A Case Study on Balmer Lawrie & Co., its Book Value, Dividends & how to decide when to buy this stock?

After doing case studies on ONGC and IOC, we chose another company from our Dead Monk’s Portfolio for case-based analysis. But before we get down to details, just have a look at the 2 graphs given below. One shows increase in book value per share during the last 10 years. The second shows increase in dividend per share during the last 10 years.

Book Value Per Share (2000-2013)
Dividends paid per share (2002-2012)
The company in discussion is Balmer Lawrie & Co. It has continuously increased its book value from Rs 101 (2003) to Rs 423 (2013) at a CAGR (what is CAGR?) of 15.4%
It has also increased its dividend per share from Rs 1.80 (2002) to Rs 28 (2012) at a compound annual growth rate of an astonishing 32%. Even if you consider the last 5 years, growth rate has been a market beating 16%.
In India, dividend stocks do not get the respect they deserve. A similar stock in US markets would have definitely found a place in USA’s coveted list of great dividend stocks: S&P Dividend Aristocrats.
But this is India. 🙂 So lets move ahead with our case study…
What does this strangely named Indian company, Balmer Lawrie & Co. do?? We haven’t even heard about it…
Almost 8 out of 10 people involved in stock markets have not heard of this name. People don’t even know about the existence of this company. And even if they do, they don’t understand the rationale behind the name, let alone the heterogeneity among its business verticals. So let us first introduce the company to you.

Balmer Lawrie & Company was started by 2 Scotsmen, Stephan Balmer & Alexander Lawrie in 1867. Yes, the company is 146 years old!! As of today, it is a Public Sector enterprise under the control of Ministry of Petroleum & Natural Gas. So here we have a debt-free PSU with turnover of Rs 2100+ crore, which we never knew of. 🙂

The company operates its businesses under 5 heads – Tours &Travels, Industrial packaging, Logistics, Lubricants & Others (engineering products, tea packaging, leather chemicals, etc). You can read more about the company here.
How has Balmer Lawrie increased its book value and how this data can be used to enter this stock?
Stock Price & Book Value Movement (2003-2013)
The red blocks in above graph are book value per share over the last 10 years. As already discussed in earlier graphs too, it has been on a constant uptrend since last 10 years. On the same axis, we plotted the share prices. And it is not very difficult to see that book value has acted as a strong support for the stock price (a similar pattern was found in our analysis for Indian Oil). The stock price has rarely fallen below its book value. And when it has, it has almost always moved up into higher zones.
Can we use Price/Book Value as a parameter to check stock valuations and as a criteria to enter this stock?
Correlation between P/BV & 5 Year Returns
The graph clearly shows that lower the Price/Book Value per share, higher have been the 5 year returns. So you have the answer to the question. 🙂
Assuming Balmer Lawrie maintains its generous dividend payout policy, how can we use Dividend Yield as criteria to enter this stock?

If we see historical averages, the company has maintained an average dividend yield of 3.2%. The yields hit a historic high of mouth-watering 8.2% when markets crashed in March 2009. But it quickly moved back to more ‘normal’ levels of 3% to 4%. (see graph below)
Dividend Yields – Average, Highest, Lowest (2003-2013)
To check whether there exists some correlation between dividend yields and 5 year returns, we plotted a graph between these 2 parameters. And the result is summarized by one statement and graph below –
Correlation between Dividend Yields & 5 Year Returns
Higher the yields, higher the returns. 🙂
As we have warned in all our previous investment case studies too, please do remember…

…that above approach uses just 2 parameters, P/BV & Dividend Yield to decide about when to buy the stock. You as a reader should remember that there is a considerable difference between real life and case study. One should never invest based on just one or two parameters. This case should not be taken as an investment recommendation. Do your own research before investing your hard-earned money.


  1. Balmer Lawries business is a bit complicated though , to understand…and as you guys pointed out , just going by book value and dividend yield and payout will not be a sound strategy….Why don't you guys run a case study on Engineers India and Gandhi Special Tubes…with more parameters though , not just PB and dividend yield…you might find them worthwhile additions to your Dead Monk Portfolio

  2. @2ff086ba9bddf5dfd037a4bdbfbee0af:disqus

    We think the business (or rather businesses) are simple as individuals. It is the 'un'relatedness of all of them that complicates the issue. You can also read an interesting take on this company at http://tinyurl.com/a9ezyor

    Thanks for the stock suggestions. Will definitely have a look at them 🙂

  3. Balmer Lawrie has given excellent return in last 10 years apart from generous dividend.
    Its price appreciate more then 8 times in last 10 years with a CAGR of 23.57% & still it is available in single digit P/E with a EPS of aroung 91. For long tem investors it is surely a investment bet.

  4. Just a question… where do u guys get hold of this data… for example, where do you get the B/v data for BnL or IOC or SAIL etc…. I am desperate for such a source …..

  5. @d4f5fca7db986b42c39e7ebc4dac152e:disqus

    Book Value related data is available in Annual Reports of individual companies.
    Or you can try free resources like MoneyControl etc, which provide sufficient data in their financial sections.

  6. For Balmer Lawrie, the price does seem tempting for long term investors and those looking for yields. But recent announcement by govt asking its own departments to avoid booking tickets through govt agents like Balmer Lawrie etc has raised some concerns. This agent fee is one of the important if not the largest revenue drivers. But it remains to be seen as to how this would eventually effect company's profitability. Company has also decided to shutdown it loss making tea business and is also looking to buy a ticketing company. This may effectively negate the ill effects of govt's advise. But it remains to be seen and its better to wait for while before taking a position in this stock.

  7. Recent announcement by govt asking its own departments to avoid booking tickets through govt agents like Balmer Lawrie etc has raised some concerns. The business needs to be reanalyzed before taking a further call.

  8. Hi dev,
    Is it advisable to enter Balmar Lawrie at the current price? What is your outlook for long term?

  9. A very good Company giving handsome dividends to the Government but not getting enough encouragement from the Cenre. .They should divest this Company and give handsome returns to the Public share holders and the holding company share holders.Holding Co.BLIL is getting sep motherly treatment in the share market despite good fundamentals and handsome dividends.

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