Dhwanil's Portfolio

(Vivek) #143

Max dosent own 100% so you cant assign full value of 5640cr to market cap, its only 50% of it, similar is the case with Max bupa. Only antara is a 100% subsidiary others are joint venture.

(Mridul) #144

Well…it doesn’t own whole MHC…but calculating the valuation… does apply to the all 100% shares. My question is how come mhc is priced at 105 per share…when the acquisition costs of 423 Cr makes the whole valuation much higher…let alone other two verticals.

(Dhwanil Desai) #145


I agree that post imposition of CTT, the cost of hedging for some commodities on Indian exchanges has become very high as compared to alternatives. Hence, volumes have moved out of India…and exchanges have been very vocal about conveying this point to Finance ministry, however so far no action on it. However, this has been the case for some time now (4 years) and has nothing to do with recent decline in volumes in bullion segment as in fact the volumes were recovering pre demonetization and moving toward pre-CTT levels.

(Dhwanil Desai) #146


MHC share price has nothing to do with Max India share price…both are separate. To calculate MHC share price, you will have to look at MHC balance sheet, no of shares outstanding, profit etc. Hence, the comparison between MHC share price and Max India share price is out of context.

Best Regards
Dhwanil Desai

(Mridul) #147

Yes…I understand…I don’t know why I got confused. Max India just owns 50% of MHC…so cintributes approx. 2800cr to max India out of 4000cr.

(Dr. TarunDS) #148

Dhwanil sir,
Can yu please post ur updated portfolio s (both).
Its a tremendous learning experience for novices like me and i not only try to clone it but also an opportunity to learn

(Dhwanil Desai) #149

Hi Tarun,

Here is the update on portfoliio 1:

As the weight of Edelweiss increased beyond 20%, I cut the position and shifted the proceeds to IIFL which is in similar businesses. In fact, I feel as a business, IIFL has lower risk profile compared to Edelweiss (for IIFL,most of the lending business is towards retail, IIFL wealth is undisputed leader with strong operating leverage while Edelweiss lending book is still 70% structured credit+Wholesale business while their leadership in ARC exposes them to lending again). Again the idea to de-risk to an extent while taking advantage of the same tailwinds for the industry. Between Edelweiss and IIFL it still constitutes around 22% of my portfolio

Most of the other positions remain as it is in the same.

In portfolio 2:
Exited Alembic - reasoning is it is incurring huge capex and spending disproportionate amount on R&D while the industry dynamics is worsening. Moreover, unlike torrent, they do not have well diversified portfolio across geography that protects them from adverse market dynamics in US.

Added two new positions

TD Power systems - 5% position- Average price 210- TD Power has gone through a very bad downcycle in the business- where their steam generator business in India has eroded more than 70% in last 4-5 years. However, they have maintained the market share which essentially suggests that the industry has shrunk by 70% (they cater to industrial/captive power plants which has come to a stand still for last 4-5 years as there is hardly any new capacity creation across industries). However, what is interesting to me are few points as below

  • They have used these 5 years to broad base their product base and developing new markets. and product portfolio(generators). They have developed products in hydro power,gas engines and most recently traction generators (locomotives). Not only that, what really counts is the pedigree of customer base. They have been supplying these products to Voith (leader in hydro power turbines), ABB/Siemens/Alstom (Gas engine leaders) and GE (70% market share in traction market in US and they have their own traction generators). Thus, they have prepared a decent base for themselves to move to next trajectory…irrespective of the revival of Indian market.

  • Most interesting part is that GE which is undisputed leader in locomotives market in US and has its own traction generators has sourced traction generators for US market in last couple of years…first the test quantity and then commercial order. This speaks volume about TD’s capability in traction generator segment. Now both GE and Alstom are putting up huge (around 1000 locomotives each if my memory serves me right) and there is local sourcing norms of 70%. I am not aware of any other traction generator manufacture from India. If GE is sourcing traction generator for US market, wouldn’t it make sense to do so for Indian set up?

  • Thirdly, the way they have maintained their balance sheet in this time. One would have imagined a completely decimated balance sheet when the whole industry shrunk by 70%. Guess what, even in these times, there is hardly any working capital requirement, zero debt and 200+ crore of cash. They operate at 55% capacity utilization and according to management, with current capacity they can reach 750-800 Crore of sales.

So at 700 Crore market cap one is paying 500 Crore net of cash and even in current scenario it generates 400 odd crore of sales - at 6-7% margin (while their peak margins in product business was 14-15%).

Sasken Communication- 5% Allocation- Average buying price-420 - Again a company that has gone through very rough patch in last 5-6 years as it lost some of its key clients - over last 6 years they have struggled to bridge the lost revenue. While talking to various folks in the industry, I understood that their core capability of semiconductors/product development remains intact (and there are not many companies in India who can match their skill/experience). Last year, they received around USD 45 million in 2016 from one of its customers for breach of IP (which proves the value that resides in IP created by them through patents).

They have focused on combination of product engineering/digital platform development skills to focus on futuristic areas such as in car infotainment systems/driver less cars, Industrial automation, semiconductor business and consumer appliances through IoT. All these are very futuristic areas with large potential and unlike many of its competitors who have software/digital platform, Sasken can provide product engineering and hardware too. I feel this can be significant differentiation. They count Auto OEM, Semiconductor companies such Intel/AMD; Smart phone maufacturers (Hitachi, Nokia) as their client base.

