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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
A comprehensive analysis of stock would typically include:
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126 thoughts on “Ask Your Queries”
Hi Sir,
I am deeply appreciative of the hard work you have put in to enrich us with knowledge that would have cost lakhs of rupees as a paid course.
My one humble request is that you please teach us how to do business analysis of banks, insurance companies, and other financial institutions (like all other industries that are available on the website).
Dear Shrey,
Thanks for the suggestion.
You may refer to the following article until we write a detailed article on this topic: Can we Assess a Bank’s Financial Position from its Reported Financials
Regards,
Dr Vijay Malik
Dear Dr Vijay Malik,
Many thanks for your tutorials and your guidance in analyzing various companies. I am genuinely appreciate your in depth analysis of companies and your strong knowledge about investing. I have attempted to analyze one company, its Avantel ltd. I request you to check my analysis sir and provide your valuable insights and analysis. Thank you sir.
Regards,
Yantrapati Raghavendra.
Avantel ltd analysis
Avantel has been supporting the strategic sector since three decades and has rolled out many unique products / solutions to Indian Defence Services and allied establishments. The company in its initial years, has manufactured various building blocks of the Radios.
From early 2000 onwards; the company has reoriented itself and started offering system based solutions to its customers in four main verticals i.e. Satellite Communications, HF Communications, Electronic Warfare and Radar systems respectively. Presently, the company is in the process of enhancing its portfolio and developing SCA compliant Software Defined Radios, High Power HF systems, Air Defence Radars and Small Satellites, headquatered in Hyderabad.
Avantel ltd is listed on 31st July 2024. As of the latest information available, Avantel ltd does not have any subsidiary companies under it. The major clients of Avantel ltd are Indian armed forces, DRDO, BEL, L&T, Boeing etc.
Avantel ltd is founded by Abburi Vidyasagar, who is an alumni of IIT Kharagpur (Masters in Engineering, Electronics and communication Engineering), on May 1990, it was initially known as ‘Dialog communications pvt ltd’.
Financial analysis of the Company:-
The revenue is mainly dependent on securing orders and contracts.
Considering the last 10 years of data, the revenue in 2015 Mar is 23.96 cr and the latest revenue reported is 2025 Mar is 270cr, the top line growth has been increased by more than 10x times in the last 10 years, that’s a CAGR of 27.41%. The net profit in 2015 is 0.89cr and the revenue as of 2025 Mar is 59.2cr and that’s an impressive 52.16% CAGR. The revenue growth hasn’t been consistent, there are few outliers, For eg:- The revenue doubled in the year 2018 and it decreased by 25% in 2019. The operating margin has been consistently been increasing and so is the net profit, Company has delivered good profit growth of 41.0% CAGR over last 5 year.
Avantel predominantly operates in Satellite communication(SATCOM) , which is working capital intensive. The total assets in 2015 are 31.69cr and the total assets as of now are 297cr. The debt to equity ratio is 0.19 which is modest, (Total assets are 248cr and total liabilities are 49cr).
The CFO has been consistently increasing and its close to Net profit. ROE is 28.6% which is better than peers. ROCE stands at 37%.
Barriers of entry:-
The defense and aerospace sector presents significant barriers to entry, including:
• High Capital Requirements: Substantial investment is needed for R&D, testing, and manufacturing facilities.
• Regulatory Hurdles: Strict government regulations and licensing requirements for defense contractors.
• Technological Expertise: Advanced technical knowledge and proprietary technologies are essential.
• Established Relationships: Long-standing relationships with defense agencies and a proven track record are crucial for securing contracts.
With strong barriers of entry and unique requirements requested by clients, Avantel enjoys moderate pricing power as the key clients are Govt organizations.
Management analysis:-
Mr. Vidyasagar Abbur Founder and Chairman, key managerial person. Mr. Abburi Siddhartha Sagar, Chairman,s son reappointed as Whole-time Director effective March 8, 2024, indicating active involvement in the company’s leadership and potential succession planning.
The promoter holding were consistent until recently they have been decreased from 40.06% in 2024 to 38.57% in Mar 2025.
Rights issue:-
The company is currently issuing a rights issue at 10 shares for every 121 shares held, this will lead to equity dilution. Face value of 2rs and right to buy new shares at 40rs pr share, that’s around 67% discount compared to CMP of 122. Raising 80.9crs in the process, the company plans to utilize these for Capex of new manufacturing facility -53.85cr, Funding capex towards establishment of GSaaS(Ground station as a service)-6.16cr and general corporate purpose-19cr and the cost incurred for the issue amounts to 0.95cr. This breakdown tells us the Avantel is focused on expansion.
Risks involved in the business:-
• “We have significant working capital requirements. If we experience insufficient cash flows from our operations or are unable to borrow to meet our working capital requirements, it may materially and adversely affect our business, cash flows and results of operations.”
• Increased cost of raw materials and inadequate supply may affect business and the results of operations. Further, the company is dependent on third parties for the timely supply of raw materials. which are subject to uncertainties and risks.
• Avantel ltd is involved in certain legal proceedings, which, if determined adversely, may adversely affect our business and financial condition. (Tax Proceedings-219.05 lakhs)
• The company depends on senior management and other key managerial personnel with technical expertise(Eg:- Abburi Vidyasagar), and if its unable to recruit and retain qualified and skilled personnel, the business ability to operate and grow our business may be adversely affected.
• Avantel designs and develop and manufacture products and solutions that incorporate advanced technologies. Many of the contracts contain performance obligations that require innovative design capabilities, are technologically complex or involve developmental costs. High R&D Expenditure. Data provided by the company in its Letter of offering.
Valuation:-
The industry pe is 53.45 and Avantel PE is 57.3, the stock has been overvalued. The EPS as of today stands at 2.54rs and it dropped despite increasing profits, the possible explanation is Equity dilution.
Miscellaneous information:-
There are no related party transactions and 0 promoter pledge as of today, modest debt. Good governance, the Founder being an expert in the field is plus for the company. CARE raatings ltd has been appointed by company to monitor the ongoing rights issue. No instituitional holdings is a thing that concerning. The order book as of today is 78.91cr(Major ones include BEL-17.7cr, Newspace India ltd-43.25)
Conclusion:-
Avantel Ltd. demonstrates strong financial performance with consistent revenue and profit growth, healthy margins, and robust return ratios. However, the current market valuation appears to be significantly higher than its estimated intrinsic value, indicating potential overvaluation.
Dear Raghavendra,
Thank you for writing to us.
We noticed that the write-up contains copied or plagiarised content from online sources. As a result, we’re unable to review or engage with it further.
We’re happy to support readers who put in sincere and original effort into their analysis. Without that, it becomes difficult for us to invest our time in return.
Regards,
Dr. Vijay Malik
Hi Vijay Sir, I’m a rookie investor and an avid reader. It has been a great time visiting your websites daily and reading on analysis. It is like a hobby now😅.
Sir, I have a request, if you could write an article on How to do Business Analysis of Automobile Companies the way you’ve done for other industries as well. I greatly appreciate your efforts and thank you for being a teacher in this crucial journey. Hoping to hear from you soon.
Thanks for the suggestion, Siddhant. All the best for your investing journey!
Hello Sir,
I request your assistance in understanding how the price of the parent company and the child Company is derived post-demerger. The trigger for this question is the demerger announced by Aditya Birla Fashion & Retail Ltd (ABFRL).
The demerging scheme is that ABFRL will list child entity ABLBL (Aditya Birla Lifestyle Brand Ltd) and for every 1 share of ABFRL they will share 1 share of ABLBL with the investor.
Although the consolidated entity as of date is loss-making, historically the child entity ABLBL has always been their cash cow and profit-making. Note: ABLBL comprises all the brands under Madura Fashion like Van Heusen, Peter England, Allen Solly, Louis Phillipe & Reebok.
The losses were due to strategic acquisitions by the company over multiple brands which have enabled them to be a kind of full package in the fashion Industry spread across all genders and classes.
The interesting development factor here is that the management has recently raised equity worth 500 million USD as part of QIP in which Fidelity investment has participated @ price of 272Rs and the management has acquired preferential shares @ price of 317 Rs.
The whole intent here is to make the consolidated entities debt-free before the demerger. This detail is available as part of a public announcement recently available on BSEindia. Also, the demerger exercise is planned to finish before March 31st, 2025 also mentioned as part of the announcement publicly. All the necessary NCLT approvals are in place to proceed with demerger.
The total interest outgo as on March 2024 is to the tune of ₹914 Crores. This amount is bound to be added to income statement as profits once the entities are debt free.
It looks to be a very lucrative opportunity specially at CMP where ABFRL is trading around ₹250 to 260 Rs and is below the institutional invested price of 272 and provides a margin of safety.
Hence, kindly help us understand the model or what formula the exchange uses to decide the price of the parent business on the record date and then the tentative listing price of the demerged business.
The intention is to be able to understand and further enhance value investing for any future special opportunities like demergers.
Thanks and regards,
Abhay
Dear Abhay,
Thanks for writing to us!
Hence, kindly help us understand the model or what formula the exchange uses to decide the price of the parent business on the record date and then the tentative listing price of the demerged business.
Abhay, we request you to do an independent exercise to find the answer to your query by asking it to ChatGPT and searching on Google. Thereafter, we request you to revise your query based on your learning from such an exercise.
We shall be happy to provide our inputs to your revised query after the above-mentioned exercise.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Based on the Excel sheet analysis of Blue Dart Express Ltd, SSGRis negative even though it has positive NFAT, NPM, DPR, FCF/CFO >15, and a D/E ratio of 0.8. Why is SSGR showing negative in spite of positive numbers?
Dear Bala Subramaniaguhan,
Thanks for writing to us!
We request you to check the formula for calculating SSGR on the following page: https://www.drvijaymalik.com/self-sustainable-growth-rate/ and in the formula try to assess, which parameters increase the SSGR and which parameters decrease the SSGR.
Thereafter, we would request you to compare the effects of factors that increase the SSGR and the factors that decrease the SSGR for the company under analysis.
This exercise will help you get an answer to your query.
After doing this exercise, if you still have further doubts, then feel free to write to us. We shall be happy to provide our inputs.
Regards,
Dr Vijay Malik
Hi Sir,
Based on the Excel sheet template of Ganesh Housing Corporation Ltd
for March 2024, there is an outflow of Rs 183 crores.
So, on page number 216 in the annual report of Ganesh Housing Corporation Ltd of FY 2024, in loans and advances given to others, -a loan outstanding amount of Rs 15253 cores loan outstanding is shown as of 31/03/2023 for the company – Ganesh Plantations Limited, whereas the balance outstanding is shown as nil for the balance as on 31/03/2024.
Kindly explain how come a huge outstanding balance in the following year is 0.
Dear Arun,
Thanks for writing to us!
We request you to revisit the table where the said loan of ₹ 15253.16 lac is mentioned (page 228 of the FY2024 annual report). We would request you to focus on what was the “Maximum amount outstanding during the year” and what was the amount outstanding at the end of the year i.e. 31-03-2023. Then we would request you to think about cash movement between the end of the year 31-03-2023 and the end of the year 31-03-2024.
