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Q&A: NMDC, Sintex, Sharda Cropchem, Dish TV India & others

Modified on July 2, 2018

The current article in this series provides responses related to:

  • Opinion on:
    • NMDC Limited
    • Sintex Industries Limited
    • Sharda Cropchem Limited
    • Dish TV India Limited
  • How to track the dilution of equity when profits are rising
  • Taking cues from insider buying
  • Calculating retained earnings and increase in market cap in last 10 years



I am going to ask your opinion about 2 stocks, which I own. I shall try to give the information in the format you have provided.

NMDC Limited:

  • Holding it for about 2 years.
  • Average cost ₹120, Quantity = 1,600
  • Very good fundamentals. Available at very reasonable P/E ratio.
  • Although in commodity business, demand for iron ore will always exceed supply in India, however, domestic prices of ore are very competitive compared to landed price of imported ore. Even during current recessionary phase in international iron ore prices, NMDC Limited has suffered a very mild correction in its price.
  • NMDC Limited’s gross margin is more than 65%. Being a PSU their dividend paying record is very good.
  • NMDC Limited’s performance is consistently good without any serious issues.


Sintex Industries Limited:

  • Holding it for about 9 months
  • Average price ₹90. Quantity = 1,500
  • Sintex Industries Limited’s product, water tanks, has tremendous brand value as well as growing demand. They are also making many other products like doors, toilets etc., which will have huge demand because of the new Govt. policies. Recent growth in top and bottom line has been spectacular
  • Sintex Industries Limited’s financial performance was badly affected because of the losses they suffered in foreign exchange speculation. But now, I think, the management has learnt the lesson and financial performance is improving.
  • Debt levels are going down. FCCBs are getting converted into shares, which is a good development as it shows the faith of lenders in the company.

In my opinion both, NMDC Limited and Sintex Industries Limited, at current prices are underpriced and good investments but I would like to get your valued opinion and attention to any adverse factors, which I might have missed.

Author’s Response: 

Thanks for writing to me.

NMDC Limited:

Sales growth has been slowing down in recent years, though profitability is maintained. However, operating performance has taken a hit. Profits are not getting converted into cash as money is getting stuck in inventory and receivables. Operating efficiency is getting hit as fixed asset turnover is decreasing year on year. Company does not seem to be performing good during recent years.

Sintex Industries Limited:

Sales growth has been slowing down in recent years. Operating profit margins are maintained, however, net profit margins have taken a hit due to increasing interest costs. Interest cost has increased as the company’s debt levels have increased 10 times in last 10 years. Increase in debt is due to very low asset turnover, which is characteristic of capital intensive businesses. Operating performance also has deteriorated. Fixed asset turnover is decreasing and receivables days are increasing. Overall, company’s performance seems to be deteriorating year on year.

Also Read: How to analyse Operating Performance of Companies


Sharda Cropchem Limited

Hello Vijay Sir, It will be helpful if you can share your thoughts on Sharda Cropchem Limited. The numbers are very confusing (at least to me) and I am hoping that you would be able to share your 2 cents as always 🙂

  • Source of data is: screener and bseindia
  • Sharda Cropchem Limited is into 3 business – agro chemical, conveyor belts and industrial chemicals.
  • The company is showing great last 3 yrs. return for both sales and profit growth.
  • ROE has also increased over the years last year being the highest,
  • But on the other hand cash flow has gone into negative with last year being the highest.
  • There is considerable cash that has gone into investment activity.
  • Also march 2015 they were asked to submit clarification w.r.t to abrupt increase in trading volume.
  • Shareholding: promoters => 75%, institutions => 13.3%, FII => 5.7%. All 75% of promoters’ holding is locked in
  • Current market rate ₹399
  • compounded Sales Growth => 5yrs = 16.32%, 3yrs = 30.00%
  • compounded Profit Growth => 5yrs = 18.52%, 3yrs = 63.43%
  • RoE => 5yrs = 14.2%, 3yrs = 15.58%, last year = 17.43%
  • P/E => 37.94
  • Price to book value = 6.21
  • Dividend payout => ₹0.5 / share
  • EPS = ₹ -0.01 for Dec 2014, ₹2.10 for Sept 2014
  • 52 wk high/low => ₹217 / ₹408



  • Operating profit margin is increasing
  • Net profit margin is increasing
  • Return on net worth is increasing
  • ROCE is increasing
  • Interest coverage is 214
  • A1 CRISIL rating



  • High PE
  • Low EPS
  • No depreciation claimed in last 5yrs


I have been tracking Sharda Cropchem Limited for close to 3 weeks and it was upper circuit today, without any announcement/disclosure made by the management or any news by any of the news agencies. I am wondering whether Sharda Cropchem Limited is stock for investment or it is one of those stocks where prices are manipulated by an operator.

Author’s Response:

I am not able to understand the exact business of Sharda Cropchem Limited. I am not aware how it plans to monetize its registrations of agro-chemicals in regulated markets. Therefore any comment would be mere conjecture.

Overall, financial numbers of Sharda Cropchem Limited seem ok. Sales are growing. Profitability is maintained. No debt. Increasing dividends. Only concern is very high receivables days. You must understand the reasons behind such high receivables days.

