Ask Your Queries

Modified: 20-Nov-20

Dear friends,

This section is to assist you in the quest for stock market investing. You may ask any of your investment-related queries as comments on this page. It would be our pleasure to be of help to you in your investing journey.

 

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

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79 thoughts on “Ask Your Queries

  1. Rule of 72 shows that money will be doubled within 10 yrs at 7.2% and doubled within 5 yrs at 15%. i.e if the time horizon is let’s say 50 yrs.
    A) if money doubles within 10 yrs at 7.2%, then number of doublings will be 5 ( since each doubling takes 10 yrs) or 10,000/- becomes 320,000/- (10 -> 20 -> 40 -> 80 -> 160 ->320) and money growth is 32x.
    B) if money doubles within 5 years at 15%, then number of doublings will be 10 ( since each doubling takes 5 yrs) or 10,000/- becomes 10,240,000/- (10 -> 20 -> 40 -> 80 -> 160 ->320 -> 640 -> 1280 -> 2560 -> 5120 -> 10240) and money growth is 1024x.

    Now with MRF:
    7 Jan 2011 market price: 7060/-
    12 Jan 2021 market price: 85750/-
    Price: 12x approx.
    Now according to the rule of 72:
    Money becomes 8x i.e 3 doublings and 16x i.e. 4 doublings. So, for 12x it is approx 3.5 doublings and since that took place within a span of 10 yrs so 10/3.5= 2.85 years for each time to double the money.
    Now, 10,000/- doubles in 2.85 years for the first time and becomes 20,000/-
    20,000/- doubles in 2.85 years for the second time and becomes 40,000/-
    40,000/- doubles in 2.85 years for the third time and becomes 80,000/-.
    80,000/- will become somewhere near 120,000/- during the remaining time.

    Q1- Acc. to the rule of 72 the rate of return for MRF at 12x comes out to be 25.2% annually for money to be doubled in every 2.85 years but if we increase 7060/- by 25.2% annually for 10 years the total comes out to be 66,811/- (7060*[1+(25.2/100)^10] = 66,811/-). Why is that?

    Q2- If the total gain is simply (sold price – bought price)* numbers of shares, then where does compounding plays the role?

    Basically want to know why do people say the stock market compounds the money in the long run and how money compounds in the stock market (if it is simply the difference of prices times no. of shares).

    • Hi Prasoon,
      Thanks for writing to us!
      Rule of 72 is just a rough, back-of-the-envelope approximation of the compounding interest formula i.e. Future value = present value * (1 + interest rate)^(time period).
      Rule of 72 uses many rounding-offs and approximation. Therefore, to do any precise calculation, an investor should use the compounding interest formula as done by you in “Q1”. Rule of 72 is not different from compounding interest; but, it is a simple, rough, and crude approximation of the same.

      You are right that the gain for the total holding period, which may be more than one year, is simply (sold price – bought price)* number of shares. However, if one sees it from year on year perspective, then the rule of compounding interest come into play where the price of the stock at the end of first-period “year-one” becomes the starting price for the next period “year-two”. This is similar to compounding interest where the interest of year-one is added to the principal and becomes the new principal for “year-two”.

      Regards,
      Dr Vijay Malik

  2. Dear Dr Vijay Malik
    Please find my analysis of Marksans Pharma Limited, a mid-cap Pharma company. I request you to provide your views and comments.
    Regards,
    Veenadhari

    Financial analysis:
    Company sales have grown from 305 cr FY2010-11 to 1134 cr FY 2019-20 with a CAGR of 15.7%
    Company net profit has grown from (222) cr FY2010-11 to 117cr FY 2019-20

    The present Tax rate is 22.8% which looks like a little lower than standard.
    Current P/E ratio = 14.4
    ROCE= 25.6%
    ROE=20.5%
    EPS = 4.2 rs which is less than cash flow per share 5.12 rs. So it looks like all the profits are encashed.
    Dividend yield=0.17% looks low value
    Debtor days = 78.3 (Improved from 118.5 in 2011)
    Inventory Turnover =4.7
    Company has a healthy interest coverage ratio of 18.97.
    Company’s PEG ratio is 0.27.
    Company has a healthy liquidity position with a current ratio of 2.69.
    Borrowings have been reduced year on year at present it is Debt-free company
    Cash from operating activity increased from (65) FY2010-11 to 201 cr FY 2019-20
    Free cash flow activity increased from (228) FY2010-11 to 150 cr FY 2019-20
    Business Analysis:
    Manufacturing facilities: Goa, India; Southport, UK; Farmingdale, USA
    48.25% promoters shareholding and no pledging
    Cumulative PAT < Cumulative CFO this shows all the profits are converted into cash.

