Ask Your Queries

Modified: 08-Jun-21

Dear friends,

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

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

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All the best for your investing journey!

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207 thoughts on “Ask Your Queries

  1. Hello sir, my name is Himanshu and I am a regular reader of your insightful articles. Thanks a lot for that!
    My question is, do I need to get into the depth of the production process of the company. Let us say a chemical company like Vinati Organics Ltd, then do I need to understand the chemicals, the nature of the chemicals, the way they are producing. Do I need to gain knowledge about the biological nature of that particular chemical?
    Your views will be very helpful for me!
    Thank you!

    • Dear Himanshu,

      Thanks for writing to us!

      We would be happy to provide our inputs to your query. However, we would request you elaborate your thoughts about the importance of these aspects in company analysis. We would be happy to provide our inputs on your line of thought on this issue.

      Regards,
      Dr. Vijay Malik

  2. Hello Sir, While tallying cash flows for Prince Pipes & Fittings Ltd, I came across a weird situation that cash flow for FY2020 in the screener.in and annual report FY2020 do not match. And if we tally the same with the annual report of FY2021, then all cash flows are exactly matching. Why is it so sir?
    waiting for your reply.
    Regards,
    Tej Prakash

    • Dear Tej Prakash,

      The screener team would be in a better position to help you in this regard. You may contact the Screener team directly for clarifications about differences in the data on their website and the annual report.

      Regards,
      Dr Vijay Malik

  3. Dear Dr Vijay,

    I love this site and have read most of the articles on the site and have learnt a lot. I have a question regarding the updates on the site. How do I find the latest stock analysis that you have posted or if you have answered a query on a specific article or if you have written a new article altogether on the website? Maybe I have missed something about how to explore it correctly. Could you be please let me know how to navigate this site for new developments/updates?

    Thanks,
    Sandeep

    • Dear Sandeep,

      To receive email notifications for new articles, an investor may sign-up by entering her email at the following link: https://www.drvijaymalik.com/sign-up/

      The same form is available at the end of each article and also on the top of the sidebar on the desktop.

      On the home page, the new articles reflect in the sections: “Latest Company Analysis” and “Recent Conceptual Articles.”

      Regarding comments, an investor can choose to get an email notification when her comment is approved. We do not provide a facility for email notifications for every comment i.e. written by others on the website.

      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

  4. Should we still hold or sell when a company is trading at a P/E ratio of 130?

    Thank you Dr. Vijay for a wonderful article. I’m new to share market investing and finance but trying to learn.

    A doubt, I have a position in Happiest Minds Technologies Ltd. I bought this company at INR 440 with the sole objective of long-term investment. I do not remember my purchase price to earnings (P/E) ratio, but this company is now trading at a P/E ratio of 130, after almost 3X growth in its share price.
    Now, after reading your article, I am curious to know what an investor should do in such a scenario, still hold or square off their possible looking at the current P/E ratio.

  5. Thanks, Sir.

    I am now also sharing my detailed analysis on the business so you can consider taking this company for a deep dive – on both the business and the accounting shenanigans. Hope this helps.

    1.1 COMPANY BRIEF:
    Monte Carlo Fashions Limited (referred to as “MCFL” hereafter) is a leading player in North India in the winter wear segment with their brand ‘Monte Carlo’. It is a part of the Nahar Group which is a sizeable player in worsted woolens and other fabric and yarn manufacturing. The company is based out of Ludhiana, Punjab. The company is owned and run by members of the Oswal family who started the group back in 1949.

    Until 2012, MCFL was a part of OWM (Oswal Woolen Mills), which is a worsted woolen manufacturing company of the group. In 2012, Samara Capital, the private equity player took a 20% stake in MCFL for an enterprise valuation of Rs 9 bn (current market capitalization: Rs 7 bn) and the same was demerged from OWM. The idea was to have MCFL listed separately since it would be a pure consumer branded business with ownership to the Monte Carlo brand.

    MCFL’ main business is selling branded woolen sweaters and jackets which makes the bulk of its revenues with a strong market share in North and East India. Over time, the company has diversified away from woolens, and into cottons which today make up ~60% of sales. Apart from winter wear, the company has diversified into non-winter wear, home furnishings and kid’s apparel. However, winter wear remains the dominant segment making up ~50% of sales. The business thus exhibits high seasonality with ~55-60% sales accruing in the December quarter.

    MCFL had FY20 sales of Rs7bnn and has a market cap of ~Rs7bn.

    1.2 BUSINESS MODEL:
    This is a branded apparel business like that of peers – Page Industries Ltd (Page), TCNS Clothing Co. Limited (TCNS) and Kewal Kiran Clothing Limited (KKCL). The strength of this company is the woolen portfolio under the Monte Carlo brand (~25% of sales). Within its segment, this has an estimated 50% market share of the organized segment. Monte Carlo woolen sweaters command high gross margins and this segment is the main cash cow for the company. The problem has been that the woolen business has been a dog in terms of growth (sub 5% growth). The woolen portfolio is well penetrated into the northern and eastern parts of the country and has a limited market in the warmer parts. It grows in the mid-single digits, at best.

    The company has been investing in growing its non-woolen portfolio, which is cotton apparel. Within cotton too, a fair share of the portfolio is tilted towards winter wear (jackets) but the same is suitable for relatively less harsh winter regions of the country. The share of cottons has grown steadily over the years and now makes up 60% of sales. Other growth drivers have been segments such as home furnishings and kids apparel which together make up ~15% of sales.

    Historically, woolen apparel has been made in-house with all the raw material sourced from the erstwhile parent and now group company, OWM. For cotton apparel, some of the job work is outsourced to another group company – Nahar Spinning Mills.

    MCFL makes gross margins of 47-48%, which, at a headline level, are lower than Page (60%), KKCL (60%) and TCNS (65%). In my view, margins are higher in the woolen portfolio at ~65% while they would be lower at ~40% in cottons. Cotton margins are lower as the manufacturing is outsourced but the more important reason is that brand strength in cottons is relatively weak. Trade margins are also higher.

    In terms of distribution, MCFL has had an overreliance on the multi-brand outlets (MBO) channel (50%+) in the past but that has been under some stress post demonization and introduction of goods and services tax (GST). The company has attempted to correct the same in the last few years with a larger focus on LFS (large format stores) and online channels. The latter come with lower margins, call for discount sharing and buy on a consignment basis. At the same time, they are important given they attract an incrementally higher number of consumer footfalls. LFS and online, each contribute ~10% of sales and are fast-growing.

    MCFL also draws a fair share of 40% from the exclusive brand outlets (EBO) channel (300 EBOs). EBO count has grown at 5% CAGR over the last seven years with EBO sales growing 10% (~6% implied SSSG). 85% of the EBOs are franchised with a store closure rate of 35% (stores closed/ opened). These metrics are not ideal, and the company should look to invest more in their own EBOs as well. The store closure rate is also on the higher side, too. However, on both these metrics, MCFL scores much better than KKCL. Also, please notice that the implied store SSSG of 6% is healthy and suggests potentially good store economics. The company’s own EBO count has doubled from 20 to 40 between FY18 and FY21. This is a move in the right direction.

