I normally don’t actively write or record my hypothesis and/or rationale behind my investments despite it being a good habit to do so. I keep it on my cell or mails while discussing it with couple of fellow investor friends in short and then end up losing it quite often. Thought to start doing so and then thought, for Uniply, let me start capturing these thoughts on this forum itself to begin with for now.
Just penning down few thoughts on Uniply in very brief. These are not on the basis of numbers or ratios (as Keshav himself says that profits would be accrued in nature in the initial stages as he grows the organization and integrates the acquisitions), but just few things beyond numbers that I like to see in a business and come to my mind while looking at Uniply and are all known factors already. Not to say that these will play out in my favor in long term, etc., and it can definitely go wrong.
Accidental Entrepreneur – We know of few great entrepreneurs who created businesses and came into existence accidentally; Be it McDonalds, Facebook, SoftBank or the likes of Alibaba. There would also be many such accidental entrepreneurs who have failed though I personally get interested in such accidental entrepreneurs.
- Keshav Kantamneni also stumbled upon Uniply accidentally while his firm was appointed as investment banker by erstwhile Uniply owners to look out for buyers for Uniply.
Business model feeding into itself – This reduces dependence upon external stakeholders, brings efficiency internally and increases margins.
- Keshav started creating a business model that feeds into itself. Bought Uniply’s plywood business. Acquired Euro Décor, UV Boards to increase capacity. Bought design firm Vector projects that would ultimately need plywood, etc., as raw material. Bought ArtMatrix, the furniture designer and manufacturer that will make furniture for Vector and consume raw materials manufactured by other group companies (now that plywood business has been transferred to UV Boards as subsidiary).
Understanding of Finance and Business – Warren Buffett also I think says this to be a good combination. People with such combination may turn out to be good Capital Allocators.
- Keshav seems to be one such person, as maybe seen in his acquisition of Uniply itself and structuring his acquisition of UV boards.
Experimenting with new businesses, mostly related ones (either directly or indirectly) and even unrelated ones if one sees opportunity, Jeff Bezos way – Keep venturing into new businesses, nurture the ones which do well and cut your losses where it doesn’t work out.
- Keshav again seems to be one such person as demonstrated by points stated in “Business model feeding into itself” and other examples like venturing into affordable housing space as door suppliers etc., or using ArtMatrix’s design capabilities to design and manufacture customized furniture and sell it through e-commerce channels. These points can also come under “Business model feeding into itself” point.
- There is also news (by Times of India) of Uniply buying 1.25 million sqft tech SEZ in Chennai, but don’t know how true is this as this hasn’t been reported to the exchanges as yet by Uniply.
Like those strategy war games where you make an area stronger and then move to other area to make it stronger - Focus on most important thing, nurture it and then move onto the next most important thing . Be it in terms of focus within a business line or focus on the most important business line out few business lines.
- Keshav again seems to be demonstrating this by first focusing on the ‘Distribution’ channel after acquiring the plywood business, then focusing on Vector Projects business as a business line as that is a better margin business and also ensures internal demand for plywood business due to the size of orders it can bring in.
- He also demonstrates this by focusing on B2B first with targeted customer interaction and then B2C as a focus later as it would be easy for him to build scale via B2B as compared to B2C which is more competitive.
There are Best of Generals and Best of Commanders – I think there are best of Number 1s and best of Number 2s. For e.g. Radha Kishan Damani maybe Best of Number 1 and Navil Noronha maybe best of Number 2. Best of Number 2 are better executioners I guess.
- Keshav, I obviously assume to be in the best of Number 1 category but what he does is to focus on an important business line, nurture it somewhat and then place the best of Number 2 to take it from there. I am not saying that people that he’s placing in-charge are best of Number 2s, but I like this way of thinking and maybe best of the entrepreneurs do this so that they can move on to focus on the next most important thing or to focus on the larger objective.
Angel investor or VC thinking – I think sometimes we need to look at secondary market public stock investment ideas from the hat of an Angel investor or VC where normally you don’t have much on plate to go by apart from plans and projections, etc., (in some cases maybe not even that). Many times bet here is on the jockey. Poor jockeys with good business ideas too don’t get funding whereas opposite can happen too that very good jockey with poor or average business idea gets funding.
- I think Uniply needs to be looked at from a lens of an Angel investor or VC.
Will try to add to this thread as more thoughts evolve on Uniply.
Discl: I waited for quite some time (price wise) before taking a dip in Uniply in first half of 2016. Forms 14% of my current PF. Transacted in last 2 months and intend to scale it upto 20% of my PF eventually. Views maybe biased due to vested interest in Uniply. This is not a recommendation to buy or sell. I am not a SEBI registered research analyst. Please do your own due diligence. I might buy or sell at any time without prior intimation on this forum.