Based on your learning from the above exercise, we would request you to revise your query. We are sure that the above exercise will give you some insights.
We shall be happy to provide our input to your revised query.
Regards,
Dr Vijay Malik
Dear Dr. Vijay,
My earlier post is just an example, not related to any sell/buy suggestion.
Dear Dr. Vijay,
As you suggested SSGR (self sustainable growth rate) is better to be > present CAGR sales growth rate for last 10 years.
While analysing Vishnu Chemicals Ltd, I found growth prospect for the company may be better in coming years but its SSGR is lesser than 10yr CAGR growth rate, so company is taking debt to fund the excess growth rate but that debt is manageable as its cash flow is better.
Could you please share your views on this?
Dear Kashinath,
Thanks for writing to us.
We advise readers to use our website to get our input on their stock analysis process, and not to get our views on any particular stock.
You may share a detailed analysis of this stock by doing an in-depth reading of all the available annual reports, credit rating reports, corporate announcements, other public documents and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
Selecting Top Stocks to Buy – A Step-by-Step Process of Finding Multibagger Stocks
Once you have done the comprehensive analysis, we request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
I am sorry, Sir; but Avenue Supermarts Ltd is not available.
Hi Vamsi,
Thanks for writing to us.
We advise readers to use our website to get our input on their stock analysis process, and not to get our views on any particular stock.
You may share a detailed analysis of Avenue Supermarts Ltd by doing an in-depth reading of all the available annual reports, credit rating reports, corporate announcements, other public documents and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
Selecting Top Stocks to Buy – A Step-by-Step Process of Finding Multibagger Stocks
Once you have done the comprehensive analysis, we request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hello sir,
I am Vamsi. I am following your article in the app. But I am not getting all the companies I want. Please provide me with some response. I am eagerly waiting for your response.
Thank you sir
Hi Vamsi,
You may find the list of all the companies analysed on our website on this link: https://www.drvijaymalik.com/all-articles/
Regards,
Dr Vijay Malik
Dear Sir,
I am a regular reader of your blog and try to stay updated with each new post. I have a few questions, and I’d truly appreciate your candid thoughts. Of course, please feel free to skip any questions if you prefer.
Evolving Philosophy: Have you made any adjustments to your investing philosophy or analysis techniques, including valuation parameters, over the past five years?
Handling Underperformance: When an investment experiences prolonged underperformance—perhaps due to global recessionary trends or geopolitical issues, with little transparency from management—how do you respond? Does the potential of a “value trap” concern you? By underperformance, I mean both in terms of the company’s underlying business and the market’s reluctance to assign higher valuation multiples, even when the business performs well.
Analyzing Non-Investable Companies: What motivates you to analyze companies that you may not ultimately invest in? From reading your blog, I noticed most examples seem to feature companies that don’t align with your “peaceful investing” approach. Why not illustrate companies that do fit your criteria? Is it correct to assume the companies on your blog aren’t or haven’t been part of your portfolio?
Sustaining Analytical Effort: What drives you to conduct such in-depth analyses, often reviewing up to 20-30 years of annual reports? How much time do you typically devote to analyzing each company on average, and what’s the longest stretch you’ve worked in one sitting without a break? I am asking because I often find the details overwhelming and wonder about the time invested by the original analyst.
Reconciling Market Perceptions: How do you reconcile situations where companies with questionable governance and business models see multi-bagger returns, while companies with sound governance and consistent profitability remain unnoticed?
Learning from Mistakes: Since your success during the 2014-2017 small-cap rally, which raised your profile and led you to full-time investing, have you made any notable investing mistakes? If so, what lessons have you drawn from them?
Thank you for your time and insights.
Warm regards,
Omkar Ranjan
Dear Omkar,
Thanks for writing to us!
Evolving Philosophy: Yes, over time, as we grow as an investor and accumulate more experience, the investing approach also evolves. We have highlighted many aspects of our approach via different articles like learning from analysing 2,800 companies. Also, you may read our updated views on our valuation approach in the following article: 4 Principles to Decide the Ideal PE Ratio of a Stock for Value Investors.
Handling Underperformance: We primarily focus on business underperformance and not on the market’s reluctance to assign higher valuations. We may consider selling a company if the business underperformance is due to reasons inherent to the company or even if the business performance is due to external reasons but the management does not seem to make any efforts to mitigate those challenges/develop new sources of business/markets etc.
Analyzing Non-Investable Companies: Is it correct to assume the companies on your blog aren’t or haven’t been part of your portfolio?: We write company analysis articles on our website as case studies to illustrate the process of analysis for readers/investors. The aim is not to look at the companies from an investable or non-investable point of view. Nevertheless, in the past, we have invested in at least two companies, which we had already analysed and written articles on our website. So, while writing articles, we only look at them as case studies and at times, we have found investable ideas from our own analysed companies.
However, currently, the list of companies that we find investable, are a part of our premium service “Recommended Stocks”: Click here.
Sustaining Analytical Effort: We usually spend 1-3 weeks analysing a company and writing an article on it. We take plenty of breaks while studying documents like annual reports; at times, may take multiple days/weeks long breaks. So, the aim is to study when you feel like it and not to push yourself to do something, which you do not feel like doing at any point in time.
Reconciling Market Perceptions: How do you reconcile situations where companies with questionable governance and business models see multi-bagger returns, while companies with sound governance and consistent profitability remain unnoticed?: We focus on the business performance of companies and not on the reaction of markets to it. We believe that in their investing journey, on numerous occasions, all the investors will face situations where many stocks outside their portfolio will make huge returns for other investors. Investors should be ok with it.
Learning from Mistakes: Investing is always a grey area where subjectivity in the interpretation of any information plays a very major part in decisions. This subjectivity also applies to one’s own criteria. Say for example, if one keeps a filtering criterion of net profit margin (NPM) of 8%, then how should she look at a company with an NPM of 7.95% or 7.75%? These companies may be equally good like any company with 8% NPM. So, it is advised to always be flexible with the interpretation of information and parameters and not be rigid in their application. Now, if one becomes flexible in applying parameters, then one may end up making investment decisions in companies that may have values/parameters different than the investor’s original list of parameters; and if any of these investment decisions go wrong, then the investor will feel guilty/bad for making exceptions/becoming flexible etc. However, the main learning is that all the lists and parameters are only guiding factors and investors need to be flexible in their implementation as no one knows how the future is going to turn; therefore, investors should not feel bad about themselves or their decisions if their exceptions do not work well. This is how the investing field is. Investors need to be kind while assessing themselves as they are trying to play/work in the field, which is full of complete uncertainties.
Hope it answers your queries.
Regards,
Dr Vijay Malik
Thank you so much, Sir, for considering my queries and replying patiently.
Regards,
Omkar Ranjan
Dear Sir,
Please provide us with the business analysis of Power grid vs PGINVIT.
Dear Debesh,
Thanks for writing to us.
Debesh, we advise readers to use our website to get our input on their stock analysis process, and not to get our views on any particular stock etc.
You may share a detailed analysis of Power Grid and PBINVIT by doing an in-depth reading of all the available annual reports, credit rating reports, corporate announcements, other public documents and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
Once you have done the comprehensive analysis, we request that you submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi Sir,
I read your article on how to analyse an industry by reading credit reports. I have become a big fan of reading credit reports.
My question is could you please specify where to find the credit methodologies of companies like S&P Global and old reports of CARE and CRISIL on a particular sector?
I am able to find the old reports of ICRA and the latest reports of CRISIL and CARE but not the old reports. I would be happy if you could tell where to find the reports.
Dear Aryan,
Links to previous reports of CARE and CRISIL are available within the latest report. Each report contains a link to its immediately preceding report.
For S&P Global, you may have to use Google and you will find a downloadable PDF file at its Israeli website “Maalot”.
Regards,
Dr Vijay Malik
Hi Sir,
I was reading a company annual report where the key managerial personnel had another company from which he charges brand royalty from the listed company where he is the promoter. Will this be considered as a red flag?
Dear Aryan,
Thanks for writing to us!
We would be happy to provide our input. However, we would request you independently think and come up with your own answers to this query as to whether such charging of royalty by the promoter is problematic. If yes, then why? If not, then why?
We would be happy to provide our input on your line of thought on this issue.
Regards,
Dr Vijay Malik
According to me, it’s a bit problematic. It charges around ₹50 lakhs a year as a royalty, which is more than the salary of around 50 percent of promoters. And most importantly the company which is charging the royalty does not have its own operations. It is the sole entity of the chairman of the company.
Dear Aryan,
Thanks for sharing your line of thought about royalty. You are right that high royalties carry a risk of shifting the economic benefits from public shareholders to promoters.
Investors should analyse every related party transaction of the company with its promoters in detail as these are often used by promoters to benefit themselves at the cost of minority shareholders.
The following article will help you further: How Promoters benefit from Related Party Transactions
Regards,
Dr Vijay Malik
Sir,
I am from a non-finance background and I study investing along with my job. I really like the process of studying annual reports and business models and I have been doing it for the last 3-4 years. Due to being in a job, I have limited time available – at most 2-3 hours a day. So, I was using the strategy of focussing on just 2-3 sectors (chosen based on the possibility of scuttlebutt) which I can study deeply and kind of become a specialist in them. I wanted your views on this strategy.
My view : (Pros of focussing on 2-3 sectors)
• One can kind of become a specialist in these sectors, which really reduces the risk of making a big mistake while choosing a stock
• Easier to track a few sectors, for investors who have a paucity of time.
(Cons of focussing on 2-3 sectors)
• Themes change in the market: What if there is a technology disruption, macroeconomic changes or valuation issues that can make these sectors unattractive for several years? E.g., investors who just focussed on banks could have missed this entire bull run.
• Endowment bias for these 2-3 sectors: An investor who follows 9-10 sectors can easily compare between different sectors and get a bird view of favourable sectors.
• Requires a lot of patience – to keep on waiting for a good opportunity in those 2-3 sectors.
So, Sir, can I as an individual investor, tracking just 2-3 sectors, realistically beat the returns of the index or of star investors who have time on their hands, have a finance background and have a circle of people with whom they can discuss their ideas. (This lack of people with whom we can discuss our ideas is really a big disadvantage for retail investors. We all know the importance of Charlie Munger to Buffett while acting as a sounding board).
Sir, I will be really thankful for your reply.
Regards
Dear Prabhjeet,
Thanks for writing to us!
Prabhjeet, fundamental investing requires a lot of reading whether one focuses on a few sectors or many sectors. You are right about the pros and cons of limiting oneself to a few sectors.
An investor may start with a few sectors and then expand her focus slowly by adding more sectors later.
Nevertheless, if an investor has time constraints in doing proper analysis or monitoring of stocks, then she may opt for mutual funds. This is because, if an investor invests in stocks without a proper analysis or does not monitor stocks in her portfolio regularly and properly, then the chances of encountering negative surprises/adverse developments in the stocks/portfolio increase.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi Vijay,
I am new to value investing. I don’t come from an accounts background. How difficult will it be to learn value investing?
Earlier I had tried reading annual reports and I didn’t understand many things.