    1.3 PAST SALES PERFORMANCE AND KEY FUTURE DRIVERS:
    At an aggregate level, MCFL has shown an ability to grow sales by 8-9%. Growth is clearly divergent with the mature woolen’s portfolio growing at low single digits. Cottons and home furnishing are growing at high teens and are driving nearly 40% of incremental sales between FY14-20. This trend should continue in the coming years given the management has demonstrated an ability to diversify away from core woolen wear.

    The Monte Carlo brand is being used beyond woolens in other categories also and in my view, ~70% of total sales come under this main brand. The management does not disclose the sales of other brands except Cloak & Decker (~6% of sales) and thus, it seems that other brands are still small. There is nothing wrong with extending the Monte Carlo brands to other segments and categories as it does have a high recall.

    MCFL draws 95% of its sales from North, East and Central India and has been trying to diversify its presence in West and South. So far, they have seen limited success as the share of West and South has stagnated at single digits for many years. One clear challenge here is that consumers in the South and West do not buy winter apparel and have no connection with the Monte Carlo brand. The company thus needs to invest aggressively in building its brand in these regions for other non-winter products.

    1.4 PROFITABILITY AND RETURN METRICS, FUTURE DIRECTION:
    Gross margins for MCFL have been steady over the years at 47-48%. These are decent for an apparel category but lower than some of the other listed peers. However, MCFL makes healthy EBITDA margins of 17-18%, which are at the top end of the listed apparel peers. Despite lower gross margins, MCFL makes higher EBITDA margins due to:
    1) low rental costs as the bulk of the EBOs are franchised
    2) staff costs as a % sales are lower than industry standards (by 300-400bps). This is maybe a sign that not enough quality professional talent has been inducted. Directionally, staff costs have moved up 300 bps over the last six years.

    MCFL has a fixed asset turnover of ~3.5x, which is on the lower side versus industry peers. This is a bit surprising given MCFL does not invest much in company EBOs. While they manufacture woolens in-house; cotton apparel is outsourced. In that context, asset turnover seems lower than expected. For comparison, TCNS has asset turns of 20x (completely outsourced); KKCL: 6x (partially in-house) and Page: 8-10x (70% in-house).

    Receivable days for MCFL used to range around 75 days until FY15 but have increased sharply to 125 days over the last few years. This remains a key monitorable going forward. In my view, the reasons for the same could be:
    1) stress in the MBO channel which needs higher credit
    2) higher growth in the large format stores (LFS) channel, which buys on consignment and asks for credit
    3) company may have extended credit to drive growth.

    The company has managed to keep its overall working capital steady by increasing payable days to the same effect (70 to 100+). Since ~25-30% of payables are to group entities, the pain has been managed well. Would they be able to stretch payable days in such a manner, were they not to group entities? Peer KKCL, which has also suffered from rising receivable days has not been able to stretch its payable cycle because all its vendors are independent with no related party involved.

    MCFL makes a core ROCE (post-tax) of 13-14%, which is much lower than peers in the branded apparel business. While margins are good, the lower fixed asset turnover and more recently, the stretched working capital cycle, has dragged down ROCEs. That said, the ROCE is acceptable as it is still higher than the cost of capital (10-11%). The ROCE is also higher than the growth rate, which allows MCFL to grow with internal accruals. The company has remained debt-free and closed FY21 with net cash of Rs 1 bn (~14% of market capitalization).

    • Dear Rohit,

      Thanks for sharing your inputs on the business and financials of Monte Carlo Fashions Ltd. We appreciate the hard work put in by you in the analysis.

      Currently, there is a queue of analysis submitted by readers. Therefore, it might take a few weeks before we are able to devote quality time to your analysis and provide our inputs as an article on our website. We request you to bear with us in the interim.

      We request you not to send follow-up messages/emails as we do not reply to follow-up emails.

      In case of urgency, we suggest investors rely on their own analysis.

      Regards,
      Dr Vijay Malik

  6. Hello Sir,

    I have a new investment idea that I want to discuss with you and want your guidance on the same.

    I recently ran a query on the Screener “Current price < Book value". Apart from PSU and banks, I found the following companies. Please let me know your thoughts on the same. I think this is a good opportunity for making easy money. SCRIP Discount to BV JSW holdiings 55% Maharashtra Scooters Ltd 70% Brightcom group 11% Tata Investment Corporation Ltd 55% Welspun Corp Ltd 8% Gujarat Alkalies & Chemicals Ltd 30% Gujarat State Fertilizers & Chemicals Ltd 48% Ramco Industries Ltd 20% Uflex Ltd 27% Pilani Investment & Industries Corporation Ltd 78% Kirloskar Industries Ltd 15% Awaiting your reply. Thanks and Regards, Darshan

  7. Dear Sir,

    I was working on this company – Monte Carlo Fashions Limited (MCFL). While I like the business as a potential stock idea given current valuations seem undemanding, there are a lot of potential red flags I came across which I wanted to take your views on. Highlighting those below.

    1. High share of replated party transactions:

    30% of the cost of goods sold (COGS) are sourced from group companies. The wider Nahar group has always been into yarn and fabric manufacturing, so it is natural that MCFL sources some stuff from these companies. For woolens, the group company Oswal Woollen Mills Limited (OWM) is the largest player and one of the few with high-quality supplies. So, naturally, it supplies to MCFL. Also, earlier MCFL was a forward integration project for OWM and that business relationship has continued after the demerger.

    Grant Thornton is the auditor for these transactions so there is some credibility to the same. However, there is always a conflict of interest when promoters are 100% owners in the related party and share the ownership with minority shareholders in MCFL.

    The entire CSR expense of Rs16mn goes to a related party – Oswal Foundation.

    2. Family members take a hefty cut with low pay for professionals:

    Jawaharlal Oswal is the MD of the company. He does not take any salary but has appointed his two daughters – Ruchika and Monica Oswal as executive directors in the company. Each of them gets about ~Rs9 mn in compensation without any active role in management.

    Sandeep Jain, the husband of Monica Oswal is also an executive director and is the main person running the show for the family. He takes home Rs20 mn. His son, Rishabh Oswal, who is 28 years old, was directly appointed as an executive director and takes home Rs10 mn. I doubt he currently contributes in a meaningful way to justify the position or the pay.

    All put together, the promoters together take a salary of ~Rs50 mn, which while high, is within the limits stipulated by the Companies Act.

    The CFO is paid only Rs 2 mn, which is lower than industry standards for a company of this size. Kewal Kiran Clothing Limited (KKCL), which is conservative, pays its CFO Rs 6.5 mn and TCNS Clothing Co. Limited (TCNS) pays its CFO Rs 12mn.

    All other senior professionals in the company make Rs2-3 mn, which is less than half of what Oswal sisters make. It seems lower versus industry standards. If we make a like for like comparison of the top 5 nonfamily professionals, MCFL would rate much lower on professional pay versus peers.

