Waterbase Ltd. – A Multibagger in Making

In the nineties aquaculture was a hot industry and many companies from this sector  were listed in stock exchanges.But few years later fortunes of this industry changed with US and Japan (the biggest markets of shrimp) slowing down and many of the listed companies vanished. But as we say, what doesnt kill you makes you stronger. Even in tough times which may extend for many years, very few companies manage to survive and ultimately emerge as winners when the industry turns around. Not too long ago same thing happened with SKS Microfinance which, because of strange government diktat suffered a lot (along with the entire industry) and it wiped out most of the competition. But SKS survived and how. Now its a thriving company and reverting back to its glory. With the US and Japan markets improving this industry is on a firm revival path. Now there are only three listed company that remains with any operations in this field. Out of these three companies one is Avanti feeds, second Uniroyal marine exports (should be neglected) and the last one is Waterbase Ltd.

Waterbase is in the business of shrimp feeds. Its is an AP based company and belongs to Vikram and Varun Thapar (of KCT Thapar group). Off late, with the revival in the key markets of US and Japan, shrimp farming is on a roll and therefore, the company’s product (shrimp feed) is in great demand. Earlier the industry was not only plauged by slowdown in the US and Japan markets but also the diseases that caused havoc on shrimp farming. The substancial increase in profits and sales were driven by introduction of new disease free Vannamei Shrimp species. With the introduction of disease free Vannamei Shrimp species it is anticipated that there will
be substantial growth in the industry. The earlier species which was the Black Tiger was prone
to diseases which in turn led to constant crop failures. The disease known as the White Spot
first hit the industry in 1995 which has still today not been eradicated. Large Numbers of farms,
hatcheries and process plants were closed and exited the industry.
With the introduction of Vannamei Shrimp species most of the Farms which were closed have
been reopened and new areas are being brought under Shrimp farming. Hatcheries have
reopened and process plants are being upgraded with huge capacity expansion in anticipation
of growth. Due to the increased volumes that can be farmed / HA there will be corresponding increase in
the requirement of feeds. WATERBASE Ltd was the first to
introduce Feed for the Vannamei Species in India and today has a very dominant share of the
Vannamei Species feed Market. The Company has a well established distribution network and is
well respected for its Technical excellence. The Company today is working to full capacity in its feed mill and has invested in additional
Machinery to enhance its capacity to meet the demands. Presently Vannamei species has been
extensively introduced in Andhra Pradesh and it is expected that once infrastructure is in place
it will be introduced in the other states of Orissa, Tamil Nadu, West Bengal, Gujarat and

Now after understanding its business lets evaluate the pros and cons of this company.

1. The business of the company is regulated by quite a few goverment laws (e.g. environment law, labour law etc).
2. Aqua culture is a living organism based industry and therefore, prone to natural calamities and diseases.
3. Negative cash flows in the three of last five Financial years.

1. The industry cycle is turning and Waterbase is one of the best names in the feeds business.
2. Recently company’s promoters hiked its stake in the company from 32% to 52% by way of rights issue. The proceeds of the rights issue is to be used to reduce the debt on the company. This substancial increase in the promoter holding clearly shows the improving confidence of the promoters. Also, with the reduce debt the bottom line will improve.
3. The business of the company is not affected by foreign exchange fluctuations.
4. Demand of its feeds is increasing big time that will drive substancial growth in sales and bottomline. No major capex planned.
5. Technically looking very solid and is on the verge of breaking 12 year long consolidation. That will be a HUGE factor.

Technicals: The price is increasing with increasing volumes. The stock is on the verge of a huge breakout above 25rs. This breakout will be after 12 years of consolidation and when that happens the stock price would go up manifold. At the CMP of 18.5 rs and a market cap of around 70cr, this is a great level to enter the stock for medium to long term. As with my other suggested scripts, it is for high risk investors.


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5 Responses to Waterbase Ltd. – A Multibagger in Making

  1. Pingback: Waterbase Ltd. – Update | aceinvestortrader

  2. Pingback: Waterbase Ltd – Price Update | aceinvestortrader

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  4. srini says:

    Sir, your recos are from mid cap and small cap where liquidity will be a major concern. What’s your take on this.

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