Please let me know how much time it will take to learn value investing and what I should do to learn accounting and reading of annual reports.
Hi Raghu,
Thanks for writing to us!
Learning value investing does not require an investor to be from a finance/accounting background. However, it does require the investor to put in time and effort to read books/annual reports.
You may start by reading chapter number 2 “Language Of Business” of the following book by Jana Vembunarayanan: A Gentle And Practical Introduction To Value Investing
The PDF version is free at the following link: Click here
The Kindle version is paid and is available at the following link: Click here
The above book will help you understand the basics. We suggest that beyond the ebook, you may learn more about accounting terms as you come across them, by reading about them online.
All the best for your investing journey!
Regards,
Dr. Vijay Malik
Hello sir,
I was reading the article “Analysis: Amber Enterprises India Ltd” published on 25 March 2021. One thing I cannot find is the source of the Image you used in ” the import price of compressors over the last 10 years “?
It says source screener.in but I am not able to find this anywhere on the internet let alone on Screener.
This type of information like 10 years import price is crucial not only in this compressor context but any other commodity India is importing. Where can I find this information?
I appreciate your help.
Dear Siddharth,
Historical import and export prices of commodities are included in the premium subscription of Screener.
Regards,
Dr Vijay Malik
Hello Sir,
I have just started reading your website and I am currently going through step-by-step studying the articles.
I am from a non-commerce background and CFO calculations often confuse me. While going through the CFO calculation article, I was trying to do the calculations on one of the stocks I own i.e. Amara Raja Energy.
In FY 22-23, inventories have decreased from 1,804.56 to 1,702.19. Net decrease 102.37. Which is a cash inflow and should be added to PBT in the CFO calculation. However, an amount of 97.06 has been deducted from the CFO calculation.
This has added to my confusion. please clarify.
I am currently in Vadodara, Gujarat. Also, I would like to know any plans for a workshop in Gujarat. I will surely attend the same.
Dear Marut,
We are happy to see that you are working hard to improve your stock analysis skills and are making observations by reading between the lines in the annual reports. It is commendable.
Marut, your observation is very good. As inventories have declined, it should have been an inflow i.e. a positive entry in the CFO calculation.
In such cases, it is advisable to write directly to the company as the person responsible for the preparation of the annual report is the best person to clarify what other item from the balance sheet s/he has clubbed with inventory while making the CFO calculations, which has led to such a deduction in CFO statement.
The following article will help you: How to contact companies for clarifications and additional information?
Unfortunately, currently, we do not have any plans for a workshop in Gujarat.
As an alternative, you may watch the recorded videos (9h:30m) of one of the complete full-day “Peaceful Investing” workshop at a time & place of your comfort at your own pace as many times as you can. We have made these videos available specifically for investors who can not attend the workshops, as a premium service: “Peaceful Investing” Workshop-Videos on our website.
We believe that once an investor has watched the workshop-videos then, she does not need to attend the physical workshop.
You may watch the FREE Sample Video (16 min) of the workshop where we have discussed the basics of balance sheet along with fund flow analysis and read about other details and subscribe to these videos on the following page:
https://premium.drvijaymalik.com/product/workshop-videos/
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi Dr Vijay,
I read your analysis of Pix transmissions Ltd and was quite impressed by the analysis. I did my analysis of its inventory, accounts receivable (AR) and revenue.
2020 2021 2022 2023 2024
Revenue 304 380 449 486 493
AR 68 82 95 105 110
Inventory 73 97 125 105 98
If you calculate the Y-oY growth of these three parameters, the sales and AR have grown at around 12.8% CAGR and inventory has declined by 8% CAGR. However, from 2022 to 2024, the growth of AR is higher than revenue although inventory has continued to decline. The cash flow has increased, and the cummulativeCFO/CumulativePAT ratio is also more than 1. My query is what can be potential reasons for the increase in AR more than revenue growth.? Does this mean that Pix had piled up inventory and is now pushing it out, but is not able to collect revenues? but this seems counter given fact that its cash conversion has improved from 259 days in 2021 to 211 in 2024. So would request how to interpret this higher rise in receivables compared to revenue growth in light of declining inventories.
Dear Saurabh,
Thanks for writing to us! We are happy to note that you are working hard to do your stock analysis.
Saurabh, companies comment about changes in their key performance parameters like revenue, profits, trade receivables, inventory, payables, debt etc. in their annual reports. In case, you wish to cover the period from FY2020-2024 in your analysis, then we would request you to go through the annual reports of PIX Transmissions Limited from FY2020-2024. The following article will help you in this:
How to study Annual Report of a Company
Secondly, credit rating reports of the company also talk about the working capital position of companies because working capital debt taken by companies is usually rated by credit rating agencies. Therefore, you should also read the credit rating reports for Pix Transmissions Ltd by CARE. The following article will help you in this:
Credit Rating Reports: A Complete Guide for Stock Investors
Thirdly, about the comparison of cCFO vs. cPAT, we would request you to go through the cash flow statements in the respective annual reports to understand whether there is any other factor masking the money getting stuck in working capital like high-interest expense or depreciation or any other parameter. The following article will help you in this:
Understanding Cash Flow from Operating Activities (CFO)
We believe that after doing the above exercise, you will get an answer to your queries.
Regards,
Dr Vijay Malik
Sir! I’m Priyanshu from Jehanabad, Bihar.
I have one doubt or query on Sharda Motor Industries Ltd.
The company has many clients like Hyundai, Mahindra, Tata, Maruti Suzuki, Cummins, Carrier, TAFE, Magna, SML Isuzu, Nissan, Escorts, MAN, Isuzu, Force Motors, Ashok Leyland, Kubota etc.
So, my question is that the company has many clients and still their revenue concentration is divided into two companies i.e. (M&M and Hyundai) for almost 60 to 70% and the other remaining companies participate for only 30 to 40%. So, Sir! Can you explain this to me if anyone from the two major revenue-giving companies is gone, then it will result in a very high decrease in revenue for the company. If the rest of the companies are doing business with Sharda Motor Industries Ltd, then why do they only participate for 30%?
Dear Priyanshu,
Thanks for writing to us!
Priyanshu, you are highlighting the customer concentration risk of Sharda Motor Industries Ltd. We would request you to think and explain your views about why would a company let a few customers grow so large in the business share that it faces the risk of customer concentration.
Also, think from a shareholder’s perspective and let us know your current thoughts about if customer concentration is always bad or if it can be acceptable in certain situations. If customer concentration can be accepted, then in what situations it is acceptable? Also, if you believe that customer concentration is not acceptable at all in any situation, then why?
Once you let us know your current views about the above situations, then we will be happy to provide our input to your current line of thought.
Regards,
Dr Vijay Malik
I have read all the points you shared.
So, in my point of view, I think there is a trust build-up between Sharda Motor Industries Ltd and companies like Hyundai and Mahindra because both companies have been connected with Sharda Motor since 1998 and 2002-03 respectively.
Priyanshu, you are right that, at times, due to long-standing relationships with customers, companies allow them to be a large part of their sales and permit customer concentration. In fact, at times, such companies/suppliers grow big because their key customers have grown big and as a result could source larger quantities of goods from such suppliers. If to keep customer concentration low, suppliers refuse orders from such customers, then suppliers’ business would be hurt.
Therefore, when an investor analyses the customer concentration of any company, then she needs to assess such aspects as long-standing relationships, parent-subsidiary, same promoter group relationships etc. on a case-to-case basis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi Sir,
Recently I watched your workshop videos. Currently, I don’t have any stocks. Shall I get a list of stocks that can be in the buying range once I subscribe to the recommended stock service?
Dear Jenesh,
Thanks for writing to us!
Yes, once you subscribe to Recommended Stocks service, then you will get a list of stocks in which stocks will be labelled as “Buy” and “Hold” recommendation at current market prices. You may read the following page for more information: Click here
Regards,
Dr Vijay Malik
I have done a lot of research; however, I did not find how many retail investors are there in any company. Please tell me the way how I can get data on retail investors in the company so that I can calculate the entitlement ratio for the buyback
Dear Navu,
Thanks for writing to us!
Please share with us the steps you took and the sources you referred to in your research on this topic. It might be that you were close to finding the answer to your question on your own. We may help you extend your research in the right direction. Please share your research on this topic.
Regards,
Dr Vijay Malik
Sir,
As you said: Capex = (NFA+CWIP) at year-end – (NFA+CWIP) at start of year + Dep
I visited AR 2023 of Pidilite Ind and found that Capex for FY2022-23 was Rs 429 Cr (Page 56). But, using your formula, I’m getting the capex for FY2022-23 of Rs.661Cr.
Please let me clear this fact, sir.
Dear Saikat,
Thanks for writing to us!
We request you to take two steps:
1) first, verify if you correctly comparing standalone financial data with standalone or consolidated financial data with the consolidated one.
2) Second, go to the detailed schedules of the financial statements and go to the sections detailing fixed assets. In those sections, add all the items labelled as “Additions.”
By these two steps, you will get the answer to your query.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hello Sir,
I would like to have your valuable analysis & guidance on whether Tanla Platforms Ltd is good for investment.
My Analysis –
1. Sales growth is consistent & increased from ₹105 cr. in 2014 to ₹3,355 cr in 2023 with 34% CAGR. As per the Credit Ratings FY2022 revenue increased – “During FY21, the revenue of TPL grew by 20.57%, y-o-y over FY20 and it registered total operating income of Rs. 2,353.88 crore as against Rs. 1,952.23 crores in FY20 (Rs.1,013.61 crore in FY19) mainly on account of an increase in the revenues backed by an increased customer base post-acquisition and launch of new platforms and higher revenues from existing business. Overall growth is driven by both acquiring new customers as well as expanding within our existing customer base”
2. Profitability grew only from Mar 2021 at 15%. From 2014 to 2020 net profit was marginal and made an even loss in 2014 of 19% and in 2020 loss of 11%. Will it sustain?
3. Tax payout was negative to low till 2021 at 14%, in March 2022 & 2023 paid 20% & 21% as profitability grew.
4. SSGR has suddenly gone up to 103% from being negative in 2021 at -46% & 3% in 2022. SSGR is above 10 years Sales growth at 47%
5. Positive FCF at ₹1200 cr.
6. Considering valuation to be undervalued compared with industry PE which is 33.4 & a P/E ratio of 21 & even a PEG ratio of 0.23 is good for investment?
Thank You,
Kalyani Wadnere
Hi Kalyani,
Thanks for writing to us!
After looking at your analysis, we notice that there is a lot of scope for improvement in the analysis submitted by you. It does not incorporate the knowledge, which has already been shared on our website by way of multiple articles and company analysis.
We request you to revise and update your analysis with respect to in-depth financial, business, management, valuation, operating efficiency analysis and peer comparison.
