Average Daily Value (ADV) on the exchanges has not grown and hence the numbers have been tepid all through last couple of years. In fact, couple of months before demonetization, the volumes picked up on exchange, but post demon and GST, bullion segment volumes have been down. There were multiple headwinds for bullion segment which was one of the largest contributors to revenue. Even though, pick up in volumes compensated for the loss of volume in bullion, there still remained deficit.
Moreover, as it happens most of the time in India, regulatory actions expected (launch of options, participation of Institutions on exchange and new contract/product approvals) have taken more time than people expected.
On the other hand, despite all headwinds, market share in all segments have remained upwards of 95%+ through out. Uncertainty about stability of top management is no longer there with current MD in place for more than a year now and doing a good job.
So, it has been going through grinding time correction for some time, however the base business remains very resilient and the key hypothesis remains intact. However, what remains uncertain is the timeframe in which this hypothesis plays out. As I had mentioned in my initial thesis, I always put it into bucket of 10 times in 10 years- return expectation…,and knowing that returns will inherently be lumpy across the decade. I am biding my time…at this level.
DIsclosure: Invested with significant portfolio allocation at average price of 400+