They have utilized these proceeds judiciously- to buyback their own shares and distributed some as dividend. So as it stood when at my buying price, at 750 Crore market cap- they had 400 odd crore of cash and 450 Crore of revenue. More improtantly, management has said they want to increase revenue from USD 70 million to 200 million in next 5 years(30%+CAGR). Even if we discount this and assume 15% CAGR- and operating leverage kicking in- you are getting growth for free at this price (if you do simple math- you will get pleasantly surprised). To support this growth they have hired chief marketing officer from Persistent (I have heard very good things about him) so seems like they are sincerely trying to achieve what they are saying.

On the other hand, Sasken management has not been one of the best executors as they ventured into IT services business couple of years ago and then realized that it did not match with inherent DNA of product engineering company.They wound up these efforts after 2 years.

In short, I am betting on limited downside, while if the story plays our as they expect, one can get asymmetric returns.

One small suggestion- Though there is nothing wrong in cloning- please do your own due diligence and get comfort/conviction in the story as I may change my views and exit without updating here. As we know the portfolio posted here is not static and may change with business dynamics and/or available opportunity set.

Dislosure: I am not a registered Investment advisor/research analyst and views posted here are not recommendations to buy/sell. Please do your own due diligence before making an investment decision and/or consult an Investment advisor.

(kanvgarg123) #150

Dhwanil, the promoters of TD Power systems reduced some 12 % stake in the last 3 years from 62 odd to 50% any reasons for it?



Hi Dhwanil
AYM Syntex is underperforming. Revenue and profit is down for 2017. Shall we continue to hold? Would appreciate your views.

(Milind) #152

Thanks Dhwanil for sharing update

(Milind) #153

Hi Dhawnil,

How to you see result of sasken released for Q1? is it on expected line for you?


(Dhwanil Desai) #154

@kanvgarg123, No idea for reasons however I do understand that the promoters (Kherechas) have typically been financial investors and they may have sold stake to institutions/strategic partners.

@PRSAUDAG, I continue to hold some position however as mentioned I have reduced it significantly. Again, I feel, such kind of business transformation do take time and what I am enthused about is the direction and focus. It is indeed commendable. It is not easy to walk a path where one has to absorb short term pain for doing the right thing from long term perspective. In latest concall, there were some tangible signs of new products making headway in some segments (BCF) and their partnership with multinationals. Such developments give clue that they seems to be on right path. At the same time, proportion of new/niche product in the overall portfolio is very low and will remain low at least for next couple of years while base business dynamics is not very favourable. I will keenly track the development and may add when I see the scale reaching tipping point.

@malthankar, It is tepid as it has been in the past. However, these kind of things do take time and will give some time to management to prove their mettle. I will monitor how they travel on the growth path as envisaged by the management and evaluate after a year or so whether the management is walking the talk or it is mere aspiration. As of now, one is playing for optionality with downside protection. However, if growth doesn’t come through, we will have to reevaluate the thesis.

(sachit) #155

Hi dhwanil, do you still hold ENIL? Needed some perspective about latest results

(kanvgarg123) #156

Hi Dhwanil,
Are you still following td power systems? The results were quite bad for this quarter and net worth has gone down a little. Since, they have a lot of cash, they won’t go bust but I would like to know your analysis.

(Dhwanil Desai) #157


Yes, the results were pretty bad. However, they indicated in the concall that it was partly because of Q1 revenue shifting to Q2 due to delay in dispatch and partly due to higher deliveries scheduled in [email protected] However, they are on course to generate 400 Cr revenue from product business with 9-10% margins. They also indicated around 125 Cr of topline in q2. These kind of lumpiness does happen in capital goods industry so one has to live with the same.

(prachi) #158

Hi Dhwanil
I am new in this value investing. Do you still hold IIFL ? What are your views on that in present circumstances ?

(Dhwanil Desai) #159

Hi Prachi,

I continue to hold IIFL. My investment thesis around IIFL remains intact and it seems to be playing out as expected if we look at the numbers. IIFL wealth is a very interesting opportunity where having a large scale and market leadership- can lead to positive feedback loop providing tailwinds. their capital market business too seems to be sweet spot given the stage of capital markets. Capital market business and wealth management business have very good operating leverage and hence incremental topline growth can have non-linear impact on bottom line (and it cut both ways, so it may also work against an investor, when capital market is in doldrums).

On the lending side, I feel, they are growing in well calibrated manner with focus on retail book. Till now, they seem to be doing a decent job of managing their underwriting.

So overall, it seems well positioned to grow its earning at decent pace.

(prachi) #160

Thanks a lot Dhwanil for sharing your views.

(Jaclyn) #161


I am recent entrant to this club since it aligns with my investing approach. I also spent considerable time to go through this particular thread and its adds value to my thought process.

If you can re-update the portfolio that would be helpful to see how it has evolved over the years?

Thank you.


(vivekvikramsingh) #166

Hi Dhwanil,

Wanted to know your view on Insurance Sector. In last couple of month we have seen lots of Insurance IPO. As per my understanding there two type of insurance companies first general insurance , second life insurance. My question to you is which type of insurance companies will have more brighter future in terms of sales and profit.

Vivek Vikram Singh