Cupid Ltd – Helping the world play safe!

[siddy92]

Something that i observed :

MD salary has gone from 37.5 L ( 37.5 Gross salary , no profit linked bonus) in 2016 to 1.08 Cr ( 63 L gross and 40 L profit linked bonus) . On the other hand the PAT trend from 2016 to 2019 ( 15.9 Cr , 20 Cr ,17 Cr ,15 Cr). 3x increase in the salary without growth in PAT . Why ?

There were 5 non financial investments in 2011 : Cupid R&D , Sakshi hotels, Arihantsidh properties ,Ramniyati Realities,Sanmati Realities which got eventually written off come 2019.(total ~ 50L )
Cupid R&D is understood but why was there a need for an export oriented condom manufacturer to invest in realty business.

One of the investors in the latest concall asked these questions but they werent answered.

Any views ?

[dineshssairam]

@siddy92

MD salary has gone from 37.5 L ( 37.5 Gross salary , no profit linked bonus) in 2016 to 1.08 Cr ( 63 L gross and 40 L profit linked bonus) . On the other hand the PAT trend from 2016 to 2019 ( 15.9 Cr , 20 Cr ,17 Cr ,15 Cr). 3x increase in the salary without growth in PAT . Why ?

The Management Salary for Cupid, at all times has been within the Statutory Limits allowed by the Companies Act. We can do some jugglery by picking the starting and ending dates, but ultimately the amounts paid were completely legal. In fact, in recent dates the Limit is not even being fully utilized.

@siddy92

There were 5 non financial investments in 2011 : Cupid R&D , Sakshi hotels, Arihantsidh properties ,Ramniyati Realities,Sanmati Realities which got eventually written off come 2019.(total ~ 50L )
Cupid R&D is understood but why was there a need for an export oriented condom manufacturer to invest in realty business.

I believe this is the discussion that was going on just some 7-10 posts ago. I posted the official response from the management.

Cupid Ltd – Helping the world play safe!

Very satisfactory response. With this, I’m happy to say that I understand Cupid’s business end to end. [Screenshot_20200904-142312__01] Let me also take a moment to appreciate the fact that Cupid is a great example of how to treat the minority Shareholders and transparency / disclosures.

Request you to please read the thread (At least the latest posts) before asking questions. Repetitive questions will only clutter the thread.

[vivekinfinite]

I would like a clarification on cupids short term borrowings which was 29 cr but at the same time i see an increase in fixed deposits by 25 cr. Why did the company borrow in the first place and why it was not put in use? Was it just for the cushioning for the coming impact on its working capital

[dineshssairam]

@vivekinfinite

Was it just for the cushioning for the coming impact on its working capital

Yes. It was taken as a Working Capital loan for the Brazil Receivables. That issue is largely resolved it looks like. The management has promised to pay off all Debt in this FY.

[ShashankGupta]

Hi,

I had just one concern related to internal and statutory auditor change in the last 5 years. Would be really grateful if the VP community could contribute to this. Here it goes:

1. At least from/since 2011, the statutory auditor of the company had been Bhatter & Co. The auditor left after publication of Q1FY18.

Also, during this time period, in May 2017, new internal auditor (Mr. Ashok Karnavat) and Secretarial Auditor were appointed.

2. Then, on a board meeting on July 20th, 2017, Chaturvedi Sohan & Co were appointed the statutory auditors of the company. This appointment is to hold till 29th AGM of the company, i.e. till 2022-23.

(Chaturvedi & Co has been been in existence since 1999… Even during the PR at that time, the list of their clients was included and they performed the audit of around 46 companies. A cursory look would tell you that Cupid would be among 3 of their largest companies they audited. The company had 7 partners and the youngest one, Mr. Rajiv Chauhan, is the signee on most of the Cupid reports till now.)

3. Also, there was no mention in Q1FY18 IR that the statutory auditor would be resigning. There was also no reason given in the PR and in the conference call next day why the previous auditor was relieved/retired.

4. Now, after Q1FY21, Mr. Ashok Karnavat, Internal Auditor of the company resigned with effect from 25th August, 2020 (appointed in May 2017 during the time when stat auditor was also changed).

The reason for resignation mentioned in this Con-call was that the auditor said they had too much work and other assignments and hence wanted to be relieved.

Exact line - "Basically they were overloaded with work and mutually we agreed that it would be better if we find a replacement for him"

As against this, the Board of Directors considered and approved the appointment of B C S AND ASSOCIATES LLP, Chartered Accountants as an Internal Auditor of the company with effect from 26th August, 2020 to 31st March, 2021

Now, the community here has been effusive in praise of the management and corporate governance of the company. Maybe I don’t have enough to connect the dots here, but if there’s one thing we have learnt from previous fiascos, it is that such cliched reasons do not present the underlying reasons all the time.

Is it normally this straightforward in other companies as well for internal auditors to resign with aforementioned reason? This is a risk that one normally runs in small cap companies and personally wanted to be very sure if I’m missing something here.