    Credit Rating Report:
    India Ratings and Research (Ind-Ra) has revised Marksans Pharma Limited’s Outlook to Positive from Stable while affirming its Long-Term Issuer Rating at ‘IND A-’.

    Marksans has built a steady franchise in the regulated market space of the UK and US (over 80% revenues), with a front-end presence through subsidiaries.
    Company has improved leverage ratio which is 0.01X in 9MFY20
    Company doesn’t require any capex for new facilities until 21.
    Improved Operating Performance due to good portfolio mix, improved pricing scenario in US markets and reducing Brexit related uncertainties in the UK.

    Company has a Modest Business risk profile due to its portfolio in the OTC segment and Soft get products in the US and UK which are expected to low pricing challenges.
    Company has relationships with diversified retailers in the regulated geographies. Recently it got approvals from USFDA. Company front end presence in key markets give product approval opportunities optimally.
    However, it is vulnerable to raw material price risks, given the lack of backward integration.

    Management Analysis:
    1150Employes globally
    500+ registered products
    2462 cr Mcap at present

    Remuneration of directors and Key Managerial Persons around 3.12 cr and Other key Managerial Persons around 1.48 cr. Which looks ok since it is in 2-4% of PAT (172cr)
    Total revenue contribution of different geophagies
    UK _ 45% ( 23.5 % YOY growth)
    US _ 38.5% ( 6.1 % YOY growth)
    Australia _ 12.4% ( 17.5 % YOY growth)
    Rest of the world_ 4.2%

    Opportunities and challenges of Indian Pharm INDUSTRY
    • Government-sponsored health coverage programs
    • Growing focus on chronic diseases
    • Opportunities in newer product classes such as biosimilars, gene therapy, and speciality drugs
    • Exploring the underpenetrated markets
    • Leveraging the patent cliff
    • Public health sector to offer meaningful opportunities

    Challenges:

    India still lacks universal healthcare access
    Lack of a stable pricing and policy environment
    Dependence on external markets for intermediates and Active Pharmaceutical Ingredients (APIs)
    Excessive dependence on one geography

    • Dear Veenadhari,
      Thanks for sharing your analysis.
      We believe that more insights can be brought out by doing a peer analysis of Marksons Pharma with its competitors.
      We request you to update the analysis with peer/competitor comparison and then share it in a Microsoft Word document with us on email. We would be happy to provide our views on your analysis.
      Regards,
      Dr Vijay Malik

  3. Dear Dr Vijay,
    Greetings.
    Could u please explain to me how does compounding works in the stock market? Let us say I bought a stock of XYZ company for Rs 100. I hold that company for 10 years. That company has a return on capital employed (ROCE) of 18%. Will my return depend on ROCE of company or increase in PE of the company. I am confused here. In the first year, ROCE of 18% means my 100 Rs will become Rs 118. But as I m not getting back that money, will it be reinvested back in the company? Please help me in clearing my confusion of how exactly does compounding works here.
    Thanks and Regards,
    Dr Jyoti Kalange 

    • Dear Jyoti,
      We would request you to do an independent search by learning about what ROCE is; what it implies; how it is calculated; whether the stock price is used in calculating ROCE etc. Once you have used Google to do this search, then we request you to elaborate your learning from such a search.
      We would be happy to provide our inputs on your line of thought on this issue.
      Regards,
      Dr Vijay Malik

  4. Dr Vijay Malik,
    You have analysed and recommended Minda Industries share for purchase. I have seen your analysis and noted that the PE ratio of Minda Industries is 706.10.
    With such a high PE ratio, whether share should be purchased.
    I think the PE ratio of 706.10 in your analysis is wrong. PE ratio will be about 36.4. You may kindly check the data and clarify.
    Thanking you.

    • Hi Arun,
      Thanks for writing to us!

      1) You have analysed and recommended Minda Industries share for purchase.
      Answer: Why do you say that the article recommends the purchase of shares of Minda Industries Ltd?

      2) With such a high PE ratio, whether share should be purchased.
      Answer: We do not have any view of whether an investor should buy any share or not. An investor needs to make these decisions on her own.

      3) I think the PE ratio of 706.10 in your analysis is wrong.
      Answer: Where have you found a PE ratio of 706.10 in our article?

      We request you to read the article on Minda Industries Ltd entirely and you will automatically get answers to your queries on your own: https://www.drvijaymalik.com/minda-industries-ltd/

      Regards,
      Dr Vijay Malik

    • Dear Dr Vijay
      Thanks for your reply.
      ROCE = EBIT/capital employed, ROCE will tell me how much return the company will get on money invested in it. The stock price depends on demand and supply of particular stock in the stock market. The stock price doesn’t affect ROCE.
      My question was how does compounding work in the stock market?

