuation of land is really not getting reflected in the enterprise value of the company. The positive can emerge in case the company announces the plans for development of land assuming that even if it is two-three acres of land it will be worth at least a few Rs 100 crore going by the recent land deals which have happened in Mumbai.

So at Rs 40 crore market capital, I do not see investors losing much from these levels and some positive surprise coming from the company can really rerate this stock.