    3. Capital Expenditure (capex) seems a bit overstated:

    The net fixed asset turnover for MCFL is much lower than peers. For MCFL it is 3.5x while for Page Industries Ltd/TCNS/KKCL it is 10x/20x/6x.

    Last five years capex is 3.5% of sales for MCFL, while for Page/TCNS/KKCL is ~2% of sales.

    Higher capex and higher fixed asset base lead to higher depreciation charges which average at 4.5% for MCFL while for Page/TCNS/KKCL they are 1-2% of sales.

    Note that MCFL does not need a lot of capex because most of its exclusive brand outlets (EBO) expansion is through the franchise route. Only the woolens are made in-house (~30% of sales) while cottons and others are outsourced.

    4. High cash balances yet keep debt on books:

    Over the last 8-10 years, the average cash on books has been ~Rs 750 mn while the average debt on books has been Rs800 mn. Although, debt has come down to Rs 300 mn over the last two years.

    But I did not understand the logic of having high cash and debt on books at the same time. For example, in FY16, they had Rs1,200mn in cash with Rs 1,000mn in debt. The cash earns interest at ~10-12% while the debt costs 14-15%. Why pay the spread? (the interest earned and paid is calculated using their profit and loss (P&L) and balance sheet (BS) figures).

    The cost of debt has trended around ~15% which seems on the higher side. Initially, I suspected that this may be debt from related parties lending to MCFL to pocket a higher interest rate. However, that does not seem to be the case. So, I am not clear on what could be the reason.

    • Dear Rohit,

      Thanks for sharing your observations. The hard work put in by you is visible.

      Rohan, the following articles will help you regarding your observations:

      How Promoters benefit from Related Party Transactions
      How to identify Promoters extracting Money via High Salaries
      7 Signs to tell whether a Company is cooking its Books: “Financial Shenanigans”
      How to do Management Analysis of Companies

      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 these observations. 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. In this manner, she can ask all of the queries in one go.

      You may share a detailed analysis of the company 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 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/

      All the best for your investing journey!

      Regards
      Dr. Vijay Malik

  8. Dear Dr,

    For some companies, Screener provides consolidated financial only for the last 3-4 years. However, the standalone financials are there for 10 years. In that case, how to use your stock analysis excel template? Should we download the standalone financials or consolidated financials for 3-4 years will be good enough for analysis? Kindly suggest.

    Also, in your excel template, it is mentioned in your instructions sheet that there is a “Description” sheet providing links for all the analysis parameters. However, I couldn’t find any such “Description” sheet in your latest version 3.1. Please advise.

    • Dear Prakash,

      For companies that have consolidated financials for less than the last 10-years, we advise investors to merge the historical data so that she analyses the consolidated data for recent years and the standalone data for the previous years. We have written about how to combine/merge the standalone and the consolidated historical data for companies in the section “How to combine Standalone and Consolidated financials for historical analysis?” in the following article:

      Standalone vs Consolidated Financials: A Complete Guide

      Regarding analysis parameters, as per the updates/changes in version 3 of the Excel template, we have removed the description sheet and included details of each parameter as a pop-up comment in the “Analysis” sheet itself. Please refer to the following details on the Excel Template product page:

      Important: Removed the separate description sheet and instead added the interpretations of all the parameters of the Analysis Sheet as “comment” in the narration/label cell on the Analysis Sheet itself. So, if an investor wants to learn how a parameter is calculated and how it should be interpreted, then she has to just hover the mouse/cursor on the narration/label cell. A description will pop-up, which will contain the details about the parameter, its calculation and its interpretation.

      Hope it answers your queries.

      Regards,
      Dr Vijay Malik

  9. Dear Sir,

    I would have read your article “When to sell stocks” some 20-25 times and understand the approach. 

    In today’s times, the markets either remain very fearful (as in March 2020) or very greedy (as of today) where any company can list at 100% premium. The Nifty valuations with trailing twelve months (TTM) price to earnings (PE) ratio of 27 appears reasonable to many. However, the change in the methodology of including consolidated earnings recently is not spoken much in the media. The valuation metrics for small and midcaps are even higher.

    It’s true that at some point in time the overheating will disappear and markets may fall, but that would be construed as “timing the market”, which no one can do effectively. So, what can one do now? During 2017, many small and midcap stocks rose significantly, only to correct from February 2018 onwards.

    So far as I have understood your approach, I don’t think you will make any changes. That said, how will you react to the valuations of some of the mid and small-cap stocks which are 76-80 times on a TTM basis? Many pundits propagate the theory of asset allocation based on market valuations. However, that may not be the best strategy to create wealth although that can generate good interim income.  However, post the market correction even the best quality small caps fall and remain range bound for years. Are you thinking other than what you have written in the article?

    Thanks & regards,
    Omkar Ranjan

    • Dear Omkar,

      Thanks for sharing your inputs.

      As mentioned in the article “When to sell stocks“, we do not tend to sell stocks in our portfolio, which are fundamentally good but have become overvalued. At the same time, we do not tend to buy stocks, which are valued beyond our preferred buying range. The following article would help an investor to assess our method of determining the PE ratio to pay for any stock:

      3 Principles to Decide the Ideal PE Ratio of a Stock for Value Investors

      This approach has worked well for us throughout all the market phases in the past and we tend to continue following the same.

      Regards,
      Dr Vijay Malik

  10. Dear Sir,
    Given my strong interest in investing, I pursued many learning opportunities in this regard and one of them was to purchase the e-book on Peaceful Investing and the Screener Excel Template from your website. I have read the e-book and also use the excel template together with Screener regularly to identify stocks for investing. I found these resources extremely useful and I can confidently say that I am many steps ahead of where I was before.
    Despite the above improvements, I am not totally clear about a few concepts related to the in-depth analysis of financial statements. I will appreciate if you can guide me to additional appropriate resource related to financial statement analysis (such as books, webinars etc) that can help me achieve full potential in this regard.

  11. Dear Sir, I was analysing Larsen & Toubro Infotech Ltd. For the year 2016-2017, profit before tax (PBT) is ₹12,358 million. The tax rate as taken from Screener is 21%. Therefore, tax as per PBT should be ₹2,595 million. However, current tax for the year 2016-17, which they paid is ₹3,181 million. My question is, what does it mean if the company is paying more tax than the tax rate? please help.
    BTW… BIG FAN

    • Dear Moin,
      To find out the reasons for the differences between the tax payout of any company and the standard corporate tax rate prevalent in India, an investor should read the company’s annual report. She should focus on the schedule/note for income tax reconciliation and its key accounting policies section.
      Therefore, we request you to read the annual report of Larsen & Toubro Infotech Ltd in detail and you would get your answer.
      The following article will help you in this regard: https://www.drvijaymalik.com/annual-report-reading-guide/
      Regards,
      Dr Vijay Malik

  12. Dear sir

    On my first question, I understood the derivation of the SSGR formula but my question is on derivation itself? The formula = net fixed asset turnover * npm* retention rate – depreciation

    The net fixed asset is gross block minus depreciation; so, here depreciation has been deducted and the impact of it has been taken. Now, the net profit margin is net profit divide by sales. Net profit is sales – cogs= gross profit – exp = EBITDA – depreciation – interest plus other income – tax gives net profit. Here also to arrive at the net profit we have deducted depreciation and its impact has been taken.