Read: How to do Financial Analysis of a Company

You should try to understand business of Sharda Cropchem Limited properly before taking any investment decision about it.

Current P/E ratio of Sharda Cropchem Limited is very high and does not offer any margin of safety.

Read: How to do Valuation Analysis of a Company

I would not be able to offer any opinion about its market price movements.

Dish TV India Limited

You’re right doctor, I should have shared my analysis of Dish TV India Limited, Here it is:

  • I am positive on the management (although the performance is not good) but can’t go in the detail here.
  • Dish TV India Limited was the largest DTH operator in India (it’s still is, but marginally), in terms of subscriber base. It has contracted with 450+ channels, which is highest in the industry.
  • Consumer base has been grown 16 times, revenue has grown from ₹190 cr in 2005-06 to ₹2,508 cr in 2013-14. But the company was bleeding cash and is under huge losses. For that, it has constantly raised money.
  • Net worth is negative.
  • There is a high probability that Industry might face a threat from Internet Protocol Television (IPTV) and 4G Internet.
  • 90% of revenue of the Dish TV India Limited comes from subscription money and rest from Teleport Services, Consumer Premise Equipment, Advertising, etc. Hence, 90% of revenue (from subscription) is under threat.
  • The industry requires heavy recurring expenditure, unlike telecom industry.

Can you guess why the leader is in loss and followers are in profit?

Will you categorize the DTH service as a commodity? Because I don’t see any way to differentiate the product from the products of competitors (may be that is the reason management is not performing).

Further, how would the industry react to economy, I mean will it be cyclical, counter cyclical or resistant. I think industry could be resistant as consumers have to pay very little portion of their budget for dish TV subscription. Possibly, economic fluctuation may not impact it.

My purpose for doing the research is not investment this time, I am interested in this industry.

I found that Dish TV India Limited is making loss and some experts were recommending it, so I thought it would be the best candidate if I want to learn the economics of the industry. I follow Charlie Munger, and he says “tell me where I will die, and I won’t go there.”

I know you follow the bottom-up approach, that’s why I asked for valuations and little about its prospects.

How much would you pay, if any, for this sinking ship?

Author’s Response:

You summed everything in the last line of your write-up:

“I know you follow the bottom-up approach, that’s why I asked for valuations and littler about prospects.”

Read: Choosing the Stock Picking Approach suitable to you

While reading your query, I was constantly wondering while I would be able to add any value to what you already know. In the end, I realized that you also know that I do not analyse stocks from top-down perspective.

I focus on finding companies which have proven themselves by their performance for over a decade. If some company has not done that, then I simply ignore it and start searching for other companies. I am comfortable buying growing companies in declining industries but won’t buy loss making companies in whatever industry.

Read: Final Checklist for Buying Stocks

As far as: “How much would you pay, if any, for this sinking ship?” is concerned, I would not pay anything for it.



Hi Vijay. I have been investing from last 2 year. I have sent you a post. I liked your article and it is good. I too follow similar approach like this with free cash flows (FCF).

I have just one question. The post does not mention about EPS. Do u think that it is ok not to track EPS apart from Net profit?

Also, how do track whether profit is increasing but equity getting diluted (may not be for this case).

Would be great full if you clarify.


Author’s Response: 

Thanks for writing to me! I am happy that you liked the article.

If there is no equity dilution year on year then EPS growth and net profit growth would represent one and the same thing, whether the no. of shares remain the same or increase due to split or bonus shares. In such cases, the % ownership of existing shareholders remain the same.

However, the two would not remain same if no. of shares increase due to issual of new shares which reduces the % shareholding of existing shareholders. In such cases from investor’s perspective, EPS growth would be more pertinent than Net Profit Growth.

However, in both these cases, net profit would keep retaining its significance in terms of profitability margins and the attractiveness of the business.

Read: How to do Financial Analysis of a Company

You can assess the dilution impact by looking at the share capital of the company. If share capital has increased then you should explore whether the same is due to bonus shares or issual of new shares.

Hope it helps!


Hello sir,

Thank you sir for your kind reply. I come from engineering background. I do not have much financial knowledge. So I try to stick on to diversifying my portfolio among various stocks, which render quality. Insider buying and buybacks still remain a strong force for my selection as they make the search easier.

Don’t you agree?

Author’s Response: 

Congratulation for starting the stock investing journey at the right path. Financial background is not required to become a good stock investor. However, one needs to put in the required effort to learn about selecting stocks.

Read: Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks

You are right that we should pay attention to stocks where insiders are buying as they are the people who have the most intimate knowledge about the company.


Dear Vijay Sir,

How to calculate “Total retained profits of last 10 years“? I think it is the amount of reserves money in the company’s balance sheet (in moneycontrol balance sheet). Am I right, Sir?

If wrong, the please clarify, how to calculate them?

And also how to calculate “Total increase in market capitalization in 10 years”?

I read your valuable article, but these 2 queries are not resolved. Please teach me.

Thank you for this fantastic piece of work.


Author’s Response: 

Conversion of profits into market cap is one of the important parameter to assess the management efficiency of any company:

Read: How to do Management Analysis of a Company

Retained profits = Net profit after tax – dividend paid

Market cap increase in 10 years = current market cap – market cap in 2005

Screener excel has all these data points.





  • 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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