Akash Portfolio

I took a small position (3% of portfolio) in IKAB Securities and Investments Ltd.

It was recently acquired by Mr. Madhusudan Kela of MK Ventures.
Mr Madhusudan Kela is a well known investor and was the Chief Investment Officer in Reliance Mutual Fund in the past. He was the architect behind the staggering growth in RMF’s AUM from less than Rs. 200 Cr to over 1 lakh Cr in less than a decade, for which he was recognised as the Best Equity Fund Manager, and received this award from the Prime Minister of India.
After a 17-year successful stint at Reliance Group, he went entrepreneurial in Jan 2018. He is currently the promoter of a proprietary investment vehicle started in 2018 — “MK VENTURES”, which is a boutique proprietary investment firm focussed on alpha opportunities. He is also on the committees of CII, FICCI and SIDBI.

Mr. Sumit Bhalotia has been appointed as Non-Executive Director of the company. He has over 15 years of work experience across diverse industries and includes more than a decade of experience in equity research & fund management. He is currently associated with MK Ventures. Before joining MK Ventures, Sumit was Assistant Vice President – Investments at Reliance Capital Ltd. Sumit has also been instrumental in developing a lot of the team’s proprietary models and market assessment tools. He closely tracks disruptions in existing businesses and emerging technologies, especially in Fintech, which has led to some of the firm’s key investments in this space.

Old investments in equities have been liquidated and the capital is kept in liquid funds. Company has no debt at present.

Approval has been sought to change the name of the Company from the existing Ikab Securities and Investment Limited to MKVentures Capital Limited in the board meeting. This seems to be an indirect listing of MK Ventures and would be used as a future investment vehicle of the firm.

After initial rise due to acquisition, the stock is currently in a consolidation phase. This can be a good opportunity if they can replicate the success of Reliance fund.

Risks associated with the business

  1. There is no current business activity of the company.
  2. The valuation is high at present in relation to the book value.
  3. No commentary by the management on how the company will operate in the future.
  4. Mr. Madhusudan Kela has acquired 83.66% of the company and will have to sell some portion to make it below 75% due to SEBI mandatory rule. This will have negative pressure on price when he sells.
  5. Company might be taken private, but the chances are very low.
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@akash_das - Would like to know your (or others also tracking this company) views on any specific reason for sudden spurt in Swiss military consumer share? It is up almost 60% in 2-3 days…Is it some sort of readjustment happening because of rights issue or was it subdued for few days because of rights issue?

In short, I am not able to understand its price action since sometime now…It moved up close to rights issue, then fell down as though an adjustment to the low priced rights issue, and now seems on steroids for not sure what?

Intention is to learn from this price action near a low priced rights issue so that in future can take better decisions around such rights issues…

Also, lastly, what must be reason for the company to go for such low priced rights issue when it could have got any investor as CMP for a well renowned swiss brand exclusive franchisee in India? Thanks!

Disc: Not invested yet, Tracking. Interested and like the brand, not sure about the Indian Franchisee company yet.

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Investors may be buying some shares now and will sell the rights shares when they are credited to account and book the profit from price rise. This is just a thought. I may be wrong.

The stock price was low when the issue was announced. Issue price may have been decided according to it. Again I don’t know this clearly, this is my first rights issue.

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Any update on the rights allotment?

Timeline of Swiss Military Consumer Goods Rights issue

DATE OF ALLOTMENT 07/09/2022
DATE OF CREDIT 08/09/2022
DATE OF LISTING 13/09/2022
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I was researching a company named Varanium Cloud Limited which applied for an SME IPO opening on 16.09.22.

“The Company operates in the following key verticals:

  1. Provision of digital audio and video content streaming services to various content owners and telecom operators in India and internationally on a SaaS (Software As A Service) model such as Voice & Video over Internet Protocol solutions (VoIP) in the B2B and B2C segments;
  2. Online payment facilitation services (PayFac);
  3. Provision of low bandwidth digital education content platforms (EdTech) with complete Learning Management Systems (LMS) focused on non-urban areas under Edmission brand;
  4. Provision of information technology related services to startups and SMEs to help them transition their business to digital platforms and manage the relevant infrastructure on a IaaS (Infrastructure As A Service) model “

It sounded very vague but SaaS and EdTech by an SME lured me to this counter.

“The objects of the Net Proceeds of the Issue are:

  1. Setting up 3 Nos. Containerized Edge Data Centres;
  2. Rollout of 3 Edmission flagship Digital Learning Centres; and
  3. General Corporate Purpose.”

Again Data Centres intrigued me here.

RHP mentioned the previous name of the company as “Streamcast Cloud Private Limited”. I wondered why a company would change its name before IPO, so I checked the net for any link of fraud or scam with “Streamcast Cloud Private Limited” and found this article about Streamcast group and its promoter Harshawardhan Sabale.