    So why do we again minus depreciation? (depreciation as a percentage of sales). Already depreciation impact or deduction has happened mentioned above.

    Hope you got my doubt. Please if you can clear it. It will be helpful.

    Thanks and regards,
    Rushil.

    • Dear Rushil,

      The answer to your query is present in the step-by-step derivation of the SSGR formula. We request you to go through the derivation focusing on each step at a time (click here). An investor should try to understand in which step “Depreciation” as a parameter is introduced in the calculation. She should focus on the subscripts “0” and “1” under the parameters because they hold importance referring to the year for which SSGR is being calculated. She should focus on how the depreciation is used as a percentage of net fixed assets and not as a percentage of sales.

      Once an investor spends time understanding the derivation of the formula of SSGR by focusing on each step at a time and looking at the introduction of each of the parameters, then she would be able to get it as the derivation and the parameters are self-explanatory.

      An investor would notice that all the steps of the derivation are numbered. Therefore, in case, an investor still has the queries, then we request her to point out the specific step of the derivation where she believes that the parameters should be treated differently.

      Regards,
      Dr Vijay Malik

  13. My question is on SSGR – the formula is NFAT*NPM*Retention Rate- Deprecation.

    My doubt is deprecation is already adjusted or deducted when we take NFA (Net Fixed Asset) to calculate the NFA Turnover. Also When we take Net Profit Margin (The Net profit is also arrived after deducting Depreciation). So why we minus the deprecation again? As already Depreciation has been adjusted or minus when we calculated NFA and Net Profit. i.e. adjusted in net fixed asset turnover & NPM, then why do we again Minus Depr ie NFAT*NPM*Retention Rate- Deprecation?

    The second doubt is on calculating NFA turnover:
    To calculate it, we take the average Fixed Asset. But after getting NFA turnover, we again take the average of 3 years. (duplication of average)? I understood the logic of taking average NFA turnover for 3 years but when calculating NFA turnover for a single year can we take the end of NFA/Sales because after getting NFA turnover, we are going to take an average of 3 years.
    Please if you can clear these two doubts.

    • Hi Ravi,
      The writings in the Peaceful Investing ebook are a result of our experience of analysing hundreds of companies. It is essentially a result of practical learning instead of primarily theoretical readings.

      We suggest that an investor should read the book Intelligent Investor by Benjamin Graham to make it the basis of fundamental analysis. Thereafter, she should focus on analysing companies and reading as many (hundreds of) annual reports as possible. In this exercise, she should keep looking in Google about any new terms that she comes across.

      Regards,
      Dr Vijay Malik

  14. Dear Dr. Vijay Malik,
    Hope you are testing negative and staying positive. Stay safe.
    My name is Punith and I am from Chennai. I am a regular reader of your website posts and I admire the work you are doing on the stock analysis front. Last week, I came across a post written by Prof. Sanjay Bakshi on “Debt Capacity Bargains”. On this topic, he has written two posts.
    1) https://fundooprofessor.wordpress.com/2011/04/24/vantage_point/
    2) https://www.dropbox.com/s/b6cma7ru1mvbuqk/Lecture_14%20-%20Debt%20Capacity%20Bargains.pdf?dl=0

    I would like to redo the exercise with companies that Prof. Sanjay Bakshi has discussed:
    1. Container Corporation
    2. VST Industries.

    Please let me know if the below-mentioned steps are right.
    Step 1: Average Cash Flow for 5 Years
    Step 2: 1/3 of Average Cash Flow
    Step 3: Debt Capacity = 1/3 of Average Cash Flow /(10 %) {10 % derives from bank lending rate}
    Step 4: Market Cap := (1.75 * Debt Capacity)+ Cash Equivalents

    Dr Mailk, I would like to know your viewpoints on this kind of valuation, where this can be useful and what situations this cannot be used.
    Please let me know your thoughts.
    – Punith

    • Dear Punith,
      Thanks for writing to us!
      Punith, we do not use “Debt Capacity Bargains” in our investing process. We do not have any views on it and therefore, we are not the best person to opine on it. We believe that you may contact Prof. Bakshi directly for your queries.
      Regards,
      Dr Vijay Malik

  15. Dear sir,
    I have purchased PTC India Ltd, Qty 553 @ ₹107.35 in the month of June 2021. What will be the target price or the growth of this share? Can I hold it for the long term for good returns because, nowadays, this share getting down and I am at a loss in the same? Please guide on the same.
    Thanks

  16. Res. Sir, This is Rameshwar learning the stock market. I have read that after 1:1 bonus shares, share prices will become half. Infosys gave a 1:1 bonus in Sept 2018 but share prices did not become half. Can you clear my doubt, please? I have the same query with a share split also. Their market value also did not get half.

    • Dear Rameshwar,
      We request you to check if, after the 1:1 bonus, the share price did not become half, then how much was the final change in share price? Was it near half or very much different from half? If the share price was different from half, then we request you to think more and elaborate what according to you can be the reason for such a change in share price? We will be happy to share our inputs to your line of thought.
      In the meanwhile, the following article will help you in understanding more about bonus shares: https://www.drvijaymalik.com/bonus-shares/
      Regards,
      Dr Vijay Malik

  17. I have subscribed for your screener and it is very helpful in analyzing the basic synopsis of any company. Also, you have explained various financial terms on your website in great details. You have done great work on a single platform. I have some query.
    Sir, as various companies have various products and they depend on different raw materials. Prices of raw material have a huge impact on the profitability of the company and hence on the share price. Can you please give some website details for checking the price chart of different commodities like minerals, chemicals, pharma ingredient etc?
    Regards
    Amit Karawat

    • Dear Amit,
      There are many avenues to get the price charts for commodities.
      – Google it and an investor may get various websites (both Indian and international) that provide such price charts.
      – For commodities listed on commodity exchanges, an investor may see price charts on the website of the exchanges.
      – Screener website provides import and export price trends for commodities; however, it is a premium feature of Screener.
      Regards,
      Dr Vijay Malik

  18. I am 43 years old. I have been investing Rs 20,000/- in mutual funds for the last 5 years with some bulk investments in between whenever possible and have around Rs 15,00,000/- in mutual funds. From May 2021, I have started investing Rs 85,000/- per month in mutual funds. I am contributing Rs 10,000/- in Canara Robeco Emerging equities fund, Rs 22,000/- in Axis Blue Chip fund, Rs 22,000/- in Canara Robeco Blue Chip equity fund, Rs 10,000/- in SBI Small Cap fund, Rs 11,000/- in PGIM India Flexi cap fund and Rs 10,000/- in SBI Focussed Equity fund. I have also purchased Government SGB worth Rs 3,38,940/- recently and have an investment of Rs 4,00,000/- in the stock market. I intend to retire early in the next couple of years, of course, my job is pensionable. But, the benefits would be reduced if I retire early. Can I have a corpus of more than Rs 2 crores after 5 years?

