3,650 per cent returns: This multibagger small-cap company makes strategic shift to focus on high margin distillery segment!

The stock is up by 67 per cent in just 1 year and over 850 per cent in 3 years.

BCL Industries Ltd (BCL) has announced that its Board of Directors has decided to significantly reduce the management focus on the edible oil business segment. This decision has been taken due to the significant volatility and depressed margins in the edible oil business segment due to reduced cultivation of local oil seeds and sustainability pressure.

As a result of this decision, BCL will terminate the lease for the Jalalabad unit and shut down the Bathinda edible oil unit in the near future. A portion of the Bathinda edible oil business will be shifted to the Bathinda distillery complex, where BCL has substantial land, power, and other infrastructure.

BCL has also applied for environmental clearance for a 150 KLPD ethanol expansion at the Bathinda distillery site. The company intends to use a majority of the available power and utility at the distillery site for this expansion.

The Board will soon make a final decision on whether to shift other parts of the edible oil business to the distillery location. This decision is being made while keeping in mind that the distillery business has better margins as compared to edible oils and this would be the most effective way to utilise the excess land, power, and utilities present at the Bathinda distillery site.

BCL expects a significant reduction in its overheads with this development and will also be able to monetise the Bathinda edible oil unit land in the near future.

The BCL management team and the Board strongly believe that this strategic decision will improve management bandwidth and increase focus on the high-margin distillery segment, where the company is experiencing strong growth.

Impact on Revenue and EBITDA

While the revenue contribution from the edible oil business for the quarter ended June 2023 was 43.7 per cent, its contribution to EBITDA was only 10.9 per cent. This suggests that the edible oil business is not a major contributor to BCL's profits.

Working Capital

The edible oil business also has a significant working capital requirement. With a change in the business model, BCL anticipates a decrease in the working capital cycle in the future.

BCL Industries Ltd Limited is a part of the Mittal group with a market cap of Rs 1,300 crore.

On Thursday, shares of BCL Industries Ltd plunged 1.95 per cent to Rs 540 per share with an intraday high of Rs 567.65 and an intraday low of Rs 540.

The shares of the company have a PE of 17.73x whereas the sectoral PE is 36x with a ROE of 19 per cent. The stock is up by 67 per cent in just 1 year and over 850 per cent in 3 years. Furthermore, over the course of a decade, the stock yielded remarkable returns of 3,650 per cent to its investors. Investors should keep an eye on this Small-Cap stock.

Disclaimer: The article is for informational purposes only and not investment advice.