You should do an in-depth reading of all the available annual reports, credit rating reports and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, credit rating reports, and margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hey Dr Vijay Malik,
I have been following your investing analogy for a few years now and picked a few good long-term stocks in recent times. However, lately, I have been analysing a few metal stocks under ₹1,000 crore mcap and found this stock “Maan Aluminium Ltd”. It got my attention as aluminium is the second most in-demand metal and with the growth aspect in the infrastructure industry of India, I was pretty bullish. Although the stock after its recent rally seems a bit overpriced, my main concern is with the company’s shareholding, which saw promoters selling around 5% this year. Where can I find appropriate reasoning for this? As this could be a management problem, I would like to stay alert or aware of the reasons for such changes in promoter holding.
My analysis of Maan Aluminium Ltd:
Financial aspects:
Sales Growth in last 3 years CAGR is 15%
Profit Growth last 3 years CAGR is 87%
Although OPM & NPM margins are thin as it’s a commodity business.
CFO to PAT is low at 0.49.
Dividend Yield around 1%
Debt to Equity 0.42
The company seems to manage inventory efficiently as inventory turnover is around 17 times as compared to other peers at 3-5 times.
Valuation analysis :
PE Ratio seems high right now at 16.
Although the PEG Ratio is less than 1, so it shows stock has upside potential.
P/B is a little high at 5 after the recent jump in share price.
Stock is still lower than the average industry PE even after the stock rally.
Management Analysis :
Shareholding seems healthy with promoter holding around 60% and FIIs DIIs having 0 to 1% holding.
The promoter’s salary is higher than 2% with PAT being ₹50 cr and chairman (managing director) Mr. Ravindra Nath Jain having a salary of ₹2.47 cr.
Recently its CEO Mr Viksit Chadha resigned on 30th May 2023. Although the stock has not shown any negative impact on his resignation.
Promoters have been reducing their stakes since the June 2023 quarter.
I would love your feedback on this stock and your perspective on its future potential. Thank you.
Hi Kishan,
Thanks for writing to us!
Kishan, after looking at your analysis, we notice that there is a lot of scope for improvement in the analysis submitted by you. It does not incorporate the knowledge, which has already been shared on our website by way of multiple articles and company analysis. It does not incorporate learning from reading of annual reports from FY2007 available on BSE website, credit rating reports and other public documents.
We request you to revise and update your analysis with respect to in-depth financial, business, management, valuation, operating efficiency analysis and peer comparison.
You should do an in-depth reading of all the available annual reports from FY2007, credit rating reports of Brickwork and ICRA and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, credit rating reports, and margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Sir,
In the annual report of HDFC Bank for the year 2011-12, In the section Movement of Provisions for NPAs following is mentioned:
Opening balance = 1397 crore
Additions during the year = 1398 crore
Write-off = 941 Crore
Write-back of excess provisions= 208 crore
Closing balance = Rs 1646 crore.
But in the P&L statement, Rs 651 crore are deducted as Provision for NPAs. How can I relate this figure of Rs 651 crore to figures given in the section Movement of Provisions for NPAs? Is this difference due to the Write-off?
The second question is whether the write-back of excess provisions (in the case of banks) is added to P&L or if is it deducted from new provisions being created in P&L. I am not able to find anything regarding this in conference call transcripts.
I know Sir that you don’t recommend studying banks as their asset quality can not be ascertained from their financial statements but can you please explain the above doubts so that I can better understand the concept of provisions?
Regards,
Prabhjeet Singh
Dear Prabhjeet,
Thanks for writing to us!
We would be happy to provide our input. However, we would request you first do an independent search for the answer by reading about accouting of provisions by financial institutions/banks on Google and then think to come up with your own answers to these queries. Thereafter, please elaborate on your learning from such an exercise.
We would be happy to provide our input on your line of thought on this issue.
Regards,
Dr Vijay Malik
Sir, Why is Nifty PE trading at lower levels while the index is trading near its all-time high?
Dear Shagun,
We do not have any views about Nifty index levels or its PE levels.
Regards,
Dr Vijay Malik
Dear Sir,
I was reading about a company called M/s Pakka Ltd., a manufacturer of paper and compostable tableware. During my study, I came across an instance of merger of a company owned by the promoters into M/s Pakka Ltd. As per my analysis, the valuation given to the merged company was very generous. I request your valuable inputs.
As per AR 2022-23, the company informed that it has absorbed by merger another company, called Yash Compostables Limited (YCL). The Scheme had been approved by the Hon’ble National Company Law Tribunal, Allahabad Bench vide order dated April 18, 2022. As such, 28,38,500 Equity Shares of Face Value of Rs. 10/- each of Pakka Limited were allotted on 13.05.2022 to the Shareholders of YCL.
AR 2022-23, Page 119,
https://pasteboard.co/QCkLnloPmdSz.png
In this way, around 7.45% of the company went to YCL shareholders.
https://pasteboard.co/YieDrbma9lBK.png
From the Merger related documents available on website of Pakka Ltd., at least 99% of the shareholders of YCL were promoters of Pakka Limited.
https://pasteboard.co/ULEsDjySFWQl.png
https://pasteboard.co/33boYOaq2ig0.png
https://pasteboard.co/JLBqTO8YuRk8.png
So, it is clear that ~7.45% of the equity holding in Pakka ltd after the merger went to the existing promoters of Pakka Ltd only.
Now, the NCLT scheme annexure gives the basis of valuation of YCL as follows: –
Pdf named ‘YPL NCLT Convened Meeting- Notice to equity shareholders, pages 123-142.
https://pasteboard.co/KmDgc0pW8gfq.png
As such, the methods used to value YCL and ‘Pakka Ltd’ were ‘DCF method’ and “Market Price method”, respectively, as Pakka Ltd was already listed on exchanges.
As the DCF takes into account the future projections, following were the projections used: –
https://pasteboard.co/K4XOJ3e1fEh8.png
So, the revenue was projected to grow at a CAGR of `~46% from FY 2020 to FY 2023.
https://pasteboard.co/QhPjTMd85RUQ.png
Similarly, PAT was projected to grow from loss of -1.3 cr to profit of 16.2 cr.
Further, the valuer says that the management of YCL has forecasted company’s earnings.
The valuer did not feel any need to question such high projections.
https://pasteboard.co/gNsKItiE3rxE.png
As a result, the Equity value of YCL was calculated as ~118 crores as on 01.06.2020, whereas it was still making loss of 1.3 crores as of 31.3.2020.
https://pasteboard.co/YIgtIeQALuKZ.png
AR 2022-23, Page 249 of Pakka Ltd shows that YCL has negative Net assets as on 01.04.2020.
https://ibb.co/5vXBDrd
Now, if we compare the projected revenues of YCL with actual figures from Pakka Ltd. ARs, we see projections were indeed too high. (Although not directly comparable, but since YCL was mostly making tableware products, I am using ‘Moulded products’ revenue from Segmental reporting in Pakka Ltd.
(in cr) FY 2020-21 FY 2021-22 FY 2022-23
Projected Revenue 344 516 670
Actual Revenue 23 32 53
Total Revenue of Pakka, after merger 184 291 408
Even the total revenue of Pakka Ltd. is way less than the projected revenue of YCL alone.
Also, the Moulded products division was not able to report profits even in FY2022-23, whereas it was projected that YCL would have ~16 crores of PAT in that FY.
Based on the information discussed above, it seems to me that promoters were able to get a bigger pie of Pakka ltd by valuing the YCL at exorbitantly high valuations.
Dear Ravdeep,
Thanks for sharing your research into the transaction.
There have been numerous instances where the reports of independent valuers have been questioned by investors. The same is due to reasons similar to the one pointed out by you like reliance on estimates provided by the management. Therefore, in such cases, investors should always be cautious when relying on such reports of valuers and always do their own analysis about what should be the reasonable valuation of the entity being merged/acquired.
Once again, we appreciate the hard work put in by you into the analysis.
For more instances where promoters have benefited themselves at the cost of minority shareholders via related party transactions, you may read the following article: How Promoters benefit from Related Party Transactions
Regards,
Dr Vijay Malik
Hi Dr Vijay,
I am highly impressed by your knowledge-sharing posts and teaching investors like us in Benjamin Graham’s way. It’s not wrong to say that you can be considered Benjamin Graham of India.
I want your opinion in analysing your thoughts on my below analysis of a lab-grown diamond jewellery stock – Goldiam International Ltd.
-Sales trend – Goldiam has grown its sales at a CAGR of 6% in the last 10 years, though it increased from 2014 to 2017, it saw a decline in 2017 and 2018.
-During the years, with an increase in sales, its NPM has increased from 5% to 16%. From that observation, it can be seen that although the company is in a commoditized business, it has been able to transfer raw material fluctuations to the end customer and has purchasing power.
NFAT – Asset turnover ratio gives a cyclic trend. It went from 13 to 19 and back to 12 recently. A higher NFAT indicates that the business has an asset-light business model.
Receivable days – the company has high receivable days of more than 100 days which is not a good sign for any stock.
Inventory turnover ratio – this has improved but last year it was reduced.
FCF analysis – the company has generated an FCF of ₹281 cr after doing a capex of ₹51 cr. It has rewarded shareholders through dividends and buybacks and it has created a value of ₹5.8 for every 1 INR of retained earnings.
SSR – The company has an SSR of more than 120%, which shows it can sustain its growth without debt and a reduction in shareholding.
Cash and investment- the company has 257 crores of cash available on the balance sheet.
Currently, it trades at a PE of 25 which does not offer a margin of safety at this valuation, so it’s a good idea to keep this stock under my radar before making any investment decision.
Additional aspects of the company-
-The company has shifted its business model from brick-and-mortar to a multi-channel e-commerce model.
-It is tapping into the Australian market soon and it has received success from the US market. it has an order book for the next 6 months from it.
– the promoters have skin in the game which is run by the Bhansali family.
– However, as we all know in jewellery businesses most people buy it using black money and it acts as a safe haven for them, I found a few articles on the web that its promoters have been penalised for saving taxes using that route.
I am posting my analysis first time on this platform. Please excuse me if I am not able to upload articles from presentations, websites and the Screener Excel sheet.
Request you to please check and suggest your insights on my analysis when you find time.
Thanks
Karan
Dear Karan,
Thanks for sharing your analysis with us!
Karan, we notice that the analysis primarily relies on the Excel analysis of financial data of the company. We request you to improve the analysis by reading all the available annual reports from 1997 present on BSE website, conference call transcripts (the company conducts half-yearly concalls) and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Dear Sir,
I was reading about a micro-cap company called M/s Roto Pumps Ltd., a manufacturer of industrial pumps. I stumbled upon a transaction wherein it seemed like the promoters took loans from the company to subscribe to the company’s warrants. I request you to give your valuable input.
In the annual report (AR) 2020-21, the company informed that as per a special resolution dated 19th May 2021 passed by the Members of the Company through postal ballot by remote e-voting, there will be an issuance of 2,50,000 warrants to the person belonging to the promoter category @Rs 141.28/- per warrant, and the Company has received 25% amount as per scheme of warrants.
https://pasteboard.co/KwE6gUXUVGZx.png
Further, in the next year AR 2021-22, it was confirmed that the process was completed on 27.01.2022 with the issuance of 250000 shares @ Rs. 2+140.11 = Rs. 142.11 /share.
