An inspirational Teacher

The word guru is derived from two words, gu and ru. The Sanskrit root gu means darkness or ignorance, and ru denotes the remover of that darkness.
I have been blessed to have so many teachers in my life who have showered their knowledge, apart from parents teachers have the most profound impact on our psyche in life
I would not be talking about all of them here then the post would become a book, But I will talk about one
Prof S P Srinivas who taught us worldly wisdom through his finance lectures, Sitting through and listening him in class was an enormous experience, I always walked out with an awe feeling , how can one man have such an immense grip on so many subjects – Finance, Psychology, History, Literature and I can go on and on, and top to it all he has the best one liners on pretty much everything in life 🙂
He was always in library outside classes, reading always reading – He was a real life example of what Munger calls a learning machine
Tons of what he said stays with me and guides me when I am indecisive, he is a permanent … Read the rest

July 25, 2015

Suven Life – Embedded Triggers Triggered

Last year I wrote on Suven Life Sciences, also I did some secondary level maths to get a sense of returns an investor could get buying the business at then market cap (~2000 INR Crores or 400 Million USD) and exiting in 2024

See Snap shot below

The base case CAGR didn’t excite but reading management commentary compelled me to take a tracking position in model portfolio

Over to this year

One thing in AR gave me a Jeff Bezos moment

For the first time management was sounding optimistic (this is coming from a management which is very conservative on record)

Emphasis mine

Management views on past

Despite having grown the business every single year across the last five years, our business sustainability has been consistently questioned. We are perceived as a high risk service-based business marked by volatile quarter on quarter earnings because successful project completion may not necessarily translate into repeat orders if the project does not carry through at the innovator’s end

Management views on Future

The big message that I wish to send out is that this reality is likely to change. The volatility in our business model may moderate extensively following the commercialisation of

… Read the rest

July 18, 2015

Get a framework to understand Value

One of the many difficult question to answer in investing is what drives value of business

What makes one business to trade at a premium to other business in eyes of market participants and how does one identify any such business which is out there and still not recognised by Markets

There is an excellent thread on Valuepickr and I keep going to as it does a great job of answering these question

First lets understand they key value drivers, Most of what I am proposing below is based on this excellent paper by Bear Stearns¹ .

Value increases by

Growing operating profit and investing in NPV positive opportunities
Increasing ROIC (by taking capital out of the business or identifying high return projects)
Reducing WACC (Lowering risk)
Extending competitive advantage period (CAP)

Let’s give this a fancy name – 4 pillar framework

Can we put above theory in practice lets tackle each of the above components one by one

1. Growing operating profit and investing in NPV positive opportunities – This sounds fairly intuitive, has two parts

How can a company improve its operating profit – By Expanding operations or By expanding margins (EBIT as % of sales) – … Read the rest

July 10, 2015

Annual Review – Poddar Developers

Reading well detailed annual reports have their own pleasure. Today, post is on annual review of Poddar developers , I have written couple of times on Poddar here and here

Numbers first

Increase in Sales by 47.97% and increase by 156.88% in PAT

The company made allotment of 11,10,900 Equity Shares of Rs. 10/- each fully paid at a premium of Rs. 1115.21/-

Opportunity size is very big, here is extract from AR

The recently released Report of the Technical Group on Urban Housing Shortage (TG-12) (2012-17) has estimated the Housing shortage to be 18.78 million out of which 56.18 per cent is in the economically weaker segments and 39.44 per cent is in the Lower income group categories. As per projections of a report by the McKinsey Global Institute, the housing shortage under business as usual circumstances could go up to 38 million units by 2030

There is a thrust from central govt. as well for affordable housing

Ministry of Housing & Urban Poverty Alleviation has undertaken studies and extensive consultations with a variety of stakeholders including the private sector, non-governmental sectors, state governments and urban local bodies as well as other Government of India departments as well as

… Read the rest

July 9, 2015

Annual Review – CERA

Previously I have written on CERA here & here

Let’s try and summarize key messages from 2015 annual report

The headlines

Sales up by 23%
Net profits up by 30%
3,51,000 equity shares issued on preferential basis
Company also entered into competitive tiles market with exclusive tie up with manufacturers of tiles
Company has set up Wind Turbines of 11.825 MW and 1.00 MW Solar Plant which will generate about 90 % of the requirements and it will offset against monthly consumption of energy bill

Management focus

The growth of your Company, much above the market growth, is largely on account of its continued efforts in leveraging the high brand value and product optimization besides deeper penetration in tier 2 markets. These efforts are further fortified by strong and structured marketing efforts, good product quality and after-sales service, and backed by a very loyal distribution network across India.