  19. Sir, I have a few queries. I could not find answers to my doubts on Google or in your articles; hence, I am asking them.
    1) If auditor’s fees grow at a CAGR much faster than revenues over 5 to 7 years, is it a red flag?
    2) If CWIP is very large, is it a red flag? As depreciation does not have to be charged on CWIP.
    3) If there is a large difference between the tax on cash flow statement and tax on P&L, is it a red flag?

    • Dear Malhar,
      Regarding growth in the auditor’s fees and CWIP, we request you to think and share your thought. We would be happy to provide our inputs on your line of thought.
      Regarding difference in the tax in CFO and P&L, the following articles will help you:

      https://www.drvijaymalik.com/understanding-cash-flow-from-operations-cfo/

      https://www.drvijaymalik.com/how-to-calculate-deferred-tax-assets-change-in-trade-receivables-payables/

      Regards,
      Dr Vijay Malik

      • Auditor Fees: I think auditors could be bribed for signing off and not pointing out any irregularities. Hence, e.g. audit fee growing at 40% CAGR when sales are growing at 10% CAGR, in my view, is a red flag. Generally speaking, revenue could be taken as a broad indication of the work done by auditors. Hence, when auditors work (revenue of the company) is growing at 10% CAGR, auditor’s fees should not grow faster. Fees should be reflective of the work done by auditors.

        CWIP: I am not sure about this. Depreciation does not have to be charged on CWIP; hence, management could delay the commissioning to boost the bottom line.

        • Dear Malhar,
          Auditor’s fees: Thanks for sharing your views about auditor’s fees. An investor may also think of scenarios where, previously, the auditor’s fee might have been below the prevailing market rate and the fees might have been increased to bring them in line with the market. In addition, there might be a change in auditor and the new auditor might be an expensive entity. We suggest that an investor should consider all these different scenarios before she arrives at any conclusion about an increase in the auditor’s fees.

          CWIP: Thanks for sharing your thoughts about the possibility of delaying the commissioning of under-construction projects to boost the bottom line. However, such a conclusion might not be straightforward because at the end of the day the expansion project is undertaken to increase the revenue and thereby profits. In case, the CWIP of a company continues beyond the reasonable period in which the expansion project should have been completed, then an investor may search for information to know whether the project is stuck due to any issues like govt. approvals, local protests etc. This is because, there might be many reasons for the projects to get delayed including a change in the market scenario where initially, the demand projection might be high, which later on turns out to be a temporary increase.
          Regards,
          Dr Vijay Malik

  20. Respected Sir/Madam,
    I received information about a recharge scheme with varied payment amounts where the subscriber would get Rs 8,000 in his account every month for the lifetime if he chooses the Rs 25,021 plan and makes a payment for it. I checked on the internet and found that KAAK ECONOMIC is an unlisted company and its two directors are from the same family. I request you to share your insights and advice on whether it is safe to invest in this scheme. Regards,
    Hussain Kaka

  21. Sir, I am doing a business performance analysis as per the benchmarks provided by you. In this connection, I have a doubt. ROE and ROCE are two important ratios in assessing business performance. Whether ROE is more than ROCE OR ROCE is more than ROE? Which is desired from the investor’s point of view?

  22. Sir, I read ur analysis of Kanchi Karpooram Ltd. I am briefing some recent figures. In Sep 2020, the company has zero debt, more than 50 crores in cash, CFO increased to 30 cr half-yearly. The maximum red flag, which you had analyzed in great details, now seem to disappear like negative free cash flow, capex by debt funding, high interest paid to promote rating issue etc. Now, the remaining red flags are related party transactions in the form of sales to Suresh Industries and high growth in directors’ remuneration. I want to ask you whether the stock is worth buying now looking at recent performance?

    • Dear Amit,
      Our analysis articles are a one-time opinion in response to the analysis submitted by the reader. Unfortunately, we do not update the analysis based on future results/developments. Investors need to take their own decisions.
      Regards,
      Dr Vijay Malik

  23. Sir,
    I could not find answers to my doubt on Google or in your articles, hence I am asking this query. Sir, in many of your articles you have said that unspent CSR boosts profits.
    I found this article https://taxguru.in/company-law/accounting-corporate-social-responsibility-csr-expenditure.html#:~:text=Any%20amount%20spent%20on%20CSR,immediately%20when%20they%20are%20incurred.&text=As%20such%20no%20provision%20is,is%20required%20to%20be%20made. which says that no provision has to be made for unspent CSR unless the contract has been entered for spending the CSR, and there is a liability
    But in one concall I attended, the mgmt said that their other expense is higher because of provision made for unspent CSR. So can you please clarify whether or not unspent CSR boosts profits?

    • Dear Malhar,
      If you are getting different views on different sources, then we believe that any chartered accountant or any lawyer who is an expert in the Companies Act would be able to give a definitive opinion in this matter.
      Regards,
      Dr Vijay Malik

  24. Good Day,
    I have a query regarding some of my shares which were with Karvy. After registration of a complaint in NSE, 2 of the shares are still Under the securities tribunal. The shares are Hindalco and PC jewellery. Can you please advise the next course of action to get back the same? Also, I have been losing out on the dividends as well. Awaiting your answer.
    Kind Regards
    Rakesh

    • Dear Rakesh,
      Unfortunately, we do not have anything to guide you in this regard. You may contact Moneylife who had run a campaign for investors in this matter.
      Regards,
      Dr Vijay Malik

  25. Hello Sir,
    If the SSGR is negative NPM is consistently falling for 10 yr, on the other side, the company has 70% FCF, is the promotor not taking an interest?

    • Dear Padma,
      It is difficult to arrive at any opinion based on limited information. A full detailed analysis of the company may be needed to have any opinion.
      Regards,
      Dr Vijay Malik

  26. Hello Dr Malik,
    I have learnt a lot from you. Thank you so much.
    ESOP and ESOS are not discussed much on your website. Is ESOP and ESOS are same? At what price ESOS is allocated? What is the duration employee need to hold ESOS? How ESOS impact an investor who has a holding of that company?
    Like today’s company updates to exchange:
    “This is to inform you that ICICI Bank has allotted 364,110 equity shares of the face value of 2 each on May 10, 2021, under the Employee Stock Option Scheme (ESOS)”
    Where to find more details? How to evaluate frequent ESOS allocation?
    Thanks

    • Hi Devendra,
      Thanks for sharing your feedback.
      Devendra, we request readers to do an independent search for an answer for their queries on Google before asking queries. In the case of ESOP/ESOS, there are numerous articles available on the internet. We request you to read the online articles and do an independent search.
      In case, after such online search and reading, you still have queries, then you should elaborate your query along with your learning from online search and reading. We will be happy to provide our inputs to your updated query.
      Regards,
      Dr Vijay Malik

  27. Sir,
    As I am not finding clarity on my doubt in Google or in your posting, I am writing this mail to you. Regarding Meghmani Organics Ltd share price, on 9th March 2021, it was Rs 84.63 and on 15th March 2021, the price has gone up to Rs 125.40. It is almost 50% up. Let me know the reason for this hike so that I can learn more about the stock market since I want to learn before I invest as I already lost some money in the stock market.
    With Thanks,
    Sarathy

    • Dear Sarathy,
      We do not have any opinion/views about changes in the stock price of any company. However, in case, an investor believes that any news has led to an increase in the stock price and she is not able to find such news on Google search, then she should read all the corporate announcements by the company on BSE and NSE. She may also search about the company on the websites of business news channels and listen to any interview of the management of the company, if there, to find out if the management has said something in the media, which led to the increase in stock price.
      If the investor is not able to find anything after such a search, then she may contact the company directly for more clarifications.
      Regards,
      Dr Vijay Malik

  28. Sir,
    As per your one article, a subsidiary company can hold shares of the holding company to increase promoters’ contribution. However, as per company law it is not allowed, can you highlight more on the same?