AR 2021-22, page 36
https://pasteboard.co/P1HqY2ZRb1j8.png
So, it is clear that the process started and was completed in the same fiscal year, i.e. 2021-22.
Now, in the same AR 2021-22, under ‘Related party transactions’, there is a curious disclosure.
The following loans were taken and repaid during the same FY.
Page 85,
https://pasteboard.co/Y7YSNW59w5JL.png
The total amount involved is 89 lakhs. Also, the 25% of the warrant amount comes to be approx. Rs. 88.82 lakhs (25% of 2,50,000*142.11 = 88,81,875/-). Further, the loan amount is divided in the same ratios as the issuance of shares from warrants.
Page 85,
https://pasteboard.co/MwtR39bWVf3q.png
Now, another confusing thing is that the ‘Heading’ written over loans disclosure is ‘Loans form directors’.
https://pasteboard.co/hWi64PD0mwtY.png
If it is a case of promoters taking loans, the ‘Heading’ should have been “Loans to directors”.
On the other hand, if the ‘Heading’ is correct (although there is a spelling mistake as ‘form’ is written instead of ‘from’), then the question arises as to why the company needed a loan of Rs. 89 lakhs from promoters, that also in the same ratios as the 25% of warrant amount when it was ‘Net cash positive’ to the tune of ~5 crores.
Page 109,
https://pasteboard.co/0cXUrI92qZwm.png
So, the question arises whether the promoters took interest-free loans from the company to subscribe to warrants, and tried to conceal it too by giving ‘vague and incorrect Heading to the disclosure’
So, to me, it seems like the promoters took interest-free loans (as ‘related party transactions’ do not talk about any interest payments) from the company to subscribe to warrants in their personal capacity, and tried to even conceal it by giving ‘vague and incorrect Heading to the disclosure’, which does not sound like a good Corporate-governance practice.
Dear Ravdeep,
Thanks for writing to us!
Instance of promoters raising loans from the company/from pledging of shares etc. to subscribe for warrants etc. are not unheard of. You may read the following article to learn more: How Promoters use Loopholes to Inflate their Shareholding
tried to even conceal it by giving ‘vague and incorrect Heading to the disclosure’
We believe that before concluding that the promoters are deliberately misleading the investors, one should contact the company to ask for clarification.
question arises why the company needed a loan of Rs. 89 lakhs from promoters, that also in the same ratios as the 25% of warrant amount, when it was ‘Net cash positive’ to the tune of ~5 crores.
To have any view on this, an investor will need to do an in-depth analysis of the company including reading all its annual reports from FY1997 onwards (available on the BSE website), and all credit rating reports etc. so that one may know the real financial position of the company.
You may share a detailed analysis of this stock by doing an in-depth reading of all the available annual reports, credit rating reports, corporate announcements, other public documents and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
Selecting Top Stocks to Buy – A Step-by-Step Process of Finding Multibagger Stocks
Once you have done the comprehensive analysis, we request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
Regards,
Dr Vijay Malik
Please explain bet company net worth vs surplus fund.
Dear Sunil,
We request you to do two things. First, please clarify what you mean by “bet company net worth.” Second, we would request you first do an independent search for the answer on our website/Google and then think to come up with your own answer to this query. Thereafter, please elaborate on your learning from such an exercise and ask the same so that other readers can also benefit from your query and its response.
We would be happy to provide our input on your line of thought on this issue.
Regards,
Dr Vijay Malik
Respected Sir,
In Nestle SA Consolidated Financial Statements of 2014, in Note 12 Provisions made during the year are 920 but it is not visible in its income statement. Maybe it has been included in Restructuring costs, Litigation and onerous contracts in Note 4 but I am not sure regarding this. So can you please confirm this?
Also in the cash flow statement, there is no entry regarding provisions (check Note 17 for this). There is an entry “Variation of provisions” in the cash flow statement of amount CHF 324 million but I am not able to relate this to detailed note 12 of Provisions. Please explain what is “Variation of provisions” in the cash flow statement and how to relate this to detailed note 12 of Provisions.
I will be really thankful.
Dear Prabhjeet,
Thanks for writing to us!
Prabhjeet, we request you to do an independent search for the answer by searching/Google online about the treatment of provisions in different financial statements like balance sheet, profit & loss statement and cash flow statement.
Once, after this search, you understand whether and under which conditions provisions impact one or all the financial statements, then you will get answers to your queries. In case, after doing such a search, you still have queries, then we would request you to elaborate on your query along with your learning from the online search. Then, we will be happy to provide our input on your line of thought.
Regards,
Dr Vijay Malik
Hello Dr Vijay malik,
I’ve been following your articles to understand fundamental analysis in depth and it has been very helpful. I’ve also started analyzing companies and wanted you to overlook one of the companies that I’ve analyzed, in which I have some unclear doubts as well which would require your help to solve and understand.
UTI Asset Management Company
There are two doubts I’m unable to solve regarding the analysis of UTI AMC, first is if there is no debt on the company then why is there interest paid off every year since 2019 in their Profit and Loss account?
The second doubt is their related party transactions. Since there are so many subsidiary companies in UTI AMC, it is getting very complicated to do management analysis as every subsidiary company has different CEOs/MDs. Let alone the transactions between these companies are also a little complicated to study. It’d be a great help if Dr Stock helps us simplify the analysis of this company.
Below is the rest of my analysis for UTI AMC. I’m no big expert in company analysis but your articles have given me some clarity on how one should look at a company’s stock and business, I hope you revert back, Sir 🙂
Revenue Model :
The total AUM of UTI company is ₹14.98 lakh crores
Breakdown of AUM :
https://drive.google.com/drive/folders/1aurDzQYfjn6o-RtU1LoSRKnwaBVoy54X?usp=sharing
Financial Analysis and Valuation Analysis :
https://drive.google.com/drive/folders/1g9eqwmkpR825jbzcTKdrP2BQU3xh69BU?usp=sharing
Sales growth takes cyclical hits in some years like 2020, this is due to the nature of business UTI AMC. When markets are down then automatically the AUM takes a hit plus the expense ratio they charge customers every day is less than what they’d get in a bull market. Although this business has excellent margins, still due to market volatility and changing economic conditions, there may be some downfalls in the earnings of the company during bear markets.
Margins are considerably lower than its competitors for two primary reasons :
Lower Expense Ratio and Exit Load in equity funds as compared to what its competitors like HDFC AMC charge.
Distribution networks contribute more to sales than direct sales, this decreases their margin as companies have to pay distributors a part of their income.
Fixed cost nature of business: When markets are down a lot of people exit from their investments and new investments in funds are slowed down but the employees in the company(Portfolio managers) have fixed salaries and costs like rent/bills. This restricts companies to cut down their costs during bear markets and affects business margins in the short term. Eg of this is seen in Mar 2020 quarter, when the stock market fell and their sales growth took a hit whereas the company’s cost remained the same, which resulted in negative OPM.
High SSGR and NFAT indicate the company will not need to raise any funds to grow in future and is self-sustainable. The company has sufficient Free Cash Flow too for creating value in the long term for its shareholders.
The margin of safety: PE ratio is trading higher than 10, this is around 21 which is close to industry PE of 23. Also, the company has a PEG ratio of around 2, which sums the company is not exactly at the undervalued stage. The earnings Yield by the company is lower than Gsec bonds (-3%).
Although the company has high SSGR and FCF, the margin of safety as per valuation analysis doesn’t meet the criteria. Hence, the company is a little expensive right now.
Cumulative CFO vs Cumulative PAT Remains a constraint in Cash Flow as only around 50% of profits are converted into cash by the company in the last 10 years, as it shows a lot of money is stuck in WC and Trade receivables.
Industry Analysis (Finding MOAT) :
Sales Growth yoy comparison of HDFC AMC vs UTI AMC
https://drive.google.com/drive/folders/1bdIKIigUEh-X3k3cc_f4XPcmnvN5NkOy?usp=sharing
Sales growth of UTI is almost the same as HDFC AMC; however, the OPM margins of HDFC AMC are quite higher around 70-75% whereas UTI AMC is struggling at 45-50% OPM. This shows the company may not have any MOAT product/service which will stand out from its competitors.
However, UTI AMC has 3 times bigger AUM than its competitor HDFC AMC. Although growth in sales is lower and market share in PMS is reducing slowly even after having first mover advantage in the mutual fund industry still it holds only 5.83% market share in the mutual fund industry much less than 11% by HDFC AMC.
Management Analysis of UTI
Shareholding Pattern :
https://drive.google.com/drive/folders/1zS8tUDEd5ykI6DcHI3oS1QgpMuQrlg1h?usp=sharing
Investor notices the company is owned majorly by Government Institutions, this may be a problem as govt companies by nature are slow decision-makers and often fail to grow business, especially in sectors where technology plays a big role in expansion. With the growth in discount broker apps like Zerodha, and Groww and many people opting to invest conveniently from their phones, apps like Coin may help it increase its direct investments but competitors like HDFC AMC have their banking data and clients to capture more market share aggressively, whereas UTI seems to fail in expansion. (Check their market share in the mutual fund industry, UTI is not seeing much growth as compared to HDFC AMC).
Promoter Salary :
CEO/MD is Imtaiyazur Rahman. Total compensation stands at Rs 8,85,58,277 per annum as of the year 2021- 2022. This is higher than our salary criteria of 1% of Net Profit. Other executive directors’ salary stands for Rs 1,15,24,038 + other benefits/bonuses of the company.
Management Discussion on Industry and Economy :
https://drive.google.com/drive/folders/14ykbfjEX_W5cTNtK06urjqzYy2ZNjVgL?usp=sharing
Growth opportunity for Indian Mutual Fund Industry as India’s total AUM to GDP ratio is still very low as compared to other countries. Whereas globally avg AUM to GDP ratio is around 76% India is still at 15-17%. This gives a significant growth opportunity as India is called a favourite to be the next developed economy of the world. The finance sector will play a crucial role in it and hence the opportunity for the MF industry and stocks that come under Mutual Fund Industry like UTI AMC.
Although Investors must be cautioned here as this recent growth in AUM is snitched with Bull run and stock market hype created by social media which has increased retail/individual investors’ participation a lot in the last 2 years, this hype may not be sustainable as we can already see in 2023 number of inactive demat acc are increasing.
https://drive.google.com/drive/folders/1JbLtol6KRf87MrYlg4YoXYXGW40J0br2?usp=sharing
{Source: Livemint website}
Dear Kishan,
Thanks for writing to us!
Kishan, currently, there is a queue of analyses submitted by readers for our opinion. Therefore, it might take a few weeks before we can dedicate time to UTI AMC.
Nevertheless, regarding your two queries, we would request you to provide us with your current views and we will be happy to provide our input to your current line of thought.
1) For example, if a company has no debt on the dates March 31, 2022, and March 31, 2023, then can there be a situation where it had taken debt during the year and paid it off during the year? How would the balance sheet look in such a case and would it have any interest expense?
2) If a company has many subsidiaries, then an investor should prefer to analyse consolidated financials. She should also focus on related party transactions based on consolidated financials. Consolidated financials cancel out transactions with the subsidiaries. However, if a company has many transactions with outside third parties at a consolidated level, then, unfortunately, there is no shortcut and one has to analyse each one of those transactions to arrive at any opinion.