      • Dear Jyoti,
        Thanks for elaborating your learning about ROCE.
        Regarding compounding in stock markets, we request you to do an indpendent search for answer by doing Google search. Thereafter, we request you to elaborate your learning from such independent search.
        We would be happy to provide our views on your line of thought.
        Regards,
        Dr Vijay Malik

  5. “Dr Stock” name is perfectly suited to you, Sir. Perfect analysis. This website is excellent. I didn’t come across anything like this website. I came to your website through “escorts employee welfare trust analysis” in google search, but I didn’t know who is the other shareholders in Escotrac (apart from Escorts). Some colours or images should be used for better reading.

  6. Sir, why holding companies trading at a discount, like IDFC or other group holding company? Also, how an open offer is beneficial to the shareholders?

    • Hi Santhosh,
      We would request you to do some self-thinking about these queries and also take the help of Google search to arrive at answers independently. Thereafter, we request you to share your learning with us. We will be happy to provide our inputs to your line of thought.
      Regards,
      Dr Vijay Malik

  7. Hello. I am an investor in Indian stock markets. I have some questions:
    1) Are shareholders allowed to request companies for a hard copy of the annual report?
    2) What to do if the company does not provide a hard copy of the annual report despite asking for it?
    3) Are shareholders allowed to ask for free product samples of a company?
    4) Are shareholders allowed to request printed copies of other documents like investor presentations?
    5) Are shareholders allowed to ask questions to management outside of an AGM(via email)?
    6) Are shareholders allowed to ask for other items like a free notebook, free poster etc from the company?
    7) What are some other rights of shareholders?
    Kindly answer all questions pointwise. Thank you!
    Thank you!

    • Dear Ajay,
      We believe that a lawyer who is an expert in the corporate law, Companies Act and various other regulations would be the best person to guide you about the rights of the shareholders provided in various laws.
      You may contact any lawyer or study the laws yourself.
      Regards,
      Dr Vijay Malik

  8. Hello Sir,
    Wish you a very Happy New year.
    While going through the Atul ltd Annual report, I have seen they carry a list of subsidiaries and categorized it under Operational and Non Operational Subsidiaries.
    Also, most of these subsidiaries carry negative reserves. As per me, a negative reserve means the company has eroded all its capital.
    But I fail to understand how a 100% subsidiary of Atul Ltd (Atul Ltd has good cash), eroded its net worth and what is the implication while considering Atul for investing purpose.
    Snapshot Ref :
    https://ibb.co/kSKPvJK
    https://ibb.co/YfjNt4c

  9. Sir,
    By using your stock analysis excel, how one can analyze bank stocks, pharma and IT stocks as while analysing such companies you need certain other rations like in banking sector, CASA ratio is very important and in IT companies, the number of clients increased/decreased is important.

  10. Hello Sir,
    I am 30 years old and new to stock investing. It would be of great help if you can guide me on the following questions as I get mixed responses but never a concrete reply.
    1. Investors follow many strategies to accumulate stocks and I agree there is no concrete number of stocks a person to hold in a portfolio. For Eg: I understand you have a very focussed portfolio of stocks as you have a very in-depth understanding of stock analysis and you confidently invest the entire capital in 4 or 5 stocks. Then there is another approach, after reading “little book that beats the market – Joel Greenblatt” where the author suggests rotating 25-30 stocks every year based on the returns and many other strategies.
    As like many salaried investors I allocate say 20000 INR per month for buying stocks. So how should my approach be? I find a stock say “STOCK A” by analysing the fundamentals & then buy it for ₹10000 at the end of January, then comes Feb. Should I keep accumulating again “STOCK A” in Feb and how long do I do this?
    You have answered in one of the questions that lumpsum buying is ok compared to staggered investments or timing the market but for investors like me, do we save 10K month-wise and invest or buy monthly “STOCK A” until the PE ratio is in buyable level then move to next stock.
    2. Answering another user’s query you have quoted about peter who advises about Index investing for the majority of the investors even buffet recommends the same. So what should we do, can we just invest our entire monthly equity investment allocation to index funds (provided I do not need the money for another 10-15 years).
    It would help a great deal if you can throw some insights as I guess many new investors would have the same question and I have posted the same question in many forums but I have not received any feedback mostly.
    Hope this gets answered.
    THANKS
    ARUN NIRANJAN N

    • Hi Arun,
      It is nice to know that you have found our work value-adding.
      Regarding, the guidelines about how many stocks an investor may have in her portfolio, the following article will help you: https://www.drvijaymalik.com/how-many-stocks-you-should-own-in-your-portfolio/
      and about how to decide about existing stocks in the portfolio, whether to buy/sell/hold, you may read our answers to a readers’ query “How to decide about existing stocks in the portfolio: buy more/hold/sell?” in the following article: https://www.drvijaymalik.com/stocks-buying-checklist/
      As far as, queries about how an investor should buy stocks from her monthly savings or about how to include investing in index funds in her savings plan, one needs to understand that these aspects need personalized attention looking at an investor’s actual financial position, her income, liabilities, savings, family situation etc. Unfortunately, we do not provide individualized personal financial advice.
      Therefore, either an investor may go through the above articles about general guidelines and then make decisions on her own. Or if she finds that she is not able to make concrete decisions based on general guidelines, then she should hire an investment adviser who may help her with specific advice looking at her financial position.
      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

