Based on my recent call with the company:
Pledge reduced to 0.
Hi Enelay,
You have any update on CMI? I have invested heavily on this company. I am willing to hold on this for a long time.
There rating has been withdrawn due to non cooperation. I was also invested in this but exit the day i heard that they are not cooperating with Rating Agencies because i considered this as very big red flag
I’m still invested with no transaction recently. I asked the company about the rating but didn’t get a response. Waiting to see this quarter results before deciding next actions.
Where is the news on Rating withdrawal? [quote=“prabhatg1, post:112, topic:6882”]
rating has been withdrawn due to non cooperation.
[/quote]
http://www.careratings.com/upload/CompanyFiles/PR/CMI%20Limited-10-07-2019.pdf
Co has taken ratings from CARE ratings. No issue. Same rating maintained
This is old report (July 2019).
The rating is dated 7th October, 2019. It is generally valid for 1 year when it comes for review. So It appears that Co has taken the decision to go for CARE ratings only and not avail CRISIL rating. It is standard industry practice for rating agency to issue such “non cooperation” warning and downgrade notice. The CARE rating is currently valid
Results out. Q3 is disappointing. No reason for such low sales 110 crore. Other players are maintaining their sales while CMI is down from 180 crore quarterly sale.
Interest amount is 10.5 crore per quarter, very high.
Stock should see more supply and levels of 25-32 shouldn’t be ruled out, with no recovery in sight of course.
Finally Promoter Amit Jain buying shares from open market and share price is moving north.
I recently started reading about this company, business quality is below average as suppliers want immediate payment & customers take long credit periods, squeezing CMI in between. Moreover customers approve production at different stages(Factory inspections) making inventory go up, further deteriorating business model. Making it a working capital hungry company.
What attracted me is current valuations and available free capacity for growth.
Valuations are no doubt very attractive but I’m unable to figure out, going forward how will company fund the growing working capital requirement as CFO is negative and this covid-19 lockdown will lose a qtr of earning, from where money for interest payment will come?
Taking a debt is option but interest coverage ratio is weak and cant be deteriorate further
Dilution of equity is another option, but it will reduce future returns for investors.
What do you think, before it becomes CFO positive, how future WC requirement will be fulfilled by company ?
I exited this company in Feb after holding for ~ 3 years taking a large loss on a position I had wrongly averaged down multiple times. The catalyst for my exit was a convo with an exiting employee who said he had quit and that the company was facing pretty significant liquidity issues. Made the classic novice mistake of looking only at the P&L and ignoring the B/S and especially C/F here, and also falling in love with my investment despite red flags from time to time. Would be careful here about accounting quality and solvency risk.
Can you share what were the Red flags you avoided from time to time? It can be a useful learning lesson for me in my investment journey.
Some of these are just the nature of SMEs and also could be explained by the drying up of liquidity post IL&FS which squeezed CMI. CMI actually paid a decent dividend which was counterintuitive since they were not generating any cash. No idea where it will go from here but Micro cap investing is hard…
Do you know any information regarding why CFO’s resigned in last 3-4 years?
If anyone attended AGM, Inputs will be appreciated
