Elegant Marbles - A Ben Graham value play

I was looking at the list of companies trading below their book value and came across Elegant Marbles and Granites. The company's share is trading at INR 47. The company has equity worth INR 4.5 Crore of 45,00,000 shares of face value INR 10. This translates into a market capitalization of INR 21.15 Crore.

Negatives:

1. The company's business is not anything to write home about. The company is in a very competitive industry and profit margins are not high. The OPM varied between 3-7% in the last five years
2. Over the last ten years, company has paid dividend in each year except the year 2002. 
3. The company has mostly remained profitable except in 2005 when the company had an operating loss but due to other income the company remained profitable at net level. 
4. The tax/PBT is also less compared to 30% tax rate without any incentives. Tax/PBT was less than 10% in four out of the last five years.

Positives:

1. The company's annual report of 2009-10 shows that the company has significant amount of investment in quoted shares and mutual funds. The balance sheet shows that the total amount of shares held at market prices on 31 March 2010 was INR 17.8437 Crore (see the footnote of Schedule "D", Market value of Quoted shares). I calculated the same portfolio today and it shows a value of INR 20.42 Crore. Since the markets are overheated, if we give a discount of 40%, the portfolio value still comes in at abount INR 12.25 Crore.
2. The company's balance sheet also shows that it holds liquid mutual funds whose market value on 31 March 2010 was INR 23.4825 Crore. Since the market value of liquid funds do not vary much, I take it as is.
3. The company also holds Debentures of Shree Ram Transport Finance Company with market value of INR 22,21,776. 

The total value of all this with discount given to equity holdings come to INR 35.95 Crore. The company has negative working capital of INR 1.19 Crore. Removing that from the cash holdings gives INR 34.75 Crore of current assets. The company does not have any short/long term debt. Thus the current market cap of the company discounts the current cash position of the company by around 40%. The company's plant/machinery/land and other assets are not even looked at. Seems like a compelling Ben Graham buy.

Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. The better sales will be the frosting on the cake. - Warren Buffett