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John 4:13, 14 Jesus answered and said unto her, Whosoever drinketh of this water shall thirst again: But whosoever drinketh of the water that I shall give him shall never thirst; but the water that I shall give him shall be in him a well of water springing up into everlasting life.

8 Jul 2019



Shivalik Bimetal Controls Limited is in the business of joining materials through different methods such as diffusion bonding, cladding, electron beam welding, solder re-flow and resistance welding. They can manufacture multi-gauge and multi-material strips. They primarily manufacture Shunts and Bimetals since 1985.

Thermostatic Bimetals: A strip consists of two or more layers of different alloys firmly bonded together. One layer of alloy having higher coefficient of thermal expansion compared to other layer. So when heated, alloys of different materials would expand to different lengths and would change the curvature of the strip without causing any damage to the bonding. This simple property can be used in many electrical applications where 1) Temperature Indication is needed; 2) Control of any parameter against temperature is required; 3) Where compensation in circuitry is required in adjustment to ambient temperature; 4) In application where heat is converted to mechanical energy. There are umpteen applications of Bimetals in electrical equipments like Circuit Breakers, Overload Relays, Energy Regulators, Light Flashers, Automatic Fuses, Pressure Gauges, Electric Iron, Coffee makers, Washing Machine, Baking Oven, Refrigerator, Water Heater, Fluorescent Light Starters and many similar areas. In Automotive, it’s used in Exhaust manifold Controls, Turn Indicator, Oil Pressure Gauges, Circuit Breakers, Oil Cooling Regulator etc. Quality Bimetal Strips are made of “Kanthal” Alloys and other specialized alloys as per requirement. “Kanthal” is the trademark of Iron Chromium Aluminium alloys made for wide range of Resistance and High Temperature Applications. Kanthal is the product of Sandvik group and made with specific heating technology provided by Sandvik. Shivalik has the Furnace bought from Kanthal - Sandvik which they purchased in 2010 when Sandvik sold one unit second hand. May visit 8 for more details about the product and technology. It is pertinent to note that Shivalik uses Hot Bonding Process as compared to most volume based Bimetal manufacturer who produce it by Cold Bonding Process. Advantage of Hot Bonding is long coil of material without welding and high bond integrity. Cold bonding needs subsequent sintering process to remove oxides and other impurities from metal interfaces to improve quality of bonding. It is unsuitable for critical high temperature applications.

Shunts: These are also Bimetal Strips only. It acts as a Resistor and made from two or more alloys consist of different Temperature Coefficient of Resistance (TCF). It is defined as “resistance change of a conductor per degree change in temperature”. The lower the TCF, the better the sensitivity (as a thumb rule only) of the shunt as there would be low level of power loss and high level of stability. Shunts can be of many varieties but high precision low TCF Shunts are manufactured from various types of alloys. Some of the major material from which these are made and their thermal or electrical characteristics can be found here: 6.

Resistors are widely used to reduce current flow, adjust signal levels, divide voltages and terminate transmission lines. Main use of these Shunt Resistors are found in Energy Meters, Battery Management Systems (BMS) of Electric Vehicles, AC/DC Converters, Inverters, UPS etc. It is manufactured by Electron Beam Welding method by Shivalik Bimetal. This gives a very high quality bonding needed for critical and high temperature continuous application with precision.

Market Size: Even though the use of Bimetal is ubiquitous, the market size is small in US$ terms. Hardly there is market of Rs. 1000 cr of Bimetal worldwide as price of a Bimetal strip may be in the range of only Rs. 5/- to Rs. 20/- for manufacturing a gadget costing Rs. 2000/- and component price would be constant even if the higher product range is used. For example, imagine you are buying two electric iron costing Rs. 700/- and Rs. 1000/-. The amount of Bimetal Strip used and its quality would be same in both cases and vary between rs. 5/- to Rs. 6/- only.

The demand of High precision Shunt is higher and growing rapidly. This is a key and basic passive component in Electric Vehicles, Electronics of an automobile, Robotics, Internet of Moving Things, Augmented Reality and vertical Farming. There are wide variety of resistors and many suppliers for it. But the specific shunts Shivalik manufactures are mainly used in battery Management Systems (BMS), Intelligent battery Sensors (IBS) and Energy meters. All three are high growth areas. Presently there is shortage of supply due to high demand as can be found here … 53

To get an idea of wide variety of resistors and details of their suppliers can be found here 32

Coming to specifics of Shivalik Bimetal, there is a visible improvement in their numbers over past few quarters and from Shipment records it can be found that they are supplying to Vishay Intertechnologies, a major passive equipment and component supplier in the automotive industry. It is a major achievement for a small player like Shivalik Bimetal in a product range where undisputed leaders are Taiwanese big behemoths. Resistors and Multilayered Ceramic Capacitors (MLCC) are not critical like memory Chips and CPU but a basic building block for completing the passive component basket of supplies. Another major source of supplies would be Medical Equipment market. No precise market size estimate is readily available with me but I consider it to be growing rapidly as seen from shortage of supply and increase of lead time as depicted in above report, Rough estimate is about US$ 24 billion which includes all types of passive equipments.