You may read the following articles in this regard:
Regards,
Dr Vijay Malik
Dear sir,
I am from a non-financial background and trying to learn basic accounting from reading books and studying your stock analysis PDF.
Please see that I am unable to calculate the inventory loss of Rs. 41.7 cr of APL Apollo Tube Limited (Page No: 24 of the annual report 2019), as there is no mention of inventory loss specifically in other expenses and in the extraordinary expense section of the P&L account.
I can’t find any amount of Rs. 41.7 cr in the Change in inventory and cost of the raw material consumed section of the P&L Account.
Please help me understand
1. How does inventory gain or loss affect the profit & loss account and balance sheet?
2. How to calculate the amount of inventory loss or gain from the balance sheet and P&L account?
Thank you & Best Regards,
SUJIT PATRA
Dear Sujit,
Thanks for writing to us!
We would be happy to provide our input to your query. However, we request you first independently search for the answer on Google. After that, please elaborate on your learning from such a search. We would be happy to provide our input on your line of thought on this issue.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Sir, I am studying Prevest Denpro Ltd from the SME segment of BSE.
A company of this size, they are very mature when it comes to documentation. They have maintained annual reports for 6\7 odd years, and conduct concalls along with the presentation. Even though annual reports don’t talk about them or the business strategy which might get improved down the line. I am impressed with the regulatory approvals as well as the accreditation they have got. They have maintained domestic as well as international distributor lists on their website. Good to see that they have their own shopping website. The advisor list is impressive too.
I am impressed with their sales as well as profit numbers. Even though remuneration looks on the higher side as a percentage of profit. But when we look at it from profit growth vs salary growth, it’s conservative as salary has hardly grown by 2.5 times vs profit growth of 10 times. For their calibre and experience, they would definitely get better salaries outside.
What worries me is their growth since their inception. Clocking just 28 cr even after 2 decades. I presume they were busy developing the products and setting the field. I think their inflexion starts now.
I did a sort of scuttlebutt and checked with a dentist who had experience in the Middle East, she is not making use of their product.
I checked with another doctor. She isn’t aware of the company name itself. With a 0.5% market share, I don’t think many of the doctors will be not aware of them, especially from the tier 2/3 cities.
I also checked with a couple of distributors of tier 2\3 cities. One was hardly selling a couple of products of them and another guy said with the price they are quoting, their products are good but not comparable to MNCs like 3M of the world.
I checked their products on Amazon. They have a decent rating.
Atul Modi’s LinkedIn profile looks decent with the posts as well as the traction & followers he has got.
Things to watch out for:
Is Management minority shareholder friendly? The above thread doesn’t give a good picture.
Will the management walk the talk? They do with their number. But looking at the dividend talk need to give them some more time as they are still in the growing phase. If they walk the talk just like in the past with product diversification, we have a huge TAM to address.
I am thinking to take small exposure. Would have taken it if there wasn’t a restriction on the lot.
I was trying to find out related party transactions for the previous fiscal as mentioned by you. But according to AR of 20-21, related party transactions are sales of 146,000/- and purchases of 12,26,900/- with NV International. For approx. turnover of 28 Cr this does not even amount to 1% of revenue.
Am I missing something? Or do I need to check other regulatory filings? Please let me know.
Or is it that you are considering the maximum limit granted by the board for related party transactions for the year into consideration. that is 3CR each for 2 firms owned by mgmt.?
Sir my view management is suspicious. what is your view on management about salary and related party transactions?
What is your view sir about Prevest Denpro Ltd?
Dear Raju,
Thanks for writing to us. We appreciate the time and effort put in by you in the research.
Raju, you may check websites like Zaubacorp to see which other companies, the promoters are directors of and whether these companies appear in the transactions related to the company whether in the annual reports or other media articles/press releases.
While analysing related party transactions, we give more weight to the size of actual transactions instead of the approved limits of related party transactions.
We do not have any views about Prevest Denpro Ltd or its management regarding salaries or related party transactions.
Regards,
Dr Vijay Malik
Sir,
Please share a comprehensive analysis of the recently listed company Sula Vineyards Ltd.
Hi Shankar,
Thanks for writing to us.
We advise readers to use our website to get our input on their stock analysis process and not to get our views on any particular stock.
You may share a detailed analysis of this stock by doing an in-depth reading of all the available annual reports, credit rating reports and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
Selecting Top Stocks to Buy – A Step-by-Step Process of Finding Multibagger Stocks
Once you have done the comprehensive analysis, we request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Sorry, sir.
Mistakenly, I typed trade receivables in place of “Trade Payables”. In calculating the current ratio, we use trade payables in the denominator. I wanted to ask where to find trade payables in the Screener sheet.
Sorry again. Thanks in advance.
Dear Imran,
As of now, Screener does not provide data on trade payables in the Data Sheet of Export to Excel file. An investor needs to get this data from the annual reports of the companies.
Regards,
Dr Vijay Malik
Dear Sir,
I’d like to share with you a brief company analysis of Rushil Décor Limited. Despite below-par financial performance over the last 10 yrs (consistently high Debt to Equity of > 1x and cumulatively net negative OCF and FCF), there may be healthy signs of a turnaround in the last 3-4 quarters. I kindly solicit your views particularly given its current PE of 10x.
• Rushil Décor, now run by a 39 yrs old promoter, is the third largest MDF company in India in FY22 post its recent greenfield expansion in Vizag. It also manufactures laminates. The young and visionary promoter has the ambition to translate conventional laminates & MDF business into new age ‘Smarter living solutions’ driven by technology and modern surface engineering innovations that redefine the ‘future of wood’.
• In FY22, revenue from MDF was 70 % and the rest from laminates. Has 5 plants with an annual capacity of 3,30,000 CBM MDF and 3.49 million laminates, which have a global footprint in approximately 45-plus countries, Exports contributed ~22% to the total sales in FY22.
• Recently set up an MDF-making automated plant in Andhra Pradesh with a capex of over Rs 500 crore driven by smart manufacturing, and fully-automated robotic production. It is strategically located close to raw material-sourcing agroforestry plantations. It has also a proposed fully integrated plant coming up in Gujrat at a Capex of Rs 60 Cr for decorative laminates.
• Last 10 years’ financial performance has not been good. However, there have been signs recently that the company may be turning around its fortunes.
• Debt Equity Ratio has always been 1+ in the last 10 yrs (except 2 yrs) but slightly improved from 1.06x as on March 31, 2021, to 1.02x as on March 31, 2022. For the last 10 years, the company has cumulatively been a Net OCF & FCF negative, all growth was funded by debt. RoE and RoCE were always in single digits.
• Promoters’ stake increased from 53% Mar 20 to 60% Dec 20, again decreased to 55% in Dec 2022, FIIs reduced from 11% to only 1.22% between Mar 20 – Dec 22, DIIs from .8 to .28, and the public raised from 34% to 43%
• However, it is currently trading at a very low PE of 10 (18 Jan 2023) as compared to median PE of 37 (Century plywood’s current PE is 30x).
Future prospects:
• MDF in India, and the industry is expected to grow at a CAGR of 15-20 per cent from an estimated Rs 3,000 crore in 2021 to Rs 6,000 crore by 2026. Unlike the 70 % market share in the developed nations, MDF has just a 30 per cent market share in India, reflecting the high potential for MDF. Plywood share in India which currently is at 70% is expected to go down to half and will be replaced by MDF.
• It should continue the growth momentum that it has managed to gain in the last few quarters in the coming 2 years led by the prospects of the MDF segment with value‐added product contribution likely to go up from 25 per cent to 40 per cent, MDF margins will expand further.
• Rushil expects to deliver more than 30 per cent revenue growth in FY23 along with a more than 20 per cent EBITDA margin, driven by the continued ramp-up of its MDF plant
• Revenues have grown exponentially in the past 3 years to Rs 642.6 crore in FY22 at a healthy CAGR of 22 %. In addition, due to an increase in operating leverage, Rushil Décor also increased its operating margin from 10.7 per cent in FY19 to 11.8 per cent in FY22; OPM on Mar 22, Jun 22 and Sep 22 has been 16%, 23% and 23% which is quite high compared to its historic average possibly indicating a turnaround. Net profit too has grown at 16.5 % CAGR over the last three years.
Thank you and Best Regards,
Balasaheb Kale
Dear Balasaheb,
You may read our views on Rushil Decor Ltd in the following article: Analysis: Rushil Decor Ltd
Regards,
Dr Vijay Malik
Hi, I am evaluating joining your stock advisory service. I couldn’t find a performance update on your past performance over the last few years anywhere on your website. Do you give visibility on it?
Dear Nirav,
Thanks for writing to us!
Nirav, we invest in the same stocks as “Recommended Stocks”. So, you may consider our portfolio performance as a proxy for Recommended Stocks performance”. From August 8, 2011, when we started building our portfolio until now (December 25, 2022), our portfolio has generated an annualized return of 13.9% year on year as compared to an annualized return of BSE Sensex of 11.69% during this period.
Regards,
Dr Vijay Malik
Sir,
I own 9,000 shares of Sree Rayalaseema Hi-Strength Hypo Ltd. My average price is ₹655. Now, it is trading at ₹534. I reviewed it with Screener with the following results. Sales growth of 28%. PE/PB ratio of 11.9. Free cash flow/CFO of 64%. SSGR of 13%. NFT turnover ratio of 9.62%. Debt/equity of 0 and value created for each INR of 2.88.
Sir, please comment if is it worth holding for the medium or long term and if can I add to my investment in future. If so appropriate price range? Thanks in advance.
Dear Prasad,
We advise readers to use our website to get our input on their stock analysis process and not to get our views on any particular stock.
You may share a detailed analysis of this stock by doing an in-depth reading of all the available annual reports, credit rating reports and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
Once you have done the comprehensive analysis, then we would request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our input to your analysis.
Regards,
Dr Vijay Malik
Hello Sir,
It would be great to see your analysis of this exciting fast-growing company – Aditya Vision Ltd. While electronic retailing intuitively should be a low margin, high inventory, and low return business with little differentiation, this company’s growth and execution have been commendable. You may possibly pick something which I missed. Below is my short note.
• The business is exactly like a Croma or a Vijay Sales with some subtle differences which I will discuss below. They are an electronics retailer stocking multiple brands from multiple OEMs and making a margin on final sales to the end consumers. Gross margins usually range from 10-15%. In recent years they have expanded towards the brand perhaps due to stronger procurement heft. In recent years, they have started procuring upfront on a cash and carry basis while demanding a 2-3% discount. Retailers like Croma buy inventory on credit and thus may not get the discount. Aditya Vision’s positioning to the consumer is that of an ‘everyday low price’ (though that’s not an official claim) retailer for electronics among the offline options. They claim to provide the fastest home delivery (one day only) with strong after-sales support for all OEM brands which is very handy in markets like Bihar. Then there are lucky draws etc which can be major selling in these markets. The e-commerce salience is generally highest in electronics but would be lower in this part of the country. Moreover, the penetration for white goods would also be much lower in these states. With little competition from other players (Croma, RIL, Vijay Sales yet to meaningfully expand in tier two and three parts of Bihar), Aditya Vision can capture a substantial share of the consumer wallet.
