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Q&A: Future Market Networks, V2 Retail, Pioneer Embroideries & Others

Modified on July 23, 2018

The current article in this series provides responses related to:

  • Opinion about Agre Developers Limited (Future Market Networks Limited)
  • Opinion about V2 Retail Limited and Pioneer Embroideries Limited
  • Difference in financial ratios reports by multiple source of data for same company
  • Opinion about investing in stock of companies with high PE ratios
  • Clarifications about contingent liabilities and whether they should be treated as debt
  • Reader’s observations about the qualities of good businesses
  • Clarification about only marginal increase in share capital of a company when it raises additional equity
  • Clarification about impact of fundamental factors on price movements


Future Market Networks

Dear Mr. Vijay,

This is regarding my query on a stock I am holding in my portfolio and would like to know your views.

As instructed by you, I am writing answer to all 4 questions about this stock – Agre Developers Limited (Future Market Networks Limited):

  1. Holding period – 4 years
  2. Average cost of buying – ₹26 (Quantity – 6,000)
  3. Qualities noticed while investing — Demerged from Pantaloons Fashion & Retail Ltd. Company was available at mkt cap of ₹40 crore with real estate assets of close to ₹300 crores,
  4. Performance – Company has not at all performed and the share price is one fourth now.

But since it has the real estate (malls etc.) I was hoping that value unlocking will happen someday. Since apart from stocks you also have expertise in real estate, I was hoping to have this analyzed by you. I know you have been very generous and thus have a huge backlog of stocks to be analyzed. I would wait till you come to this one.


Author’s Response: 

Future Market Networks Limited (FMN) owns real estate. But it gives these properties on lease to its group entities (Future group). It’s not known whether the lease rental it receives from these group entities are at arm’s length (at prevailing market rate). However, looking at the financials it seems that the current business performance not in favour of long term benefit of shareholders.

The operating profit over years, has been in range of ₹30-40 cr. which is not sufficient to meet interest expense of ₹80-90cr. The question of creation of wealth for shareholders seems irrelevant.

Read: How to do Business Analysis of a Company

I suggest you reassess your situation as a shareholder.


V2 Retail Limited

Vishal Retails (Now V2 Retail Limited), promoted by Ram Chandra Agarwal was a hot stock ever since its listing.

The company came out with an IPO in 2007 @ ₹270, which oversubscribed by a whopping 81 times. Stock hits a high of ₹1,001 in 2008, which now quoting around ₹10.

In June 2007, Vishal raised ₹110 crore (₹1.1 billion) through an IPO but this was not enough to meet its scorching growth. It had 50 stores by then and was looking to add 130 more in a year. It tapped the short-term debt market.

Company sold its old business to TPG and Sriram Group in 2011 for ₹70 Cr (liabilities to the extent of ₹823.20 Crores and assets of ₹ 393.78 Crores transferred in this deal).

Major overhang for this company is the contingent liabilities and the court disputes.

I am fully convinced with company’s business and have confidence in RC Agrawal. Now need your views regarding this.

Pioneer Embroideries Ltd. Is looking like a turnaround story. It is making every effort to retire its debt and hopefully would make improvement in its situation by this financial year end. Let us hope for the best .One of the biggest embroidery brand ‘Hakoba’ is owned by the company.

Author’s Response:

Thanks for writing to me!

V2 Retail Limited as well as Pioneer Embroideries Limited, both are loss making companies. They might be a turnaround stories, but I do not prefer venturing into turnaround segment, when there are enough opportunities available in stock markets in profit making, fundamentally sound companies.

There are many investors who invest in loss making companies. You may look investment opportunities in them post doing your own research.

However, I believe that an investor should prefer profit making, fundamentally sound companies over loss making companies.

Read: How to do Financial Analysis of a Company



I was also checking Nitin Spinner. On Economic times – Debt/equity = 0.9. and on Edelweiss it is 1.65. Screener = 1.1.

I read at many places that cotton price will be under pressure. So, if that is true then Nitin Spinner should gain from that in margin!

Author’s Response: 

Every site would have different assumptions about what to include in debt or equity. It is important that the assumptions remain same over the entire past data that an investor analyses.

It is advised that before making final investment decision, an investor should calculate all the ratios herself by taking financial data from the annual report.

If raw material prices go down, then normally margins should increase until the time company has to pass on the benefits to customers due to competitive pressures.

Read: How to do Financial Analysis of a Company

Hope it helps!


I have a query on unique and thematic businesses that are characterized by steep PE multiples, disregarding DCF or other sane measures of value.