Increasing distribution strength – This is helps company to push new products (like tiles) through existing channels

Improving Product quality – Especially as many products sold are not made in house

Marketing

Your Company’s two-pronged aggressive marketing push of mass media advertising over television and print and partnering with industry organisations like

… Read the rest

July 8, 2015

What is maintenance Capex ?

Let me share the story of Jenny and her lemonade stand

If you are unable to read post click this link

Link

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Book Review – Pebbles of Perception

After sometime I have read a book which has oodles of wisdom on each of its page, Laurence Endersen’s pebbles of perception lives with you long after it is read

The book is an all encompasses covering wide variety of topics like choice, Self-esteem, building character, parenting, saving ,investing and living life among many others

I will try to bring out things which I learned

Be Curious

ABC: Always Be Curious

Strive to ask right questions

Stay curious. Improve the quality of questions before getting to work on answers. Use more questions to see beyond the obvious answers. Improve group dynamics by ensuring there is enough attention given to asking the right questions. Be interested.

Curiosity will lead to better questions which in turn will lead to better answers

If we search for better questions, ultimately to lead to a better answer,

Provocation is mother of invention

In the world of chemistry provocation is used to force compounds to work in different ways. The same principle can be used with thinking

Learn Learn Learn

Learning is a continuum from ignore to mastery

and most of us are happy to stay at operational competence because we can survive with operational … Read the rest

June 30, 2015

Buying house Vs Equity Investments

A while back when I wrote don’t buy a house and invest your EMI in markets, I concluded that only 1 person in 50 would actually do it

I was surprised to find through comments that Nishanth is one of the those guys, I requested Nishanth to share his experience , This post is view from Nishanth for all of us to believe it’s possible to get your goals through equity investing

____

Over to Nishanth [My tit-bits in Red]

On your investment philosophy, key influences & investing Journey

My investing journey, started at the age of 23[early start], when I started my IT career in 2004. Right from the very first salary I received, I explored various investing options and stumbled upon equity mutual funds. Through a series of articles in Value Research and other websites, I understood the basics of mutual funds and decided to invest in them. I picked 3 of the best funds out then – Reliance Vision, Franklin Indian Prima, and HDFC Equity. I didn’t have the faintest idea regarding asset allocation or diversification at that time; however I had read about the power of compounding. [Keep this with you]

I opened a … Read the rest

June 27, 2015

Annual Review – Ajanta Pharma

Firstly pharmaceutical is a space which I have started learning recently (2 years) and therefore it’s obvious that some of inferences that I will make in below review could be wrong

Secondly , Ajanta pharma as a business kept coming to my radar for last 3-4 years but I kept ignoring it due to my limited knowledge in pharma space, its only last year when I did earnings power box analysis and found that this company is in wealth maximising quadrant 2 then I became owner

Ajanta Pharma is a speciality pharmaceutical company engaged in development, manufacture and marketing of quality finished dosages in domestic and international markets.

For someone new a key snapshot to understand company, Keep it handy

The company has clear strategy is each of the above markets

India, Asia, Africa – Would drive incremental growth (which has been decent for past decade)
LATAM & USA – Would drive exponential growth if the management gets its strategy right

Normally, all of us take part in several activities in our day-to-day life and many of the patients (especially older order cheap levitra age men) were not able to take the semi liquid version of Kamagra pill helped millions … Read the rest

June 21, 2015

Investing in turnaround situations

For many value investors investing in turnaround situations is a simple ‘No’, they go buy what Warren buffet wrote few years ago

Both our operating and investment experience cause us to conclude that “turnarounds” seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price

We have written in past reports about the disappointments that usually result from purchase and operation of “turnaround” businesses. Literally hundreds of turnaround possibilities in dozens of industries have been described to us over the years and, either as participants or as observers, we have tracked performance against expectations. Our conclusion is that, with few exceptions, when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact

From WB Shareholder Letters

Investing in business with poor economics is going to lead to poor investing returns, there is no doubt about that but many a times a business makes few bad decisions (mindless expansion by taking on debt) or due to a key external situation (change in … Read the rest