The main point of the article is that this group said it would build an International Data Centre in Malta, nothing happened and they ran away. They announced forming Data Centres again in Maharashtra. Nothing happened here either. Now they will dupe the public with the same tactic. SME euphoria will sail this IPO also.

I will always check why a company changed its name from now on. Avoiding IPOs is also a good option. Staying within the circle of competence is of paramount importance to avoid landmines specially in small caps.

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Ikab Securities released a notification regarding the object of the company on incorporation.

The business ranges from textile to broker to manufacturing and what not😀. From this list a few things made sense to me.

  1. To render portfolio management services by investment in shares, stocks, debentures, company deposits, government securities loans, units, mutual funds, post office/national savings schemes, etc. …
  2. To carry on the business of consultants, merchant bankers, advisors, underwriters/sub underwriters, brokers/sub-brokers, market-makers, trustees, agents etc. …
  3. To carry on the business as financial advisers
  4. To purchase, acquire or undertake or take over the whole or any part of the business, profession, goodwill, property, contracts, agreements, rights, privileges, effects and liabilities of any person, firm or company carrying on similar business or proposing to carry on or ceasing to carry on business, profession or activity…

A resolution was passed to change the name of the company to MK Ventures Capital Limited and most probably they will operate as an investment management firm providing PMS services or as a private investment vehicle acquiring other companies’ stakes.

Screen for special situations
Special situations have the ability to unlock the value of a business and give high returns in a short period of time. Google alerts for these will pick up many fake news reports and it is difficult to analyze the vast data being thrown out. Screener.in has an announcement feature whereby one can pick up any specific situation.

I have found these keywords useful. Please feel free to provide any inputs regarding better keywords, how to play these situations or any interesting ones.

Keywords Special situations covered
offer Buy back, rights issue, takeover, offer for sale, warrants, debentures, delisting
buy back Buy back
scheme of arrangement Merger, demerger
acquisition -sast -“substantial acquisition” Acquisition
open offer Takeover
letter of offer Offer documents
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I exited RPSG Ventures and increased allocation to Tata Consumer and Nykaa. Some factors were bothering me regarding this company from sometime.

  1. Debt to equity increased above 1.
  2. Equity was diluted for acquisition.
  3. Promoter history regarding coal scam, I missed it in my assessment.
  4. Promoter’s political affiliation in West Bengal.
  5. Slowdown of BPO business.
  6. Lack of clear path of the business.
    Company has the ability to deliver good results in the future but too many variables was making it difficult to hold.
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Can you pls elaborate on these two points. Although I have no exposure to RPSPG Ventures but have to Spencer Retail. I was of opinion that Promoters are good quality Goenka group - renowned and respected in India and also the perseverance they have shown in Saregama and vision in IPL team buyout was somethink I even liked…

Sanjiv Goenka’s CESC Ltd has the licence for distribution of power in Kolkata city. He has close ties with TMC in Bengal. He co-chairs a key committee set up by the government to attract investments to the state. He was earlier associated with the Left front when it was in power.
Political connections were used to get favour in coal block allocation long time back. The fallout of clashes between the TMC and BJP is causing it to come under scanner of agencies.

Any sensible businessman must do this . Look at Ambanis history .Which side were they on while the Hand party was in power ? Businessmen by necessity has to go along with the party in power in states like westbengal (my state).If the lotus party comes into power,Goenkas will align with them .From investors point of view, companies with fixed party allegiance is more dangerous (Amara Raja).
No big business can do without underhand tricks in India(most states) .
.

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There is no absolute black and white in business or investing and opposite of a good idea can also be a good idea. Business owner and investor have the choice to move to places they are comfortable in.

That may be true, but they will be a target of central agencies for the time being and investors will suffer.

My capital and understanding is limited. I have made good profit in this stock and am having difficulty holding it during correction. So I sold it and moved funds to existing portfolio companies. There is no point in clinging to company and lose sleep over it. Plenty of opportunities will come.

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True. Conviction is something to be builtup from within .I was also interested in this company but could not buy when it was really low . Till the time Guilfree talks of listing this is unlikely to outperform.For me though , those two points were not of much concern but I am not sure how shareholder friendly the management is .

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I was just looking for, If something is happening in Swiss Military regarding integration of both businesses.
Swiss Military now have moved their Inner wear and Home appliances section from previous site to this site.
As far as I know both were separated earlier.