    • Dear Shweta,
      We have highlighted what we noticed while analysing the annual reports. The article would provide you references to the sources like annual reports, BSE corporate announcements etc. used by us to draw our conclusions. You may go through these referred sources to get more information for making your views.
      In case, an investor needs any further clarifications about whether the steps of the company or its subsidiaries are in compliance with the Companies Act or if there is any different interpretation taken by the company of the provisions of the Companies Act, then the investor may contact the company directly. The company would be the best entity to opine in this regard.
      Regards,
      Dr Vijay Malik

    • I want to know that we buy a share for the long term. Suppose, it will rise 100℅ by the end of 1 year. But sometimes if the share price rises, then we sell and if the price is down, then we buy. I’m confused because I feel that the long term is not giving a good profit.

  29. Dear Sir/Madam,
    I’m a salaried employee and my source of investible funds is monthly savings only. It’s almost never that I’ll have a significant lump sum cash/cash equivalent to buy a big quantity of stocks when they are available at a reasonable value or the market falls significantly due to a negative black swan event (ex. March 2020).
    My outlook is, of course, long term, 15+ yrs. So, would it be a good idea just to keep adding to my portfolio of 12 stocks every month without thinking too much about the prevalent stock price?
    Thank you,
    Balasaheb D Kale

    • Dear Balasaheb,
      Unfortunately, we do not advise investors about the aspects of SIP/Lumpsum investments. Investors need to take these decisions on their own.
      For personal financial matters, including SIP vs lumpsum, we suggest that you join the Facebook group “Asan Ideas for Wealth” and ask your query there. You would find many people who would be willing to guide you there.
      Regards,
      Dr. Vijay Malik

  30. I am having a major dilemma. I was researching Jyoti Resins and Adhesives Ltd. But even though its financials looked decent at first. But its promoters have resorted to pledging their shares to shoot up prices in 2016-17. Plus its auditors also resigned during that period. Should I continue the research or avoid it since there have been some instances of ill practices before?

    • Dear Babita,
      If after the current level of research, you are in a dilemma whether you should continue further or not, then you may continue researching further until you get clarity in your mind. At the end of the day, it is an investor’s own decision to make. Every investor likes different companies; so there are no fixed guidelines.
      If you need our views about your analysis, then 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 inputs to your analysis in the form of an article on our website.
      Regards,
      Dr Vijay Malik

  31. Dr Malik Sir,
    I have learnt a lot about corporate finance from your in-depth analysis of several companies. I would like to know how to interpret data on company performance from its 9-month results, where the data is given for the current quarter, immediate previous quarter, a corresponding quarter of the previous year, then 9mth consolidated and standalone data. How to compare data across quarters and interpret meaningfully.
    T SRIKRISHNA

  32. Dear Dr Vijay Sir,
    I have learnt a lot from your articles and analysis that you share with investors through your website. I have tried to do a bit of analysis on AMBER ENTERPRISES Ltd A/C manufacturers in India. It would be great if you could spare some time to analyse it further and share your inputs.
    Amber Enterprises was incorporated in 1990 in Jalandhar, Punjab. Currently, they have now 15 plants(present in North India only) including the plants of acquired companies + R&D facilities. The company started its journey as a diversified manufacturer of sheet metal components and eventually ventured into RAC and its components. That explains their presence in sheet metal components space.
    Amber Enterprises India Ltd (AEIL) manufacture window air conditioners (WAC), indoor units (IDU) and outdoor units (ODU) of split air conditioners (SAC) with specifications ranging from 0.75 ton to 2 ton. They also manufacture AC components such as heat exchangers, motors and multi-flow condensers as well as components for other consumer durables and automobiles such as case liners for refrigerator, plastic extrusion sheets and printed circuit boards for consumer durables and automobile industry, etc.
    For split ACs, since the compressor (a key part of AC) is fitted on the outdoor unit, the indoor unit fetches a lower margin compared to outdoor as well as window AC. Around 80+% of revenue comes from ACs and the remaining comes from the non-AC vertical.

    Financial analysis of Amber Enterprises Ltd:
    The company’s sales are continually increasing from FY2014 to FY2020 at a CAGR of 26%
    Operating Profit Margin Maintaining at CAGR – 8% From FY 2014-20
    Net profit Margin has been increasing from 2% in FY 2014 to 4% in FY2020
    Current ratio -1.73,
    Interest coverage ratio 2.83
    Net Fixed Asset turner Ratio has been declined from 5.58 in FY2014 to 4.14 in FY2020
    Receivable Days have weakened from 30 days in FY 2014 to 76 Days In FY 2020
    Inventory Turnover Ratio has been declined from 11.2 in FY 2014 to 6.5 In FY 2020
    Debt to Equity ratio 0.3 good sign

    The Margin of Safety in the Business of Amber Enterprises:
    i) Self-Sustainable Growth Rate (SSGR): (SSGR) of Amber Enterprises Ltd is about 3%-4% Against Sales Growth of 26% CAGR FY 2014 to 2020
    ii) cPAT is converted into cCFO due to high depreciation and interest
    iii) Free Cash flow Is Negative

  33. Good evening sir. It is really helpful to understand many difficult things by reading your articles. Please kindly provide an analysis of Amber Enterprises Ltd.

    • Dear Siva,
      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 inputs to your analysis in the form of an article on our website.
      Regards,
      Dr Vijay Malik

  34. Good morning sir. It is really helpful to understand many difficult things by reading your articles. I want to ask that how a student can raise funds to start up his business (in pharma) if he or she has a brilliant idea or product.

    • Dear Shakeb,
      Thanks for sharing your feedback! Unfortunately, we do not have any experience of raising funds; therefore, we are not the best person to guide you on fund-raising.
      Regards,
      Dr Vijay Malik

  35. Sir, what about that 1000 companies whose market cap is less than 10cr. Are those companies really small or due to weak fundamental they got that position? I am thinking that I should start with the smallest market cap. That’s why I am asking.