  11. Hello Dr Vijay,
    I wanted to understand the reasons for not choosing ROCE while evaluating companies.
    I understand that ROE=(NI/sales)*(Sales/assets)*(Assets/equity). The last item i.e. (Assets/equity) represents leverage which helps magnify ROE and makes it less meaningful to interpret. Therefore, it is helpful when we evaluate companies by their ratio breakdowns (Profit Margins, Asset Turnover, Leverage) than the combined ratio as a whole.
    Is this the case with ROCE as well? We know that ROCE=EBIT*(1-tax)/(Capital Employed).
    Capital Employed can be broken down into Long term debt and equity. Here, firms can magnify debt and use a part of it to issue dividends and lower equity, leading to a smaller increase in the denominator. The firm can use a portion of the debt to improve the numerator i.e. EBIT. This enables the firm to maintain/improve the ROCE ratio as a whole while placing it into greater financial burden due to the interest payments it has to make.
    The ratio then has the same drawback that ROE faces because of leverage.
    I understand from your explanation provided in a previous article about how Book value of equity impacts ROE and I believe it impacts ROCE the same way because of the similar component in the denominator.
    I only wanted to confirm if the leverage concept held true as well.
    Thanks!

    • Hi Akash,
      Thanks for writing to us! We are happy to see that you are doing your own equity analysis and spending time and effort to understand different concepts.
      We prefer to look at simple, individual ratios instead of combined/compound ratios in our analysis. Compound ratios though reveal some information, they also hide many aspects of a company’s financial position.
      You are right that ROCE just like ROE is influenced by many common factors like reliance on book value as well as leverage. We do not find book value as a very contributory parameter in our analysis. In addition, in the case of leverage, if the investor only takes long-term debt in capital employed, then the entire short-term debt is left out from ROCE. There have been many instances where companies relied heavily on short-term debt to create long-term assets. This dilutes the efficiency of ROCE.
      Therefore, we prefer to look at individual basic ratios instead of complex/compound ratios like ROE and ROCE.
      Regards,
      Dr Vijay Malik

  12. Hello Sir,

    I tried to analysis the Atul Ltd :

    About the company : Atul Limited (Atul) was originally promoted by Padma Bhushan Late Shri Kasturbhai Lalbhai in 1947 as Atul Products Ltd.as a step towards backward integration of their cotton textile business and was later renamed as Atul Ltd. in 1996. It hasone of the biggest integrated chemical complexes in India with a well-diversified product portfolio of around 900 products and 400 formulations. It has manufacturing facilities located at Ankleshwar and Valsad in Gujarat & Tarapur in Maharashtra, with its main site spread across 1,250 acres. Geographically, its sales are almost evenly distributed between domestic and exports. It has marketing offices through its subsidiaries in USA, UK, Germany, UAE, China, Brazil, etc.

    TRENDS: 10 YEARS 7 YEARS 5 YEARS 3 YEARS
    Sales Growth 11.54% 10.54% 9.19% 13.04%

    CAGS of last 10 year is 11.54% , a constant growth rate of 9-11 %.

    OPM 16.42% 17.64% 18.41% 18.67%
    OPM remain constant , It may mean it do transfer the cost to the customer, after reading the report I understand it possible only in limited case where company have power, In other it able to manage the cost with operation efficiency.

    Interest coverage ration is very good 103(2019) 96(2020).

    NPM : Increasing continuously.

    Working Capital ( Asset Turnover+ Receivable ) is around 100 days, that mean company able to get cash in around 100 days and it is continuously Increasing .

    CFO/Profit (last 10 yrs) 118 % mean company able to collect cash.

    Company maintain a healthy ROE and SSGR of 21, 26 % .

    CC report :CARE AA+; Stable

    Management Remuneration:
    Company Director Remuneration is with in limited, even though S S Lalbhai, S A Lalbhai draw high salary but it is with in 2% of PAT and total salary with in 4% of PAT.

    Sir love to understand your view and what are the other things look for .

