Ace investor Madhusudan Kela added select small-cap picks to his Rs 3,500 crore portfolio in the quarter ending March 2025. The largest bet among these was the multibagger, Windsor Machines. Kela holds 7.71% stake in the company.
While the broad small-cap index has remained flat over the past one year, Windsor Machines has more than quadrupled investor wealth during the period. It has delivered a whopping 350% return since May 2024. Over the last 5 years, the return has been even more phenomenal at 3,000%.
Is this a momentum trap, or a cue to buy?
Small-cap, but big goals
Founded in 1963, Windsor Machines has made a name for itself in manufacturing plastic processing machinery. With 3 manufacturing facilities in western India, it manufactures injecting mould machines, and extrusion machinery including pipe extrusions and blown film extrusions. It caters to industrial clients in diverse industries ranging from healthcare and agriculture to packaging, automotive, and consumer goods.
While it is a small business with just about 300 employees, and is a small-cap with a market-cap of barely Rs 3,000 crore, its potential for growth is evident. It has presence in 65 countries including India. More importantly, it has tried to stay ahead of the technology curve through its international collaboration with Kuhne GmbH of Germany and acquisition of Italy’s Italtech. Result? It prides itself on manufacturing machines with the lowest running cost.
Well positioned to benefit from industry tailwinds
The industrial machinery industry is one of the key beneficiaries of the government’s infrastructure push. The focus on ‘Make in India’ also supports the sector’s growth.
Within industrial machinery, machinery for plastic processing is primarily consumed in western India, which accounts for almost half of the consumption in the sector. The rest is split up equally between the North and the South. Windsor is well-positioned to capitalize on this western skew by way of its headquarters in Ahmedabad, and manufacturing facilities in Gujarat and Maharashtra.
Potential for growth
Late last year, the company announced its acquisition of Global CNC for Rs 343 crore. Global CNC’s specialization in Computer Numerical Controlled (CNC) machines, Vertical Machining Centers (VMC), and Special Purpose Machines (SPM) will add to Windsor’s precision engineering portfolio. The acquisition is expected to help Windsor capture a larger share in existing industries, while also expanding to newer industries such as Oil and Gas, and Railways.
Moreover, Global CNC’s revenues of Rs 162 crore through established client relationships are expected to bring synergistic benefits for Windsor. On cue, the stock hit an upper circuit.
The company is also raising capital to fuel its growth plans. Rs 225 crore plans to be raised by diluting company stake towards select individuals through a preferential issue. Rs 125 crore of this amount was raised from Madhusudan Kela. It also announced raising Rs 500 crore through issuance of fully convertible warrants.
But bad investments have weighed on the business
The company had given out inter-corporate loans whose current outstanding stands at Rs 59 crore. In FY25, it executed a one-time settlement towards this, wherein it had to waive off interest worth Rs 54 crore. Still, Rs 43 crore is due by the end of next month.
Furthermore, one of its subsidiaries in Italy, Wintal Machines, has filed for voluntary liquidation. Another of its subsidiaries, RCube Energy Storage Systems, saw its net worth get slashed from Rs.19 crore to Rs.47 lakh due to a critical project being abandoned. On the consolidated financials of Windsor, this reflected as a loss of Rs 19 crore in the 9 months ending December 2024. This negated almost all of the profits made in its mainstay segment of injection moulding.
While the company has provided for the investments made in said subsidiaries, it is important to make a note of its history of imprudent financial and investment decisions. These provisions fall under exceptional items in its standalone income-statement and have dragged down its profitability. Another exceptional item has been a tax-liability worth Rs 15.5 crore, which was under legal contention, and has now been recognized.
As a result, despite clocking revenues of Rs 246 crore in the 9 months ending December 2024 and logging Rs 5.68 crore in profits before tax and exceptional items, the company made a net loss of Rs 16.58 crore during the period.
Risks loom
The company has tried to diversify across the spectrum of industrial machinery. But due to reasons explained above, the investments have not worked out in its favor. Injection moulding still contributes 58% to its revenues and carries almost the entire profits of the company.
Windsor has paid off loans over the last few quarters, thereby bringing down the debt on its books from Rs 208 crore in March 2024 to Rs 10 crore as of December 2024. But given the losses made previously, new acquisitions in the works, and the questionable history of previous investments, debt on its books as well as its fundraise plans will need to be closely monitored. Q4 earnings for the company are scheduled to be announced early next week.
Finally, even considering the exceptional gains from its sale of Wintal, the stock is trading at 789 times its trailing twelve-month earnings. The P/E is negative if we consider consolidated operating profits alone. The growth being priced in, is contingent on its recent acquisition bets turning a corner. The pricey valuation does not offer much comfort.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser. An alumnus of NIT, IIM, and a CFA charter-holder, she pens her views on the economy and stock markets.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.