    • Dear Aman,
      You may start analysing companies with the smallest market cap. You will learn whether they have weak fundamentals or not when you analyse them.
      Regards,
      Dr Vijay Malik

  36. Good morning sir. Sir, the promoter of Polycab India recently sold 18,00,000 shares to some family trusts. Can you please explain the reason behind selling shares to family trusts? Thanks in anticipation.

    • Dear Abhishek,
      We request you to do an independent search for an answer by searching online about what benefits transferring an asset/shares from an individual to a family trust would have. After this independent search, you may share your learning with us. We will be happy to provide our inputs to your line of thought.
      Regards,
      Dr Vijay Malik

      • Hi Vijay, to learn to read annual reports, do I need to learn the basics of accounting from elsewhere before I jump into your materials to learn fundamental analysis?

        • Hi Raghu,
          We believe that one should start reading the annual reports or any other investing material straight away and keep learning about the accounting terms by reading more about them online as she comes across them. There are numerous articles on the internet about each of the accounting terms that would help the investor get very good clarity.
          Regards,
          Dr Vijay Malik

  37. Sir, I am also from a medical background and I want to switch my path to financial industries, more precisely into the stock market. I want to become a fund manager. So I am planning for an MBA from NISM in the postgraduate diploma in the security market. Any tips or suggestions for me and how was your transition from MBBS to MBA?

  38. Hi Vijay,
    The way you do analysis is outstanding. Could you please suggest good financial accounting books? I am looking for a book which gives a very detail understanding.
    Thanks,
    Prashant

  39. Dr Malik,
    May I ask a question on ” Changes in the inventory of finished goods, work in progress and stock in trade”, which is being used by some companies as a tool to inflate profits?
    T SRI KRISHNA

  40. Sir, I have one query. Earlier, companies used to declare their trade receivables that are 6 months/180 days past due, but now they don’t. Why is this?

    • Dear Malhar,
      We request you to analyse historical annual reports in a sequence and identify, which year the said change was introduced. Thereafter, you may search on Google what had changed in that year in accounting norms. You will get your answer.
      Regards,
      Dr Vijay Malik

  41. Hello Sir. I was reading your article on how to read annual reports (https://www.drvijaymalik.com/annual-report-reading-guide/) and I found it very helpful. Sir, as you said that you usually read 10+ years of annual reports of a company, I want to ask you: do you read the annual reports in soft copy or hard copy? Reading 10 years of annual reports by soft copy would definitely strain your eyes, even if breaks are taken in between. If you read hard copies, do you print them on your own or do you ask the company for 10 years of printed ARs? If the latter, are the companies willing to send the same? Do they send it free of cost or do they charge an amount? Do they send it to only shareholders or anyone who asks for it? Thank you, Sir.

    • Dear Malhar,
      We read softcopies of the annual reports.
      We believe that one should prefer to read softcopies of annual reports as they are instantly available for download, easy to store or carry in the digital devices, save paper, are environmentally friendly and it’s easy to search for information in them using Ctrl+F.
      One may approach the company directly to know whether they would be willing to send hard-copies free of cost or may want the recipient to pay for printing/shipping charges.
      Regards,
      Dr Vijay Malik

  42. Sir, the purpose of doing business is to ultimately make higher profits. With this background in mind, would you consider it a red flag if a company is continually spending more on CSR than the prescribed CSR expense? Let’s assume that out of goodwill (excuse the pun), a company does maybe 110% of prescribed CSR expense. But if a company, over 5 to 7 years, is doing 150% or so of the prescribed CSR expense, would you consider that a red flag?

    • Hi Malhar,
      We do not have any opinion on this. An investor may approach the company directly for clarifications about the reasons for higher CSR expenses and based on the response, she may take her own decision.
      Regards,
      Dr Vijay Malik

  43. Hello Sir, I want to know, in your years of analysing thousands of companies, have you ever seen a company that intentionally deflated/understated its revenue/profits?

    • Hi Malhar,
      Yes, we have come across such companies. However, we would request you to elaborate your thoughts about the reasons for any company to intentionally deflate/understate its revenue/profits.
      Regards,
      Dr Vijay Malik

      • Sir, I believe when a company wants to de-list, buyback its shares, or wants to smoothen its earnings, that is when a company would deflate its profits. E.g. if a company wants to do a buyback, then it would want to buy shares at the lowest possible price. Thus, by deflating profits, the market will start selling the stock aggressively due to poor results, and thus the stock will fall, allowing the company to buy back shares at a cheap price. I believe one of the ways to deflate profits is by altering the depreciation rate (by reducing useful life and the residual value of assets). I would like to hear your thoughts on this, Sir, and it would be great if you could please share some tips/methods to identify companies that are understating the profits. Thank you, Sir!

        • Dear Malhar,
          Thanks for sharing your inputs. Apart from the reasons mentioned by you, a company may deflate its revenues by collecting part of the revenue in cash, which deflates the revenue reported in the P&L. This usually happens in the companies that may have to do unaccounted expenses due to any reason or take out the money in the form of cash. In addition, companies may report deflated profits where the expenses are inflated to take economic benefits away from the listed company and the minority shareholders.
          A comparison with the peers of the company and field research by interacting with the company’s different stakeholders may help an investor in identifying such practices by a company.
          You may read our analysis of a company where the Govt. authorities found unaccounted cash during demonetization period in the following article: https://www.drvijaymalik.com/associated-alcohols-breweries-ltd/
          Regards,
          Dr Vijay Malik

          • Thank you for your response, Sir. You mentioned that an investor can understand the deflating of profits by interacting with the different stakeholders by field research. I have prepared a set of questions to ask these stakeholders during the research, which will help understand the company better. I would like to share the same with you and all viewers and I would really appreciate your inputs on the same.

            Ask a customer: (Try the product yourself if it is a B2C firm, or ask the customers if it is a B2B firm)
            Is it an absolutely essential product? If yes, it is likely that you have no option but to buy the product, giving the company a steady revenue
            Would I buy this product if it was priced 20% higher? If yes, this shows that the company has an inherent/unrealised pricing power
            How is the quality of the product?
            How often do you buy the product?
            Are there any other competitor brands you would switch to?
            Are people around you buying/using this product?

            Ask a distributor/dealer:
            Is the distributor happy with the company? Does he have any complaints?
            How much margin does the distributor get? How much % of the MRP?
            Do customers walk in the store asking for a particular brand or just the product in general? E.g. do they ask for paints or do they ask specifically for Asian Paints?
            How long after a request for new stock does the company give the stock? E.g. if you requested a set of paints today, did the company deliver that in a day? In a week? In ten days? Or has the distributor been waiting for months?
            How does the company treat you? Does the company extend credit/provide some reliefs in times of crisis?
            How often and to what extent does the company hike prices?
            Does the distributor know the name of the company’s chairman, MD or CEO? If yes, how?
            Is the demand for the product seasonal or throughout the year?

            Ask an employee:
            Are you allowed to take independent decisions?
            How long do you work in a day? 8 hours? 10 hours?
            Are you happy with your job?
            What is the employee culture like?
            Do you have any access to the top management like MD, CEO etc?
            What questions were you asked during your job interview?
            Is the authority of making major decisions decentralised or is it in the hands of one person?