    • Dear Manish,
      There is a lot of scope for improvement in the analysis submitted by you. We request you to:
      1) Read all the available annual reports of the company since FY2009, in detail and include the learning.
      2) Please go through all the credit rating reports of the company from CARE and include the learning.
      3) Do a complete in detail peer analysis with competitors
      You may submit the revised analysis in a Microsoft Word document with us in an email.
      Read the following article to get help in the detailed analysis of stocks: https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
      Regards,
      Dr Vijay Malik

  13. Hello Vijay Sir,
    I was analysing Aditya Vision Ltd, a retail consumer electronics seller in all Bihar. Presently, it has 48 outlets and 15 are in line to be opened. It will open showrooms in all district of Bihar by FY2022 and is exploring other states too.
    The sales have increased and suddenly, there is a big rise in other income to ₹9 cr from ₹1 cr. Whereas the cash plus investment is 16 crore. Is that company showing fake transactions?

    • Dear Padma,
      In the annual report of Aditya Vision Ltd, you may read the section on “Other Income” to find out what it consists of. Only after knowing what is the source of the other income, it would be appropriate for an investor to have any opinion on it.
      If you wish to have our opinion on the same, then we would request you to share a detailed analysis of the company with us and we would be happy to provide our views on your detailed analysis along with this query.
      Regards,
      Dr Vijay Malik

  14. Sir,
    Could you please explain how the Cash Flow Hedging Account is maintained in IT or any company? I was reading the FY12-13 annual report of HCL Technologies Ltd (P-14, 116, 123, 141 & 142), I was not able to understand the process of the following statement like how and why the amount is being transferred from the Balance Sheet to Profit and Loss Statement!
    “Hedge accounting is discontinued from the last testing date when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Cumulative gain or loss on such a hedging instrument recognized in shareholders’ funds is retained there until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in shareholders’ funds is transferred to the statement of profit and loss for the year. ”
    Looking forward to your reply, Sir.
    Regards,
    Arnab Sarkar

    • Hi Arnab,
      You may understand hedge accounting in an easier way by comparing it with unrealized and realized gains on stock positions.
      Until you sell your stock position, your unrealized gains are just an increased value in your portfolio without any actual profit or loss impact for taxation purpose. Your liability to pay taxes arises i.e. gains are included in your P&L only when you sell the stock (i.e. close your stock position).
      Similarly, in the simplest of understanding, for hedging instruments (derivatives), a company keeps putting the unrealized gain/losses in its balance sheet (shareholders’ funds) until it sells the hedging instrument i.e. the forecast hedging transaction occurs. Once the forecast transaction occurs, then the unrealized gains (or losses) are included in the P&L.
      This is the most simplistic explanation that we could think of for hedge accounting. For further and better explanations, you may contact and chartered accountant (CA).
      Regards,
      Dr Vijay Malik

  15. Based on the record date of 16th December, I purchased APL Apollo shares to take the benefit of bonus shares, but in my Zerodha Demat account, the shares are still showing 4 (after the split it should have been 20) and the stock price has corrected. When will the correct amount I invested along with bonus shares reflect?

    • Dear Mayank,
      An investor needs to keep in mind “Ex-Date” declared by stock exchanges for benefiting from such corporate actions. Ex-date is usually 2-3 days before the record date declared by the companies. An investor needs to buy shares “BEFORE” the Ex-Date to benefit from such corporate actions like stock split, bonus shares, dividends etc.
      In case, you have purchased shares before Ex-Date, then you should get the additional shares from the company in a few days. The company would have disclosed the exact timeline for credit of new shares in its announcement of the split of its shares to stock exchanges. You may go through that announcement. Alternatively, you may contact Zerodha or APL Apollo.
      Regards,
      Dr Vijay Malik

  16. Hi sir,
    Is there any way to invest directly in Sensex and nifty so that every 6 months or 1 year, they will remove the bad ones and add best stocks? Not through mutual funds.
    Regards,
    Kalyan

    • Hi Kalyan,
      We may not be the best person to advise on the same. You may search the internet or join the Facebook group, Asan Ideas for Wealth and ask your query there to seek the opinion of fellow members there.
      Regards,
      Dr Vijay Malik

  17. Sir,
    If the promotor holding in a company exceeds 70%, or the public shareholding is 15% or less, then whether it can be classified as a family business?
    In a company with many subsidiaries, the annual report does not show the financial statements of all the subsidiaries and the auditors also do not cover all the subsidiaries in their audit. Then, how can an investor identify related party transactions?
    How can an investor spot weak subsidiaries? Is it based on ROCE of the parent company, sales/revenue and profits?
    Pl guide me.

