Opto Circuits (India) Ltd

Value addition (manufacturing expenses) is a surprise.

For the first time, I went through the Annual Report of Opto Circuits (India) Ltd.

What looks great about the company is the margin in its medical devices business and also surprising is the value additions it does in its Indian operation.

1. Opto manufacture/assemble medical devices for 100% export.
2. It imports almost every thing (99%) what is required for manufacturing/ assembling
3. To manufacture medical devices whose sale value was 603 cr, labour charges was just over 1 crore, (thus operation is not a labour intensive), power & fuel was less than 1 crore (neither the operation is power intensive), other expenses including repairs and insurance etc do not add to even one crore (so other cost is also negligible).
4. One is made to think, what one can add value to imported raw material by spending not even one percentage of sales value and then sell it at a margin of over 35%. The products are sold in USA and Europe markets.
5. What Opto possesses which the manufacturers of these raw material do not have ? They loose huge margin if they sell final products instead of selling raw material to OPTO.
6. I thought, might be company may be making these raw materials in one of its overseas subsidiaries and final assembling is done in India. But these are not the products of any of its overseas subsidiaries as there is hardly transaction with them.
7. I thought India is a big medical market, but none of these equipments are sold in the country.
8. Company does not pay any taxes as its profit being profit from export.  but huge dividend payment is one thing which compel you to think.