• Stores are leased so except for the deposits and store capex (Rs5-6mn per store), there is no other fixed cost in the business. Stores are heavily concentrated in the state of Bihar (50% market share in the state) and more recently they have expanded to Jharkhand. Have announced plans to enter UP, MP, Chhattisgarh, and West Bengal. EBITDA margins pre-IndAS and post-rental costs were ~7% in FY22 which is quite good for an electronics retailer (one of the lowest gross margin categories in retailing). Store rentals and labour costs are again substantially lower in these parts versus say Tier 1 parts of West and South India which helps quite a bit.
• Their key secret is the high inventory turns of 4-5x which combined with a 7% margin drives a 25% plus ROCE which is impressive by retailing standards. Someone like a Croma may match up on margins but certainly not on inventory turns. The high ROCE also means that the company can fund its high growth with internal accruals. Store count has been nearly doubled to 90 odds now versus 43 pre-COVID. The management target is to take it up to 150 by FY25. While store addition has been a key growth driver, the same-store sales growth has been impressive at ~15%. This SSSG is nearly double what a well-run steady-state retailer delivers. We will have to see how it’s calculated – a conservative way is to include only mature stores in the calculation.
• To summarise – what’s working for them is 1) capitalizing on an underserved market and 2) cost and price leadership with rising scale in their home market (their store density within Bihar is far ahead of anyone else – local economics of scale matter in retailing). 3) retail is all about detail and purely going by the numbers, one has to say they must be doing the small things right – getting the SKU count right (minimal stock-outs), picking the right store locations (claim zero store closures since inception, DMART is the only one I know to have this) and retaining cost leadership with a good after-sales service experience.
• A lot depends on whether they can continue to execute and scale this, by forecasts suggests they can do sales of Rs19-20bn by FY25 with a PAT of Rs700-800mn. The current market cap is Rs17.5bn which is 0.9x FY25 sales and 20x FY25 PAT. I assume that they reach a store count of 125 by FY25 versus 150 guided by the management. The valuations are reasonable given their scale but not demanding if the store is genuine and they deliver on the numbers.
Hi Rohit,
Thanks for writing to us!
After looking at your analysis, we notice that there is a lot of scope for improvement in the analysis submitted by you. It mainly focuses on the business opportunity, operating efficiency, comments on peer performance and ROCE. It does not incorporate the knowledge, which has already been shared on our website by way of multiple articles and company analysis.
We request you to revise and update your analysis with respect to in-depth management analysis, related party transactions, past capital allocation decisions etc.
You should do an in-depth reading of all the available annual reports FY2017 to FY2022, RHP before its IPO in 2016, credit rating reports and other public information and then submit your updated analysis in a Microsoft Word document to us over email: vijay.malik@drvijaymalik.com. We would be happy to provide our input to your analysis.
You should go through each of the articles of the below-mentioned series of articles and especially focus on articles related to the management analysis and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, RHP, credit rating reports etc.:
https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
All the best for your investing journey!
Regards,
Dr Vijay Malik
Dear Sir,
I have some queries related to Rainbow Children’s Medicare Ltd, which are listed below:
A) As per Rainbow’s annual report 2022 page no.252 it was mentioned cancelling the unused CCPS (FV= ₹48/-) & issue the same amount of equity (FV= ₹10/-).
1) Why it is unused?
2) Above mentioned conversion is based upon the total value of CCPS (no. of CCPS x FV) equal to the full value of equity share (no. of equity share x FV). My question is are all different types of share conversion taken this way or there’s another way?
B) In trade receivable section there is 27.6% (2022) expected credit loss w.r.t. total trade receivable (consolidated) page no. 212. Is this an issue?
C) On page no. 114 (key audit matter for standalone) impairment of loans receivable mentioned Rupee 290 million (Rosewalk healthcare Pvt ltd. subsidiary of Rainbow) & ₹507.27 million (Madhukar rainbow children) unsecured loans which are loan part of the standalone balance sheet but on page no. 183 (key audit matter for consolidated) impairment of loans receivable mentioned only loan outstanding 507.27 million (Madhukar rainbow children hospital) unsecured loans.
The consolidated balance sheet loan amount must include the standalone balance sheet loan amount also but above it is mentioned only for one, Please clarify.
Madhukar Rainbow children’s hospital (a unit of Madhukar multispecialty Hospital and Research Center) has a relationship with Rainbow as “others” (page no. 147), what does it mean? Is it part of Rainbow or not?
D) Page no. 231 (RPT) shows that Rainbow purchased equity shares (Unimed Healthcare Private Limited) from Dr Adarsh Kancharla (KMP) in 2021. Further, it was sold to Mrs Padma Kancharla (a relative of KMP) for the same amount.
I didn’t get the meaning of why Rainbow bought Unimed from KMP and further sold it to a KMP relative. What are your view and interpretation of it? Further (page no. 232) it was mentioned that Rainbow gave the rental security deposit of 3 cr. to Unimed.
E) What is the difference between Inter-corporate deposits realised & placed (p.no. 162)?
Thanks & Regards
Satyajeet
Dear Satyajeet,
Thanks for writing to us!
We would be happy to provide our input to your queries. However, we would request you first do an independent search for the answer on the internet/Google and then elaborate on your learning from such a search.
You should read various online existing articles dedicated to CCPS, its issuance, conversions etc.; expected credit loss on receivables; how while consolidating financials, intragroup transactions are netted off; how different related parties are classified based on their shareholding in one another; different terms related to inter-corporate deposits and related terms like placed/realized etc.
Once you have done this exercise of learning more about these aspects, then we request you to rephrase your queries in light of your new learning. We would be happy to provide our input on your updated learning.
Regards
Dr Vijay Malik
Sir, I have 109 rights issues of Mahindra & Mahindra Financial Services Ltd in my demat account. Now, how do I sell them?
Dear Mr Birle,
We believe that your stock broker is the best person to guide you about this issue.
Regards,
Dr Vijay Malik
Dear Sir,
Let me know why the P&L tax is not matching with cash flow income tax statement. For example, in Talbros P&L statement net ₹1,147 lac in 2022 while as per cash flow statement, income tax paid for the same year is ₹1,842 lac.
Dear Satyajeet,
We would request you first do an independent search for the answer on the internet/Google as well as on our website regarding why the tax expense in P&L and cash flow statements are different. Please elaborate on your learning from such a search.
We would be happy to provide our input on your line of thought on this issue.
Regards,
Dr Vijay Malik
Sir, I have a query. Suppose the stock price is ₹3,000, if I buy an OTM put option of Rs. 250 on the last day of expiry, at the strike price of ₹2,000 and after 10 minutes the market goes down to ₹2,980; still above my chosen strike price obviously, but then I exit the trade. Will it make me a profit? please help me to conclude this!
Dear Ripan,
We do not have any views to share on this. You may contact your broker to understand different scenarios in options trading along with impact of different regulations as well.
Regards,
Dr Vijay Malik
Dr sir,
I think Orient Cement Ltd has the backing of a low PE ratio, decent profits, recent promoter-buying and bottom pricing support. Just wanted to know your opinion because you have done a deep analysis of cement companies, which I am not able to do. Thanks.
Dear Kunal,
We do not have any views on Orient Cement Ltd. We advise readers to use our website to get our input on their stock analysis process and not to get our views on any particular stock.
You may share a detailed analysis of this stock by doing an in-depth reading of all the available annual reports, credit rating reports and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
Once you have done the comprehensive analysis, then we would request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
Regards,
Dr Vijay Malik
I bought Indowind Energy Ltd stock at a high value of ₹40.95 on January 4 without certain knowledge. In order to avoid loss, I started to buy more quantities of this stock continuously just to make sure that I end up getting back my amount without incurring any loss. However, its stock price kept on decreasing after that. In the last 6 months, until now, my invested amount is ₹16,307, whereas the current value is ₹11,214. In total, I have 866 shares with an average buying price of ₹18.83. However, the current share price is ₹12.95. My current loss is ₹5,900. Because of the high investment in this stock, I could not buy any other stock. Please tell me what should I do. Should I buy more quantities of this stock in bulk at the current price to bring down my average buying price? If yes, then how many stocks should I buy and at what value? Please tell me, Sir. I need your advice.
Dear Karthikeyan,
Thanks for writing to us!
Unfortunately, we do not have any view on Indowind Energy Ltd and therefore, we do not have any advice to provide about the stock.
In case, you wish to have our views on our analysis of Indowind Energy Ltd, then you may share your detailed analysis by doing an in-depth reading of all the available annual reports, credit rating reports and competitor analysis. We will be happy to provide our input to your analysis in the form of an article on our website. You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles.
https://www.drvijaymalik.com/stocks-analysis-stepwise-process/
Once you have done the comprehensive analysis, then we would request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Regarding Stock Analysis Excel Template
Hi, I find your trial video on investing very informative and I am considering opting for the Peaceful Investing Workshop videos. However, I just want to check whether the latest “Stock Analysis Excel template” is compatible with Excel 2007 or does it require Excel 2010.
I have Excel 2007 on my personal laptop.
Thanks
Dear Manish,
Thanks for writing to us!
Manish, we have created the Excel Template using Excel 2013. It is in xlsx file format.
As per error messages we see when we try to save it as an “Excel 97-2003 workbook”, some of the formulas and conditional formating are incompatible with Excel versions before 2007. However, we are not sure whether the same would produce any error with Excel 2007 version as well.
We would suggest that you should postpone buying Excel Template until you update your Excel version in the future.
Regards,
Dr Vijay Malik
Sir,
I came to know about you through a tweet from Mr D. Muthukrishnan where he praised your good work. After that, I read about you on your website. I was so pleased that someone is there to guide young and old like me. I have bought your e-book Peaceful Investing and reading it. I am also reading different articles on your website. I must admire you for giving so much knowledge free on your site. Also, your book is such a class.
In the meanwhile, I found your premium service Dr Vijay Malik’s Recommended Stocks. I am interested in this, but I have a few questions. I know you will soon answer them. These are as below:
1) How much initial amount should be invested in this portfolio so that it is helpful.
2) As I am 56 years old, however, I can invest for the long term, still, should I go for it.
Please answer these queries.
Regards
Sanjeev Goel
Dear Sanjeev,
Thanks for providing your feedback about our articles and our ebook.
Sanjeev, your queries about how much money you should invest into the stocks covered under “Recommended Stocks” as well as whether you should invest in these stocks looking at your age profile, would be better addressed by any personal investment adviser who may guide you about investment size in equities and their suitability as per your age profile. Unfortunately, we are unable to provide such investment advice.
“Recommended Stocks” is only an equity research service where we provide our buy/hold/sell opinion about stocks. Rest of the decisions like how much money as minimum investment or allocation of a portfolio as well as suitability as per age profile etc. are to be taken by the investor on her own. Unfortunately, we do not provide any such guidance.
All the best for your investing journey!
