The current article in this series provides responses related to:
- Opinion about Agre Developers Limited (Future Market Networks Limited)
- Opinions about V2 Retail Limited and Pioneer Embroideries Limited
Agre Developers Ltd (Future Market Networks Ltd)
Dear Mr Vijay,
This is regarding my query on a stock I am holding in my portfolio and would like to know your views.
As instructed by you, I am writing an answer to all 4 questions about this stock – Agre Developers Limited (Future Market Networks Limited):
- Holding period – 4 years
- The average cost of buying – ₹26 (Quantity – 6,000)
- Qualities noticed while investing — Demerged from Pantaloons Fashion & Retail Ltd. Company was available at a market cap of ₹40 crores with real estate assets of close to ₹300 crores,
- Performance – The company has not at all performed and the share price is one-fourth now.
But since it has real estate (malls etc.) I was hoping that value unlocking will happen someday. Since apart from stocks you also have expertise in real estate, I was hoping to have this analyzed by you. I know you have been very generous and thus have a huge backlog of stocks to be analyzed. I would wait till you come to this one.
Regards
Author’s Response:
Future Market Networks Limited (FMN) owns real estate. But it gives these properties on lease to its group entities (Future group). It’s not known whether the lease rental it receives from these group entities is at arm’s length (at the prevailing market rate). However, looking at the financials it seems that the current business performance is not in favour of the long-term benefit of shareholders.
The operating profit over years has been in the range of ₹30-40 cr. which is not sufficient to meet the interest expense of ₹80-90cr. The question of the creation of wealth for shareholders seems irrelevant.
Advised reading: How to do Business Analysis of Organised Retail Companies
I suggest you reassess your situation as a shareholder.
Regards,
V2 Retail Ltd, Pioneer Embroideries Ltd
Vishal Retails (Now V2 Retail Limited), promoted by Ram Chandra Agarwal was a hot stock ever since its listing.
The company came out with an IPO in 2007 @ ₹270, which oversubscribed by a whopping 81 times. Stock hits a high of ₹1,001 in 2008, which now quoting around ₹10.
In June 2007, Vishal raised ₹110 crores (₹1.1 billion) through an IPO but this was not enough to meet its scorching growth. It had 50 stores by then and was looking to add 130 more in a year. It tapped the short-term debt market.
The company sold its old business to TPG and Sriram Group in 2011 for ₹70 Cr (liabilities to the extent of ₹823.20 Crores and assets of ₹ 393.78 Crores transferred in this deal).
The major overhang for this company is contingent liabilities and court disputes.
I am fully convinced of the company’s business and have confidence in RC Agrawal. Now need your views regarding this.
Pioneer Embroideries Ltd is looking like a turnaround story. It is making every effort to retire its debt and hopefully would make improvements in its situation by this financial year-end. Let us hope for the best. One of the biggest embroidery brands ‘Hakoba’ is owned by the company.
Author’s Response:
Thanks for writing to me!
V2 Retail Limited as well as Pioneer Embroideries Limited, both are loss-making companies. They might be turnaround stories, but I do not prefer venturing into the turnaround segment when there are enough opportunities available in stock markets in profit-making fundamentally sound companies.
There are many investors who invest in loss-making companies. You may look for investment opportunities in them after doing your own research.
However, I believe that an investor should prefer profit-making, fundamentally sound companies over loss-making companies.
Advised reading: How to do Business Analysis of Organised Retail Companies
Regards,
Dr Vijay Malik
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Disclaimer
Registration status with SEBI:
I am registered with SEBI as a research analyst.
Details of financial interest in the Subject Company:
I do not own stocks of the companies mentioned above in my portfolio at the date of writing this article.