    • Hi T. Srikrishna,
      Thanks for writing to us!
      A family business is not a well-defined term. Therefore, we are not certain if we determine whether a company is a family business based on promoters’ shareholding. An investor may note that when promoters have direct or indirect shareholding exceeding 50%, then they have more influence on key decisions than the situation when they have less than 50% shareholding.
      Why do you believe that the auditor does not include all the subsidiaries in the annual report in the consolidated financial statements? In case, of any clarifications about financials of subsidiaries or related party transactions, an investor may contact the company directly and request the annual report of each subsidiary. The following article will help you:
      https://www.drvijaymalik.com/how-to-contact-companies-for-clarifications-promoters-hold-shares-via-companies-trade-payables-interest-free-funds/
      To spot weak subsidiaries, an investor may follow any of the following two approaches:
      1) Compare the standalone and consolidated financial performance of the company. If the consolidated financial performance of the company is worse than its standalone financial performance, then it would indicate that the subsidiaries of the company have weak performance. The following article will help you: https://www.drvijaymalik.com/standalone-vs-consolidated-financials/
      2) Study the table of subsidiary performance in the annual report, which provides performance detail of each of the subsidiaries. In this table, the investor can see, which subsidiaries are making losses etc. The following article will help you: https://www.drvijaymalik.com/annual-report-reading-guide/
      Regards,
      Dr Vijay Malik

  18. Hi Sir,
    Thank you so much for sharing your knowledge. I was just trying to replicate the examples from your articles to gain a better understanding and wanted to ask the below for the calculation of SSGR (Supreme industries).
    1. The dividend payout for 2019-20 is 178cr (whereas the cash flow shows 352.22). As per my understanding 178 is excluding the DDT and the final dividend paid for FY2018-19
    2. We deduct the DPR from NPM, is it fair to deduct the debt as well? Could you share the formula incase the above can be done just so that I can use it confidently?

    • Hi Nishant,
      Thanks for writing to us!
      The dividend payout may reflect the dividends declared for any financial year whether they are paid within the same financial year or not. On the contrary, the cash flow statement would reflect the dividends paid out during the year whether they are declared for this financial year or the previous financial year e.g. a dividend declared in March but paid out to shareholders in April. You may revisit your query in the light of this information.
      You may find the formula of self sustainable growth rate (SSGR) along with a sample step by step manual calculation of SSGR of a company in the following article: https://www.drvijaymalik.com/self-sustainable-growth-rate-measure-of/
      We do not deduct debt repayments in SSGR calculations. You may try it at your end and see if it give better results.
      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

  19. Sir, I was analyzing how promoters manipulate their shareholding patterns and your article was extremely useful! I was seeing Pvt Ltd promoters(not individuals) and their board of directors on Zaubacorp. I saw that the Parekhs(of Pidilite) are on the board of Devkalyan Sales Pvt Ltd, but neither Shanghvis nor Valias (of Sun Pharma) are on the board of Shanghvi Finance Pvt Ltd. Is this a serious red flag or can it be ignored?

    • Hi Ajay,
      We believe that any opinion based on only limited information like merely a presence or absence of specific directors on the board, without doing a complete detailed analysis is taking a myopic view. We are not able to provide any opinion on such a situation.
      We request you to share with us your detailed analysis of the company with in-depth analysis of annual reports, credit rating reports and peer analysis. We will be happy to provide our inputs to your analysis.
      Regards,
      Dr Vijay Malik

  20. Hi Sir,
    Thanks for sharing your knowledge.
    1)I have a doubt about Zerodha account. When I have opened my Zerodha account, I signed on POA. How to check my account and whether my shares are safe?
    2) when you opened Demat account, did you sign the POA?
    Thanks & Regards,
    Kalyan

    • Hi Kalyan,
      Nowadays, regulations around the brokerage industry are changing every few months. Therefore, we believe that contacting someone from the brokerage industry or reading the latest articles about it on the internet may intimate you about the current guidelines and safety of accounts. After Karvy’s problem, SEBI has tightened the regulations where taking out shares from clients’ accounts is becoming more difficult for the brokers. Still, any person from the brokerage industry would be the best guide on this matter who would be able to tell you how safe your shares are.
      We had signed the POA while opening the Demat account.
      Regards,
      Dr Vijay Malik

  21. Hello Dr Vijay Malik,
    I was reading your articles on this site. In your portfolio, you mention that you have had 218 transactions since 2016 out of which 216 are Buy and only 2 are Sell. Yet, your portfolio shows a very good increase in value, during these 4 years. With just 2 “Sells”, are all those gains, just unrealized gains and dividends that have been paid out by these stocks you have invested in? Please let me know if I misunderstood the portfolio numbers.

  22. Hi Sir,
    When we are reading annual reports seeing standalone financials and notes. But in your articles, you say that investors should focus on consolidated financials. What do you follow? Do you read both or only Consolidated financials?
    Regards,
    Kalyan

  23. Hello Dr Stock!
    I have one query: I know how companies can manipulate their earnings and cash flow, and this is of course so that promoters can pilfer cash from the listed entity. However, how do you know how exactly the promoter is looting the company? E.g. you can see that company has very high miscellaneous expenses, which is a red flag, but how to decipher it? E.g. I saw one video of Mr Saurabh Mukherjea (link: https://www.youtube.com/watch?v=Brbjq92q2P0 ), where he talks about listed entity paying promoter 50 Crores for a private jet. So how to know the exact details about the private jet rentals, as this would not be given in annual report? Thank you!

