A great investment is supposed to be dull and boring, and what could be more boring than a company that manufacturers cookers and cookware? Cookers are supposed to come with a replacement cycle of 10 years, which in today’s world is a generational shift. The use of technology in the product is limited and no one buys cookers on EMIs, which keeps them insulated from interest rate movements. The old quandary of who really buys a cooker is no longer relevant.
Cookers have penetrated only 20% of rural India. More importantly, people do not buy multiple cookers each year but buy one or two once every few years, which is why the propensity of the customer to swing towards the best brand without compromising on quality is high and unparalleled. That brings me to the stock that I have been bullish on for a while — the ₹481-crore Hawkins Cookers brand. The leading producer of cooker and cookware in India, Hawkins promises years of predictable revenue and profit growth, even as it throws back a lot of cash in dividends to its shareholders.
Trouble in paradise
However, the past couple of years have been tough on the company. It got entangled in multiple issues — labour strike at one of its three plants and objections from the state pollution control board against its factory at Hoshiarpur in Punjab. The company’s labour force in Uttar Pradesh went on a sudden strike demanding an unjustified wage hike, while officials of the Punjab government forced the company to close down its plant, alleging that it was polluting the environment. The company chose to fight both these issues through legal and regulatory channels rather than try and ‘settle’ the matter.
Faced with such a situation, any normal businessman would cut corners to set things right but the problem with the Hawkins management is that they are too honest to work in Indian conditions and have never taken the shortcut to success. While Hawkins was fighting its battle legally in court, shareholders couldn’t quite understand what was happening because they feared that going to court was like sacrificing