            These were the questions I have prepared for my field research and I would like to hear if there are any other questions you think I should add to the list, Sir. Thank you, Sir!

            • Dear Malhar,
              Thanks for sharing your list of questions. It is a good set to start the research and you may keep adding to it on the basis of your learnings from the field research.
              All the best.
              Regards,
              Dr Vijay Malik

  44. Sir, I have a question: what happens if a company declares 1:2 bonus i.e. 1 bonus share for every 2 shares held, but I have only one share? Will I get 1/2 i.e. fractional shares?

    • Dear Malhar,
      We have mentioned that a reader MUST do a Google search before asking queries. This is because, most of the times, there are numerous online articles that answer the query of the investor. Such a search saves time for the readers as well as the author.
      We would request you first do an independent search for the answer on Google and then rewrite your query by elaborating your learning from such search.
      Regards,
      Dr Vijay Malik

  45. Hello Vijay Sir. I have a couple of questions about quarterly earnings calls:
    1)Do you attend quarterly earnings calls?
    2)Do you think they are helpful in the analysis of a company?
    3)What kind of questions can be asked during the quarterly concall?
    4)Can question regarding poor accounting practices and corporate governance be asked?
    I would really appreciate it if you could please answer all the questions pointwise. Thank you, Sir!

  46. Hello Vijay Sir.
    I read your articles regularly and I find them very helpful!
    I was doing an analysis of a company called Raghav Productivity Enhancers Ltd. The company does manufacturing and trading of Ramming Mass and other Quartz related items. The company has been able to convert profits into CFO over the last 5 years and is making free cash flow as well. Profits have grown at 66% CAGR over 5 years and ROCE is around 25-30%. While analysing the company, I found that the credit rating report by CRISIL said ‘issuer not cooperating’ ( https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Raghav_Productivity_Enhancers_Limited_May_26_2020_RR.html ). The company is almost debt-free too. The management remuneration is within the ceiling as per Company’s Act( https://www.bseindia.com/bseplus/AnnualReport/539837/66917539837.pdf#page=63 ). Related party transactions were only with respect to salary and remuneration. On google search for fraud, no such fraud was visible ( https://www.google.com/search?q=raghav+productivity+enhancers+fraud&oq=rag&aqs=chrome.0.69i59j69i57j69i59l2j46i433l3j69i61.1528j0j4&sourceid=chrome&ie=UTF-8 ). I was wondering whether there are any red flags that you can find and any other inputs you have for my analysis of the company. Thank you so much, Sir!

    • Hi Malhar,
      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 at drvijaymalik.com 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.: https://www.drvijaymalik.com/stocks-analysis-stepwise-process/

      All the best for your investing journey!
      Regards,
      Dr Vijay Malik

  47. Hi sir, I’m pursuing FRM (level 1) and I want to know if FRM + CFA would be a good option or should I stick to FRM, learn other skills side by side and gain experience. And if you could recommend other things that I can learn that would help me to make my profile more interesting and strong, then please do.

    • 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: 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

  48. Hi Dr Vijay,
    Recently, I purchased your excel tool and e-book. I am really impressed; I have never come across anything like this before. I have some stocks of Sunteck Realty Ltd and Jagran Prakashan Ltd and have a couple of questions regarding them. I tried to figure out, but, no luck. If you get some time, please review.
    Sunteck Realty Ltd is a net profit-making company, but for the last 10 years, cPAT shows: + ₹998 cr, but cCFO is negative – ₹339 cr. I am sure this company is not that bad as Mr Pabrai invested in this company. What am I missing here? Is there any different way to evaluate such a real estate company?
    Jagran Prakashan Ltd pledged his 100% stock, maybe to get a loan. I couldn’t find any satisfactory reason. How an investor should react to this situation? How he can find more details about this?
    Thanks,
    Prashant

    • Hi Prashant,
      Regarding the comparison of net profits and cash flow from operations, we advise investors to read the cash flow statement in the annual reports that show a step-by-step calculation of CFO from PAT. This calculation would help an investor to understand where the profits are getting stuck. An investor should read these calculations for each of the annual reports for last 10-years to get a comprehensive picture. An investor may read the following article to take guidance: https://www.drvijaymalik.com/understanding-cash-flow-from-operations-cfo/
      Regarding pledging, an investor may contact the company directly to seek clarifications.
      In case, an investor wishes to have our views on her analysis of any company, then she may share her detailed analysis of the company 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 the detailed analysis. You should go through each of the articles of the below-mentioned series of articles and incorporate 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

  49. Sir, I read one of the company’s weakness is “Provision and contingencies have increased by 174.79%.” What does it mean? How this can be a weakness?

    • Hi Ajinkya,
      We request you to first Google about provisions and contingencies to learn more about them, about what they are and how they impact any company. Thereafter, we request you to share your thoughts about what according to you would happen if provisions and contingencies increase and how that would impact the company. We will be happy to provide our inputs to your line of thought.
      Regards,
      Dr Vijay Malik

  50. I see almost daily there is a Revoke/Pledge/Disposal of shares of HDFC Bank. Why are they so frequent as compared to other shares? What does it mean for a retail shareholder?

    • Dear Shaikh Aafaque,
      We request you to visit the corporate announcements section of HDFC Bank Ltd at BSE website, find out the announcements about share pledge/revoke etc. Thereafter, we request you to download the PDF document submitted by HDFC Bank to BSE in these announcements and read it in detail. Once you have read the complete corporate announcement, then we request you to think about the announcement once again in light of the learning by reading all its content. Thereafter, we request you to write your query again after incorporating the learning from this reading. We would be happy to provide our inputs to your line of thought.
      Regards,
      Dr Vijay Malik

      • I tried looking at the BSE website, couldn’t find any details for the same. For eg, On 6th Nov 2020, there was a disposal of 492K shares worth ₹6125.65 lacs by a connected person, I don’t see these details anywhere.

        • Hi Shaikh,
          We request you to spend some time browsing the BSE website so that you may learn which information is present where on the BSE website. The time spent in learning about BSE website would prove to be a very good investment for any investor. You would be able to know where the information about insider trading is disclosed and also where the information about the pledge/release of the pledge of shares is disclosed. There is no shortcut or alternative to this exercise other than spending time exploring the BSE website.
          Regards,
          Dr Vijay Malik

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

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

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

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

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

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

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

      Regards,
      Dr Vijay Malik

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

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

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

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

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

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

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

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

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

    Challenges:

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

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

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

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

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

    • Hi Arun,
      Thanks for writing to us!

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

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

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

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

      Regards,
      Dr Vijay Malik

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

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

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

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

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

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

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

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

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

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

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

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

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

  62. Hello Sir,

    I tried to analysis the Atul Ltd :

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

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

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

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

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

    NPM : Increasing continuously.

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

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

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

    CC report :CARE AA+; Stable

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Thanks and Regards,
    Kalyan

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

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

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

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

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

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

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

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

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

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