Regards,
Dr Vijay Malik
Dear sir, Good afternoon. Please, I want to know the complete analysis of Laxmi Organic Industries Ltd and Jubilant Ingrevia Ltd. Are these going to be multi-bagger companies in the future?
Dear Jagadeesha,
We do not have any views about these companies. You may share your detailed analysis of these companies with us. We will be happy to provide our inputs to your analysis.
Regards,
Dr Vijay Malik
Dear Vijay Ji,
This is with regard to ITC Ltd’s future and Spot price as of 13-May. For the past few days, ITC Ltd’s future price is trading at Rs. 254.50, which is Rs. 4/- or a 1.7% discount on the spot price which is currently at ₹258.50.
My doubt is the board meeting is scheduled only on 18th May for declaring a dividend along with Q4 numbers. But why the future is trading at discount? Could you please explain what may be the reason and what it indicates?
Dear Eswaran,
Thanks for writing to us!
Unfortunately, we do not have any views about the differences in the price of future and spot market for ITC Ltd.
Regards,
Dr Vijay Malik
Do you have any views on the merger announcement of HDFC Ltd with HDFC Bank Ltd? After shares of both companies rose by almost 15% or more on the date of the announcement for a brief period; thereafter, shares of both companies are falling daily. Any research report from any agency n the post-merger plan.
Dear Dinesh,
We do not have any views on the merger of HDFC Ltd with HDFC Bank Ltd and their share price movements. You may take help of Google for research reports on the said merger.
Regards,
Dr Vijay Malik
Dear Dr Vijay,
I was recently going through the 2021 annual report of Dabur India Ltd. Please pardon me if it may be my lack of observation. I saw that the company has current outstanding borrowing (short-term) of Rs. 349 Crores majorly in form of working capital needs (Page 340). However, the company has a huge outstanding cash balance of Rs. 241 Crores + other bank balances of Rs. 1087 Crores (Page 303). Then I wondered why the company should take a loan when it has a cash balance to meet its working capital? Then I noticed, the working capital loan mainly pertains to its subsidiaries. Also, it is mentioned in Note 28.3 that the weighted average contractual rate is 3.86% p.a for the groups’ current borrowings.
Is it because the rates of interest are attractive for subsidiaries and that is why it is preferring to take a loan rather than utilise the cash balances.
Am I missing something here? Request to please provide your kind opinion.
Dear Bhagavatheeswaran,
Thanks for writing to us.
You may share a detailed analysis of the company with us and we may share our inputs to your analysis along with an answer to your this query. Unfortunately, due to time constraints and the pending queue for analysis submitted by readers for our inputs, we are not able to spare time for one-off queries about companies & their data in the absence of a detailed analysis.
For us, opining about any aspect of the company without studying it completely is a myopic approach. So, we intend to know about the company completely before we provide any opinion. Therefore, we do not provide opinions about one-off queries about companies in the absence of a complete detailed analysis from the reader/investor.
From the reader/investors’ perspective, when she does the complete analysis, then many times, she gets the answer to her one-off query on her own. In addition, while doing the complete analysis, she gets to know more about the company, and get to know more queries that she may have about the company, which are better-informed queries. In this manner, she can ask all of the queries in one go.
We may share your detailed analysis with respect to in-depth financial, business, management, valuation, operating efficiency analysis and peer comparison.
You should do an in-depth reading of all the available annual reports, credit rating reports and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, credit rating reports, and margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Dear Sir,
I have 50 No’s of ICICI physical shares (not ICICI bank, it is the predecessor to ICICI Bank). Can I convert it to a DEMAT form? Is it worth anything today? Please guide.
Thanks,
Jayanand
Dear Jayanand,
Thanks for writing to us!
In 2002, ICICI was merged with ICICI Bank. You may contact the investors’ relationship department of ICICI Bank regarding how many shares of ICICI you are entitled to for your current holding of ICICI shares.
In addition, you may contact your stockbroker about the process of converting your ICICI shares into ICICI Bank shares.
For more guidance, you may ask your query on Facebook group: Asan Ideas for Wealth where many fellow investors, stockbrokers, investment advisers may be willing to provide their guidance to you.
Regards,
Dr Vijay Malik
Dear Sir,
I have a query on your “Follow my portfolio” service. You have mentioned – Portfolio returns of 30.0% against Sensex returns of 12.2%. This is as of which date? Could you please provide the latest figures?
Thanks & Regards,
Omkar
Dear Omkar,
Thanks for writing to us!
We request you to visit the following link to find all the details about the information about the data of returns presented on the website like the cut-off date, annual breakup, comparison with index, market-cap wise breakup etc.: Follow My Portfolio with Latest Buy/Sell Transactions Updates
The next update about the returns would be in April 2022 when we would update the data based on the position on March 31, 2022.
Regards,
Dr Vijay Malik
Hi Vijay sir,
I am tracking a company named “Tips Industries Ltd”, which operates a business in music licensing and film production. I believe music licensing has just started multi-year growth due to digital demand and companies with good management can create enormous wealth for shareholders. Reflecting on this, the company has performed significantly and even it is in the process of demerging the music licensing business from film production.
While doing a management analysis of the company, I observed a peculiar pattern in many annual reports from FY16-FY21. The company is giving around a ₹5 cr loan to key management personnel (KMP) every year as a secured loan and doesn’t mention the interest rate for it (stated below). For a company having ~₹90 cr annual revenue, loans of ₹5 cr are not a small amount.
“The Company held Loans and Advances of Rs. 510 Lakhs as on March 31, 2020 (March 31, 2019: Rs. 510 Lakhs). The loans and advances are in nature of rent deposit paid to landlords and are fully recoverable.”
I wanted to understand the management transparency in the business. Only this part is stopping me from having conviction in the company but I don’t want to miss out potential company with this doubt. Please let me know if I missed anything and this related party transaction does look like a red flag to you.
Thanks
Yash
Hi Yash,
Thanks for writing to us.
You may share a detailed analysis of the company with us and we may share our inputs to your analysis along with an answer to this query. Unfortunately, due to time constraints and the pending queue for analysis submitted by readers for our inputs, we are not able to spare time for one-off queries about companies & their data in the absence of a detailed analysis.
For us, opining about any aspect of the company without studying it completely is a myopic approach. So, we intend to know about the company completely before we provide any opinion. Therefore, we do not provide opinions about one-off queries about companies in the absence of a complete detailed analysis from the reader/investor.
From the reader/investors’ perspective, when she does the complete analysis, then many times, she gets the answer to her one-off query on her own. In addition, while doing the complete analysis, she gets to know more about the company, and get to know more queries that she may have about the company, which are better-informed queries. In this manner, she can ask all of the queries in one go.
We may share your detailed analysis with respect to in-depth financial, business, management, valuation, operating efficiency analysis and peer comparison.
You should do an in-depth reading of all the available annual reports, credit rating reports and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, credit rating reports, and margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi Vijay Ji,
I have learnt a lot from your analyses. Based on my reading, I have created a template for business analysis and I have been using it over the past few months.
A few months ago, I came across a company called Nikhil Adhesives Ltd. I would like to hear your thoughts on it. Here is my analysis:
Business Overview:
Nikhil Adhesives is in the business of selling paint emulsions, industrial adhesives, speciality chemicals and consumer adhesives. Following are the main offerings of the company:
Companies products are used in the following way :
https://ibb.co/CbZcWDz
As per the 2021 annual report, 85% of the paint emulsions is supplied to large corporate paint manufacturers & the balance through distribution channels. As per the 2020 annual report, the company is manufacturing adhesives for Asian Paints Ltd (this is contributing to 7% of the revenue).
This is from the 2019 annual report – “With Asian Paints, your company has entered into long term agreement of manufacturing and supplying various grades of Construction Chemicals along with the existing businesses of supplying adhesives and paint emulsions. Your Company has acquired an industrial land at Tumkur near Bengaluru, Karnataka from Government of Karnataka in which your Company will manufacture various grades of Construction Chemicals mainly for Asian Paints and also in due course your Company will manufacturing various grades of existing emulsions and adhesives.”
As per the 2018 annual report, the company entered into a long term agreement with Dow Chemicals International Pvt Ltd to supply paint emulsions.
Clients of the company are:
They operate 5 plants and 25 branches and warehouses. Plants are in the following locations –
They have 400 distributors and 15000 dealers across India.
https://ibb.co/pLsgB8G
Operations Overview: https://ibb.co/ZM693sW
Operational Efficiency: https://ibb.co/86KNT8d
Risks to the company:
Current competition in paints may leave no space for smaller players. It would be safe for Nikhil Adhesives to be a B2B company. B2B companies should continuously invest in R&D and enhance their product portfolio. However, the R&D spends over the years have been negligible.
https://ibb.co/wwbqL0G
One thing that I noticed was, the company’s receivables are negative and on the higher side. Most of these negative receivables are exceeding the profits from operations. From googling what I found was, this could be due to advances paid to the company. I am curious why clients are paying so much in advance (as if the products are in scarcity). I would like to know from you if this should be treated as a red flag.
Thank you in advance,
Satya.
Hi Satya,
Thanks for writing to us!
Satya, after looking at your analysis, we notice that there is a lot of scope for improvement in the analysis submitted by you. It does not incorporate the knowledge, which has already been shared on our website by way of multiple articles and company analysis.
We request you to revise and update your analysis with respect to in-depth financial, business, management, valuation, operating efficiency analysis and peer comparison.
You should do an in-depth reading of all the available annual reports, credit rating reports and other public information and then submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles including an in-depth reading of all the available annual reports, credit rating reports, and margin of safety and peer analysis etc.:
Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
All the best for your investing journey!
Regards,
Dr Vijay Malik
Hi, I have purchased some shares of Brightcom Group Ltd @200, KBC Global Ltd @17 and FCS Software Solutions Ltd @8.27, Ador Welding Ltd @700, India Cements Ltd @180, Housing & Urban Development Corporation Ltd (HUDCO) @52 and NMDC Ltd @163. What to do with these shares?
Hi Sandeep,
We do not provide any buy/sell/hold recommendations about stocks. We do not have any views to share about these stocks.
Regards,
Dr Vijay Malik
Thank you so much, sir. I am really grateful that I met you in this lifetime.
You are welcome, Ritesh! All the best for your investing journey!
Regards,
Dr Vijay Malik
Hello Sir,
Could you please do the analysis of Gland Pharma?
Thanks.
Hi Rajdeep,
We advise readers to use our website to get our inputs on their stock analysis process and not to get our views on any particular stock. You may share a detailed analysis of Gland Pharma Ltd by doing an in-depth reading of all the available annual reports, credit rating reports and competitor analysis. We will be happy to provide our inputs to your analysis.
You should go through each of the articles of the below-mentioned series of articles and do an improved analysis by incorporating the learning of each of these articles: Selecting Top Stocks to Buy – A Step by Step Process of Finding Multibagger Stocks
Once you have done the comprehensive analysis, then we would request you to submit your analysis and conclusions along with the reasoning for each of your observations in a Microsoft Word document. We would be happy to provide our inputs to your analysis.
Regards,
Dr Vijay Malik