  24. Dear Dr Vijay Malik,
    Sub: Welcast Steels Ltd (BSE Code: 504988)
    I am a resident of Chennai aged 67. I am a keen Stock Market Observer for the past for more than 35 years. I am a shareholder of Welcast Steels for quite some time now. I chose this stock because:
    1. Its Equity is just 0.64 Cr
    2. It posted reasonably good numbers till FY 2019
    3. It is 75% owned by AIA Engg which is a Bluechip Company fancied by investors.
    But I accept my calculations went wrong and its share price is steadily decreasing. Moreover, they have decided to close down their only Manufacturing unit in Bangalore permanently with effect from close of Business hours on 02/11/2020. In case the Company gets liquidated it is not known what the Equity holders can hope to get. To get an idea one must know the value of this Company’s land bank being its factory premises at Plot No.15, Phase I Peenya Industrial Area, Bangalore – 560058.
    I look forward to the guidance of yourselves an Ace Investor and Consultant.
    Thanks and regards,
    R Thiagarajan

    • Hi R Thiagarajan,
      Thanks for writing to us!
      We do not have any views about Welcast Steels Ltd, AIA Engineering or about the land value of its factory premises in Bangalore.
      The investor may contact the property brokers in Bangalore to know the potential value of the factory land. She may also contact the company to know whether the factory land is given as a security to any lender for loans taken by it or any other group company.
      Regards,
      Dr Vijay Malik

    • Hello Sir,
      I have a primitive doubt. I could not get any clear answer while searching through the internet. I want to know can one keep on investing in shares and mutual funds year after year, and does not file income tax return (ITR). The income from all sources is less than 5 lakh per annum (LPA), and no selling of shares and mutual funds. Recent news about giving details of each share transaction in the ITR has added to the confusion for me.
      Thanks and Regards,
      Gaurav

  25. Surprising as there is no information on Google or co web site about my ODD query of yesterday.
    I thought you will refer this to Co. Supreme ind. As query is very much related to Supreme Ind.

  26. Respected sir,
    My query is odd but very Important.
    Who is the Supreme company or registrar and share transfer agent?
    How much time in months /years should it take to complete the transmission/transfer procedure?

      • Sir, from the recent article about management trust and promoter shareholding pattern published as of today 24th August 2020, my query is:

        As we see promoters misuse their shareholding by pledging too much or misallocating capital, in turn, resulting in investor’s wealth destruction.

        So there are companies with zero promoters’ holding like ITC, HDFC and L&T, where there are people to rule the company. My query is how much is the possibility that they will not misuse capital allocation and also who is the main majoritarian in zero promoters’ holding company who takes the decisions on behalf of company’s wealth and shareholders too?

        Suppose zero promoters’ holding company’s shareholding is acquired openly to the large extent by some foreign companies and they increase their stakes to that level that they can interfere in company’s functioning to fulfil their agenda. So is zero promoter-owned company is at a high risk of misusing and misallocating capital for personal agenda of some large non-institutional and institutional players?

        • Hi Mohit,
          Thanks for writing to us and asking these queries.
          We request you to think and elaborate your current thoughts on the following aspects, which will help you get to the answers to your queries:
          1) What is the process in which major decisions of companies are taken? What role do the shareholders play in this process in proportion to their shareholding? Does this process change if a company is majorly promoter owned or majorly public-owned?
          2) Take examples of some of the companies, which are primarily institution owned and see if they are immune to capital misallocation or the key-man benefitting himself/herself at the cost of shareholders. You may see examples of IL&FS, Yes Bank, ICICI Bank etc. In addition, you may read our analysis of the following two companies, which are primarily institution owned, to see how they allocated capital:
          Analysis: Stovec Industries Ltd
          Analysis: Honeywell Automation India Ltd
          When you think and try to find answers to the above, then you will get the answer to your queries. Feel free to write to us with your learning from the above process, if you still have queries.
          Regards,
          Dr Vijay Malik

    • Hi Krishna,
      An investor may get the production capacity and sales volume data in the following sources: annual reports, company’s website, credit rating reports, press releases, any news article about the company etc. If such a data is not present in any of these sources, then she may contact the company directly for the information.
      Regards,
      Dr Vijay Malik

  27. Hello Sir, I found this website a few days ago and I read many of your articles. It is very valuable information and knowledge you provided.
    I have one question. I will be very helpful if you give an answer to this question.

    If any company has grown and is fundamentally strong; but has very low volume, demand and supply. Will this company share price increase?