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Took a small position (2%) in Quest Softech India Ltd. It has been recently acquired by AmpVolts AC DC Renew Private Limited.
AmpVolts is a facility management company dedicated to making EV charging infrastructure easily accessible through its upcoming network. It is based in Vadodara, Gujarat.
Shift to EV will require an intense network of power structures, cables and EV charging stations in all regions. Demand for these services will depend on the pace of shift from oil engines to electric.
Risks:

  1. Company has not started operations.
  2. Slow EV adoption rate will impact the demand of its services.
  3. No track record of promoter.
    I will treat this as a startup investment and will not increase position till the business shows profitability.
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I have taken a small position in Shri Bajrang Alliance Ltd.
The company has two main divisions – Steel Manufacturing and Agro Division.
The Steel Manufacturing unit has an annual rolling capacity of 60,000 MT. The company is engaged in manufacturing of structural steel products such as Angles, Beams, Channels, Flats, H-Beams, and Rounds.
The agro division incorporated in 2020, this marks the group’s first foray into foods business through 100% vegetarian frozen food products under the brand name GOELD. The company sells frozen food packets in the domestic and export markets through various retailers, wholesalers and overseas channel partners. Their manufacturing facility located at Raipur has an installed capacity of 6600 tons per annum with a cold storage facility which has a capacity of 500 tons below -18 degrees Celsius.
Currently Agro products form 44% of revenue.
The Company had also forayed into Natural oils, Oleoresins and Natural Food Supplements domains. In the course of time, GOELD intends to advance into supercritical oils, nutraceuticals and straddle the entire gamut of retail foods.

Risks
Large contingent liabilities
The company has a sizable amount of contingent liability, majority of which pertains to corporate guarantee given by the company to one of its associate companies – Shri Bajrang Power & Ispat Ltd at the time of its inception.
High competition and cyclicality in the steel industry
The company faces stiff competition from both established players in the region as well as from the unorganized sector players due to low level of product differentiation. Also, the steel industry is cyclical in nature and witnessed prolonged periods where it faced a downturn due to excess capacity leading to a downturn in the prices.

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Infibeam Avenues Ltd
Infibeam operates an online payment system with technology platform solutions across industry verticals. The company operates as a payment processor for online merchants, websites and commercial users for which it charges a fee on successful transactions. Infibeam’s payment system, CCAvenue, provides nearly 250 unique payment options in India, processing payments across 27 international currencies that enable online and mobile payments for merchants. Infibeam also provides services of various platforms, such as the Government e-Marketplace (GeM), Bharat Bill payment services (BillAvenue) and hospitality solutions (ResAvenue), among others.

Bullish viewpoints

  1. One of the few listed fintech company in India.
  2. The Company has received In-Principle Authorisation to operate as a Payment Aggregator under the Payment and Settlement Systems Act, 2007 from Reserve Bank of India.
  3. Profitable fintech.
  4. Has become debt free.
  5. International expansion in UAE, Saudi Arabia, Oman and USA.
  6. Plans to provide all financial services to merchants in future.
  7. Trading at lower valuation to peers.

Risks

  1. Exposed to regulatory changes.
  2. Intense competition from PE and VC funded startups like Billdesk, PayU1, Razorpay etc.
  3. Lesser growth in comparison to peers.
  4. Might require debt to go in funding space.
  5. Vulnerability to changing technologies and consumer trends in e-commerce services.

Took a small position recently. Any views are welcome.

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Portfolio update

Company name Allocation
Central Depository Services (India) Ltd. 18%
Borosil Ltd. 17%
Tata Elxsi Ltd. 14%
Avenue Supermarts Ltd. 12%
Swiss Military Consumer Goods 10%
Tata Consumer Products Ltd. 8%
IKAB Securities & Investment Ltd 5%
Quest Softech 4%
FSN E-Commerce 4%
Hindware Home Innovation Ltd. 3%
Heritage Foods Limited 3%
Studds Accessories Ltd 2%
Sanghvi Brands Ltd 2%

Recent changes
Shri Bajrang Alliance
I exited after realizing that the main business is cyclical in nature and I am at the wrong end of the cycle. They most probably won’t demerge the frozen food business anytime soon.

Infibeam Avenues
After digging for red flags, I found issues about insider trading and spat between auditor and management. Recently I have exited completely.

Heritage Foods
It is a dairy products company. I took a small position to keep track of the upcoming rights issue.

Sanghvi Brands
It operates spa, salon and gym with tie up with international brands. Business was affected due to covid. It is a turnaround play.

I deviated from stable growth companies towards special situations and microcaps with uncertainty and growth potential. The volatility is difficult to digest. I am thinking of doing sip in the core portfolio companies going forward with small lumpsum into opportunity as they arrive.

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What part of this change to past holdings happened by market movements and what part by your sell and add decisions?

Looks like you sold some Tata Elxsi and added dmart and swiss consumer if I am not wrong…