Mirza International - consistent performer but undervalues at present?

The problem with investment into companies like Mirza International is the classic case of company doing excellently, but not the stock. I believe this arises because of the nature of the entity being a family business that prioritizes self before other shareholders. This is also evident in the obscenely high salaries taken by the management. The management could choose to remunerate itself through dividends, for which cash seems to be ample, but they have instead chosen to enrich themselves.

Further, these kind of businesses simply see a succession of children joining the company and taking up comfortable salaries for themselves. They may work hard, but this prevents the company from being seen as a professional meritocracy driven organization.

These reasons are perhaps also why mutual funds rarely invest in these kind of businesses. Another such company I really liked but declined to invest in is Arrow Coated Products (Arrow Greentech now). For the kind of balance sheet and financial ratios sported by ACP, there is no reason to trade in the 15-17 PE range, but it does. There too, one will see high promoter salaries, children being inducted onto the Board and very low dividends. Again, no mutual fund participation in ACP, whereas for professionally managed firms such B/S and ratios would have been lapped up by all and sundry.

I have long pondered why companies like Mirza and ACP never get the valuation they seemingly deserve despite having an excellent business. The above is what I have distilled the reasons into.

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