  28. Hi Sir,
    We get 10 years annual reports of companies in Screener Website. Like this, how do we get the conference calls of 10 years? Is there any website like screener?
    Regards,
    Kalyan

  29. Good morning sir,
    I am happy to found the analysis of investments. As a student, I want to learn how to do analysis of financial statement for investment purposes. Kindly help.
    Thanks and Regards
    AZRA KOUSER

  30. Hi Sir,
    The way you are giving the responses to us are awesome and thank you for encouraging us.
    I have doubt about the news:
    i) how are you getting news, which channels do you watch daily?
    ii) what and all newspapers do you read daily?
    iii)what websites do you visit daily?
    iv) Which magazines do you follow?

    Please let me know Sir so that it will help a lot.

    Thanks and Regards,
    Kalyan

    • Hi Kalyan,
      Thanks for writing to us. We are happy that you found our work value-adding!
      We read Mint and Economic Times by way of RSS feeds, which allows us to focus on specific sections. We do not watch TV channels. We do not visit any website regularly. Twitter helps us a lot in focusing on good articles recommended by the people whom I follow.
      We spend most of our time reading annual reports whether for our own existing investments, for finding potential investments or for providing our views on the analysis submitted by readers (for Company Analysis articles). We personally believe that reading as many annual reports as possible will help the investor the most. The following article will guide you in reading annual reports: https://www.drvijaymalik.com/2014/10/annual-report-reading-guide.html
      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

  31. Hi Sir,
    I have invested in a company called CG Power. Avg. price of share I had is approx 17 rs while CMP is 22 rs.
    Now Muruguppa group has taken over and the news is that there will be fresh issuance of shares in Q3 @8.56 Rs to Murugappa group. Approx 65 Crore shares will be allotted to them.
    I want to know that whether this 8.56 rs allotment will also affect the shares in market & the price will fell down to 8.56 rs from CMP of 22 rs. or this deal is only applicable for Muruguppa group & market price will remain unaffected.

    • Hi Ankit,
      Thanks for writing to us!
      We request you to share your current thoughts about whether the new share issuance at a lower price will influence the current market price or not?
      You may search on Google about any similar instances where shares were issued to the acquirer at a price lower than prevailing market capitalization and form your views.
      We will be happy to provide our inputs to your line of thought.
      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

    • Dear Sir, I have tried searching through google but not getting any concrete response, Moreover bit confused with the plethora of information. Requesting to please suggest a specific website or please give your view.
      regards

      • Hi Ankit,
        Thanks for writing to us!
        Ankit, we advise readers to do independent search and thinking and then come up with a possible answer themselves first. Thereafter, we provide our inputs to their line of thought. We can always give our opinion straightaway without the reader searching for an answer. However, this approach is not helpful.
        Request you to sift through the online available information, think about possible factors, outcomes etc. and then frame an opinion and then elaborate it. We will be happy to provide our inputs to your line of thought.
        All the best for your investing journey!
        Regards,
        Dr Vijay Malik

  32. I have been investing in the stock market since past 5+ years. I am a fan of value investing. I do a detailed research about the company before buying the stock. I will not say, that i have always invested in good stocks, but I have learned from the mistakes I have made.
    However, I am always in a quandary when to sell the stocks. When I buy the stock, I keep a track about the financial ratios, annual report, management report. When I buy a stock, sometimes, it may happen, that the fundamentals of the company began to deteriorate. I don’t sell it right away considering that this could be a transient phase for the company. However, most of the time, the fundamentals begin to deteriorate further and now the Share price is below my buy price. It happens for most of my buy.

    So, what would your team suggest, when the fundamentals go awry and the reason I had bought the share for does not exist anymore, should I sell the shares at loss? This feels bad, as I could have made a profit on the share when the fundamentals were good and I had only held on to them considering such frequent selling/buying is against fundamental investing.

      • Hi Vijay,
        I am currently new to fundamental analysis. I am following all the articles and so far it has been very useful. I want to know how much time it takes to learn fundamental analysis for people like me who have just started learning?

        • Hi Raghu,
          How quickly and how much a person would learn depends upon the amount of time and effort an investor is willing to put in. In addition, even with the same amount of effort and time, the output/amount of learning for two different people would be different. Therefore, you would appreciate that any generalization in this matter would turn out to be wrong.
          We believe that if an investor keeps learning the concepts as she comes across and analyses 50 different companies from as many different industries as possible, by doing an in-depth reading of their annual reports, and credit rating reports as well as credit rating guidelines then she would be fairly confident in fundamental investing. Now, how much time an investor would devote to this exercise differs from one investor to another and whether someone would put in her heart in the exercise or do a cursory job, would also make a significant difference.
          Therefore, you would appreciate that any generalization of time required in the aspect of learning fundamental analysis may not work for investors.
          Regards,
          Dr Vijay Malik

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