Abrasives

As per Wikipedia "An abrasive is a material, often a mineral, that is used to shape or finish a workpiece through rubbing which leads to part of the workpiece being worn away".

Fundamentally speaking as long as you are in business you have to use your work tools- abrasives are not like steel hammers and are worn out, so you have to change them frequently which means constant business the entry barriers are not high and the un organised sector is big but if you are a regular user you know how frequently abrasives get worn out so you develop a relationship with products that are less wornout i.e. their USP 

Abrasive industry in India caters more to the industrial sector. There are 4 major companies in Abrasive listed space

Carborundum Universal (CUMI)
Grindwell Norton
Orient Abrasive
Wendt

All the 4 in Listed space cater to different industries because of variation in products though CUMI and Grindwell have some products in common.

Carborundum Universal is part of Murugappa Group. As far as I understand Carborundum people are making tons of cash but the problem is they can not scale up their business so they are making acquisitions when we acquire something we pay more than its actual value and there is added risk of lack of integration. So growth rates can't be positive.

Grindwell Norton is an partnership of Saint Gobain and some Indian partners. It is also well diversified in abrasives.

Orient Abrasive's name is deceptive they are a leader in manufacture of refractories which are used in lining of different industries to protect from heat. their margins are low hence lowest pe in this abrasive space.I am not particularly bullish about orient abrasives though it is the cheapest of the 4 because they are increasing assets @ 19% where as their sales are growing @ 13%. So the PE is justified

Wendt is the best of all of them they are mainly concentrated in diamond cutting blades. Their business is predictable unless either women stop buying diamonds(no chance in near term) or diamond cutting business goes out of india(more probable). Wendt is a partnership between wendt(mnc) and CUMI (the first one)

The above 3 except CUMI are fairly valued may be the reason for high price of CUMI is cheery consensus of MF managers. At present prices all of them are on the overvalued side. But in case of falls/slides abrasive business can be useful if you are a very long term player

Written by a pessimist and sometimes humorist

P.S. I couldn't find much about grindwell. I am an ECE grad so couldn't find  much on technical details
Please share your views

Regards
Brijwanth

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