The latest results of Arihant and other Companies in the Capital Markets Sector clearly show at least an intermediate cyclical downturn for this sector.
Apart from the sector-wide downturn, there are certain Company specific factors that have significantly reduced the attractiveness of Arihant compared to 3 years back when this thread was started.
The valuations (P/B, D/Y, etc) are now more than 3 times the valuations back then.
The Company has diversified into Residential Real Estate and financed the same by debt. Hence, it’s D/E has now touched almost 1, from being a zero debt Company 3 years back. Any further cyclical deterioration in profits will have a multiplier effect due to fixed interest payment obligations. This has also resulted in it increasingly becoming a play on Capital Markets + Real Estate from being a pure Capital Markets play 3 years back.
As mentioned in an earlier post, I had sold a portion of my holdings a few months back, primarily to rebalance my portfolio. The remaining holdings have been sold recently after the Q4 results.
Overall, this investment has provided me about 430% return in less than 3 years when the overall market has given barely 50% return.
I will continue to track this Company and this Sector for any future investment opportunities and might invest again in future if the risk-return tradeoff improves significantly.