Pricol, an auto ancillary company, in 2009, was India`s largest manufacturer of Dashboard Instrument Clusters and oil pumps used in 2/3/4 wheelers (http://www.icra.in/Files/Reports/Rationale/2009-May-Pricol-Rev.pdf).
The company was notorious for the labor unrest and the subsequent murder of its senior human resource executive in its Coimbatore facility.
http://online.wsj.com/news/articles/SB125858061728954325
The trouble seems to have been brewing since 2007 and had reached its climax in 2009, with the above incident.
http://news.oneindia.in/2007/03/13/tripartite-talk-btwn-pricol-workers-postponed.html
The company also has its plants in Pune and Manesar. These plants had kept the company afloat during those trying times.
http://www.thehindubusinessline.in/bline/2009/07/04/stories/2009070450871500.htm
The company, until 2007 was a leader in this niche area (automobile instrumentation). The slew of awards it has received from its customers is a testament to this.
http://www.pricol.com/customers/awards/
SUBSTANTIAL DEBT REDUCTION
From more than Rs 300 Crs of debt in 2009, the company has substantially reduced its debt exposure which currently stands at Rs 50 Crs. This has been possible through high cash flows (a back of the envelope calculation for years 09-10 to 12-13 show the 4 year average free cash flows to firm to be around Rs 58 Crs/year) and the slump sales of 2 of its subsidiaries.
The slump sale deals with Denso Corp and Johnson Controls have brought more than Rs 100 Crs of cash to the company.
EXCELLENT TIE UPS
The above slump sales subsequently lead to tie ups with Johnson Controls and Denso Corporation, multi-billion dollar giants with technical know-how, from the United States and Japan respectively.
The company has 51% stake in the Denso JV and a 50% stake in the Johnson Controls JV.
The Denso deal is also strategic in nature, as pointed out by the company in this article
He noted that the market share of Japanese automobile companies in the country was expected to remain substantially higher than 50 per cent. If Pricol was to hold on and increase its share of business with Japanese manufacturers in the country, it should have a ‘close partnership with a Global Vehicle Instrument manufacturing company in close association with Japanese vehicle manufacturers’.
SOME NUMBERS
For 2013-14 (annual report not available, numbers from moneycontrol.com), the company clocked a top line of Rs 890 Crs and PAT of Rs 28 Crs in 2012-13 (while revenue has more or less remained in line with 2012-13, PAT has seen a big jump from the Rs 16 Crs for 2012-13). A little less than half of the company`s revenues came from dashboard instruments (for 2012-13, don`t expect a great change in revenue mix in 2013-14). Promoters, in 2012-13, took home a little more than Rs 1.1 Crs as salary and hold a 39% stake in the company.
PHI CAPITAL
PHI Capital was issued preferential warrants to the tune of 4,500,000 shares (corresponds to 5% of company`s paid up equity capital) at Rs 18/share in late 2011. The same are convertible to equity shares as of June 2013. While the cash inflow through this agreement may not be substantial, this move I believe has got more to do with the fact that PHI Capital has a presence in the automotive sector (PHI has taken a stake in Mahindra First Choice wheels and TVS Finance and Services). It is noteworthy that for a long time, a Denso executive was a part of the Pricol board. I don`s believe that Denso will be a part of the board any longer since Denso have sold their stake in Pricol and have invested into the joint venture. A PHI Capital executive sitting on Pricol`s board will be a healthy sign.
http://www.vccircle.com/news/others/2011/11/21/phi-capital-picking-47-auto-component-firm-pricol
BUY RECOMMENDATION
A history of healthy dividend payouts and excellent operating cash flows, excellent relationships with top auto companies, tie ups with a couple of international technology suppliers and the fact that the company`s revival from a period of a dark crisis has been little noticed by the market are reasons good enough to own this stock. With a market cap of Rs 360 Crs (for a current market price of Rs 38/share), the company`s P/E multiple for FY 2013-14 (for a PAT of Rs 28 Crs) stands at 13x. Although not cheap at such valuations, Pricol is an excellent investment for the long term investor.
DISCLOSURE: I currently do not own any shares in Pricol
thepokaranmoneymanager 
Please give your present view on Pricol, for a 1 year holding period. In their board meeting held this week the company has approved issue of further shares/securities. Will this be a positive or negative for the company. Best Regards, AP
Hello. From what I understand, this is only a board resolution and not an actual issue of shares to institutional investors. It is common for companies to do this. They may only do the board resolution and end up not issuing shares at all. Anything is possible. As of now, it is tough to speculate. If they do issue,then we will have to see the amount of shares that are issued and the subsequent dilution in promoter holding and drop in EPS. But for now, everything else about the company (from a cursory glance) looks the same as when the original recommendation was given.
Hello, I have some shares at around 32 levels and intend to hold for 1 year or more. Had raised this query as there was a sharp rise and fall in the price before and after the said board meeting. As was not sure if the resolution passed was the reason, had raised the query. Thanks for the clarification. The company analysis on this excellent blog of yours which I came across recently, adds to the holding confidence.. Best Regards, AP
When is rebound time of Pricol?
Though motor market is doing fair enough what happened to pricol, is it effect of sale of no core business to suprajit?