  • Stock P/E: 69.95,
  • Book Value: 14.61,
  • ROCE3yr average: 16.80%,
  • Debt: ₹3.36Cr. ,
  • EPS: ₹4.06,
  • Market Cap: ₹284.00 Crores
  • Compounded Sales Growth: 10 YEARS:52.43% 5 YEARS:129.47% 3 YEARS: 1230.26% TTM:110.54%
  • Compounded Profit Growth: 10 YEARS:None% 5 YEARS:None% 3 YEARS: None% TTM: 165.36%
  • Return on Equity: 10 YEARS:None% 5 YEARS:None% 3 YEARS:13.14% LAST YEAR: 14.53%

Is it a good company or what?

Author’s Response: 

Thanks for writing to me!

Whatever be the growth and profitability numbers, I would never be comfortable investing in a company at P/E ratio of 69.95

It does not offer any margin of safety. In fact, it has negative margin of safety.

Read: How to Valuation Analysis of a Company

However, there are investors in the stock market who follow different investing strategies and may invest in such a stock. I would like to delineate a belief that I hold about investing:

“There is no one path to success in stock market investing. Investors have made money in markets by following high P/E growth investing, low P/E value investing, mix of both, arbitrage, technical investing, large cap investing, mid/small cap investing and many other such approaches. Therefore, I believe that there is no single standard path to succeed/make money in markets. The path an investor should follow is the one she is convinced with and feels comfortable with.”


Therefore, I would advise that you do your own due diligence before taking any investment decision.



Hello Mr. Vijay Malik. I recently bought Nitin Spinners Ltd so was checking again. I read that contingent liabilities is very high – approx. ₹250 cr. I missed this part earlier.

Read – Analysis: Nitin Spinners Limited

Also after reading about contingent liabilities, I think that all these are to be paid and decisions cannot go anyway in favor of the company. So, why do they mention these dues in contingent liabilities?

To me these part are looking like a debt. Is it cheating or I read it incorrectly? I am not good in understanding this part. If you please give few minutes then you can dissect easily.

(On Screener, I have created “Contingent Liabilities to Sales” few months back.)

Author’s Response: 

Contingent liabilities mean liabilities which the companies might need to pay in future, however, at this point in time, it is uncertain. Showing such liabilities under contingent is not cheating. Not disclosing it in annual report is cheating.

Investors can read these liabilities and interpret them accordingly. If investors believe that they would be crystallized for sure, like you have done in Nitin Spinner’s case, then you should add it to debt/liabilities and then analyse the company accordingly.



Sir, are only 6 stocks in your portfolio enough for wealth creation or any new additions are advised? Please reply.

Author’s Response: 

Thanks for writing to me!

I do not have any targeted number of stocks in my portfolio, however, I try to keep this number as low as possible.

Currently, I believe that 6 is enough as I am getting opportunities of additional investment in existing portfolio. Once all the stocks exceed my purchasing criteria, then I will look to add new stock.

You should also read: How Many Stocks You Should Own In Your Portfolio?

Hope it helps!


I am seeing a pattern here. Companies with high ratios of fixed asset & inventory turnover, lower receivable days are continuing their up-move in the market, while others are sideways or moving down after initial up move in May-Oct 2014 rally !

Is this how it’s working now?

Author’s Response:

You can’t imagine, how happy I am after reading your this comment!

You have nailed it. The features which you just described are the characteristics of excellent companies. If companies perform well in their business, market always rewards them, though timing of market’s response may be a bit delayed.

Read: How to analyse Operating Performance of a Company

If an investor chooses and invests in companies which are operating their business efficiently, she may expect to make significant wealth from stock markets.

All the best for your investing journey!


Analysis: Avanti Feeds Limited

Difference between PAT and CFO is ₹28 cr whereas equity raised is ₹2.54cr. Can we related these two?

Author’s Response: 

The equity raised of ₹2.54 cr. that you are referring to is the par value/face value of the incremental shares issued to investors. Actual amount raised is higher than par/face value. The different between the actual investment value and par/face value is shown in securities premium account as part of reserves and surplus.

Hope it clarifies.


Hi Vijay/Chetan,

The asset turnover ratio/Inventory turnover ratio for both Suven Life Sciences Limited and Alkyl Amines Chemical Ltd are comparable but I can see Suven is showing upward trend while Alkyl is showing some down/recovery trend.

Then how confidently we can say that these ratio are very much correct to identify a potentially good stock?

Although, I can see that Alkyl is having D/E ratio (0.97) greater than Suven (0.25). And also what can be safe/good value for this ratio (around 10)? Thanks in advance.

Author’s Response: 

Thanks for writing to me!

Stock analysis is a never ending process. Every parameter gives some information about the stocks. No parameter is complete in itself. An investor should use multiple parameters in conjunction to identify good stocks.

As far as analysing price movements of any stock is concerned, it is always a guesswork. It can’t be said with certainty, what parameters market is weighing more, while giving certain value to any stock.

You may find the value to various parameters in this checklist for buying stocks:

Final Checklist for Buying Stocks





  • The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
  • I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
  • Currently, I do not own stocks of the companies mentioned above in my portfolio.

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