Shivalik Bimetals is growing its revenue fast in last couple of years and grown from Rs. 98 cr to Rs. 161 cr between 2016 and 2018 (Exports 50% in 2018). Management expects the growth momentum to continue as the specific kinds of shunts they make (among many other varieties), there are only few major suppliers as its a niche product where they developed expertise over many years of in-house efforts in product development. There are many other Tier 1 passive equipment suppliers who are also actively negotiating with them for sourcing their products. Continental Automotive and Hella are two companies along with Mouser who are major names who supply various electronic sensing products in the Automotive industry. We assume, if their supply to Vishay doesn’t constrain them from using their capacity for others then someday in future, they may be able to supply to these guys too.

Presently they have enough capacity to support the growing demand without much capex as we think the Electron Beam Welding machines are versatile and not yet optimally used.

The volume expansion is easier than significant margin expansion. We find no reason why Shivalik Bimetal can’t increase its capacity further and we feel once the present capacity, which is non-optimally used, is fully utilized and they gain trust with Vishay then others may follow suit.

The complexity comes in making the stuff owing to the design specification of the buyers. Here the model followed by Shivalik is to get the required specifications, tools and dies from the buyer and custom build to the stringent requirement of the buyer on a long term contract basis with pass through arrangement of any increase in the cost of alloys which are 100% imported. They are the largest importer to India for these specific alloys.

Number crunching here is easier as main things to monitor are growth in QoQ volume of sales without decreasing the overall margin and corresponding increase in balance sheet, if any.

Relevant Point: The company has an associate company named Shivalik Bimetal Engineers Pvt Limited which had a reported revenue of Rs. 0.59 Lakhs in 2014 (the last available data) and deals in similar product lines and another associate named Sugam Logistics which deals in the Logistics operation of the company. Also the company had a bad un-recoverable loan from its earlier product line of CRT Tubes to the tune of Rs. 6 Cr which they are gradually writing off from its books.

Overall we are quite optimistic about the prospect here. More update would follow once we have incremental insight in the progress of the company.
The brochures of the products are enclosed: Shivalik Shunt Brochure.pdf 48 (350.2 KB)

Disc: This discussion is not a recommendation to Buy or Sell the stock. Author runs a SEBI Registered Investment Advisory 45 and the stock was advised to the members of advisory about a month back. The author and his related entities have the stock in different accounts and total holding is about 5% of the total portfolio value. No purchase or sell of the stock has been made in previous 30 days.
The consistent improvement in financial also resulting in constant improvement for credit rating. Last 4 years rating for Shivalik
Rating Agency
Two notch upgrade in last two years take note of Shivalik’s improving credit profile (with with change in credit rating from CARE to CRISIL also I personally consider positive).

Discl: I have investment in Shivalik Bimetal and my view may biased. Investors shall undertake their own due diligence before investing.

Appreciate your revert and efforts. My limited point would be businesses are never linear. My more than two decade credit analyst experience, the most important point is working capital is never static. At times there would higher requirement and at time there would be release except in case of large FMCG. Working capital is like pulse rate in human body. As we excercise our pulse rate would increase and when we relax/sleep pulse rate would be below normal level. Similarly, when business go for value addition/ new products/ new market, at first instance working capital is most likely to increase. Once company establish its credential and supplier/customer develop faith about quality of product and financial strength of the company, the working capital would stabilise to industry norm.

By giving incentive, the company may manage to show figure of better working capital. For instance, many company may discount bills with bank for customer and get advance money with discount. So receivable days would be reduce, but there would contingent liability till the time cusomter of the company make payment to the bank/lender who has discounted bills.

Hence, the limited point is just looking at pulse rate without understand circumstance may lead to wrong diagnosis. Likewise, while the increase in working capital requirement is generally not a good situation, but we also need to look at whether the company is employing resources productilvely or not. I normally consider ROCE(Return on Capital Employed) as the critical ratio. In case of trading companies while asset turnover is high, but margin are thin, as compared with manufacturing value added company where profit margin is high but asset turnover is less, ROCE work as standard parameter across the industries and business in my opinion. I am rather too much simplyfying but it is my understanding.

So when I do calculation of ROCE for Shivalik Bimetal, I find constant improvement in ratio over the years.Enclosing my working for same (data soruce Screener)
Shivalik Bimetal (Rs Cr) ROCE Calculation
Net worth
Capital employed
Average Capital employed
So ROCE (on average capital employed) is improving every year since last 4 years for Shivalik, despite higher working capital. Hence, in my opinion, Shivalik, even can manage more than 20% ROCE (utilising internal cashflow for reinvested at same rate) and growth of 20% on Sales in medium, I would be very happy about investment.
Thanks once again, for bringing out meaningful points. Your reply and concern result in higher working and more conviction in investment for me.

Discl: Invested, added in last 3 months, Not SEBI registered advisor, Interested investor shall do own due diligence before making any decision.

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