(Not making any comparions here, but DHFL joint auditors which were appointed in FY13 did not offer themselves for reappointment “in view of their pre-occupation with other work” as per the FY16 annual report. The rest, as we know, is history; hence the reason for my apprehensions.)

Would really appreciate responses from your end.

Regards,
Shashank

Disclosure: Holding a small part of my Portflio.

[dineshssairam]

Very good observations, I must say. I’ve sent a mail to the CS. Let us wait for the official response.

P.S. I have used your exact words with few changes. I hope you don’t mind.

[dineshssairam]

The official response.

Apart from the response itself, we have to appreciate how quick the response was. I mailed them yesterday midnight and the response was today morning. The lead time was just 7 hours. Besides that, today’s a weekend. I’m a little surprised they even responded today (Certainly they didn’t have to).

[Ajjugattu]

Having only few customers isn’t it a risk. This is b2b business and hence business is contractual and also if new suppliers come into fray then there is price war. So this business will always command lower pe. Aren’t we supposed to buy businesses where there is possibility of higher multiple because the share holders returns are very much linked to valuation multiple going up. If earnings go up 15%, pe should also go up for 30% move in stock

[ShashankGupta]

Thanks a lot Dinesh for this. Promptness of this kind from the management does give a sense of assurance that even minority shareholders are taken care of.

[mrai74]

@mrai74

Now the question to ponder is “Will this new venture be fruitful & can it contribute as per management expectations”. We are still 3 months away from jumping in the tough market where healthy margins are enjoyed by early birds and little or very little juice is left with each passing day.

This is another development related to new business opportunity where Cupid is expecting to start revenue generation in next 2-3 months. It confirms that competition is huge & with each passing day, margins will see southward movement only.

Tata CRISPR Covid-19 test gets regulatory approval for commercial use

[dineshssairam]

@mrai74

This is another development related to new business opportunity where Cupid is expecting to start revenue generation in next 2-3 months. It confirms that competition is huge & with each passing day, margins will see southward movement only.

I talked with a couple of people in the know-how and this seems to be very true. Every Tom, Dick and Harry is getting into producing these types of Rapid Test Kits and other medical devices. I hope Cupid doesn’t allocate too much of the Capital towards this experiment.

[mrai74]

@dineshssairam

allocate too much of the Capital towards this experiment

As per last concall, they have 12 Cr allocated for this.

I heard that few test kits will be hitting the market in price range & simplicity level of pregnancy testing kits, which is really good for society but equally bad for companies like cupid planning to enter markets.

[mrai74]

continuing with my intent of gathering details impacting new medical device business by Cupid, ICMR confirmed that India is currently producing 3.5Cr test kits/month, which translates to 11-12 lac test kits / day.

On the other hand India is performing 12 Lacs covid tests per day

So we are consuming almost all kits produced each day. I understand that numbers at both end (production & testing/day) are dynamic but production should overtake tests and we will have extra kits for exports.

Other producers have raised issues related to export restrictions / problems and that could be due ZERO gap in production & consumption data.

Coming back to opportunities for Cupid, as there production start date is still 2 months away, its clear that they may NOT get any meaningful business in covid kit consumption within India and they must concentrate on export opportunities exclusively.

[suniludupa]

Mr. Garg made it clear that the test kits are not only or specific to COVID.

My take during concall - These are Rapid Test kits for virus, detailed analysis of test as well as for devices for treatments. There is a big demand in South Africa and Brazil. Govt of India, Brazil and South Africa could be the first customers. Revenue of 20 Cr to 30 Cr. Is expected by March FY21.
Two things can happen the way I see it

1. The most important is that these kits will be included in B2G tenders where cupid is qualified or can influence qualifications and thus take a large % of these orders through same customers - Governments and NGOs. Existing customers, New products strategy.
2. Company is tight lipped on using devices for variety of tests AND analysis. Have they found something (Design or process) that is unique or highly competitive?

I give 5 Stars to Mr. Garg’s entrepreneurial skills. He is not the one to wast money. Will be interesting to watch…

[mrai74]

When we buy a business, certainly we have the faith in company & management but why shall we close our eyes & blindly believe any act / commitment.

Everyone is aware of concall & commitment by management in public and if we go by that, market must consider committed amount in topline & 25% margin on commitment in bottomline. I don’t see any impact of this in prices post declaration of entering into medical devices business intent by management.

The market is open to all & we saw that early bird advantages taken by many companies. Management has tried certain things in past (just scroll a bit on this thread itself to get those details) & they were NOT successful in each & every venture. Still one can’t pass a judgment they will succeed or fail in upcoming venture of medical devices.

Haven’t heard from management regarding inclusion of test kits in MC/FC tenders and not sure if its an easy task to do so.

My observation is based on data presented in above threads, which can fall apart but certainly that keeps me on toes with my investment in any business I own.

[suniludupa]

Agree with you. Let’s wait

[mrai74]

Just for record with respect to medical device business, market rate of RT-PCR kits for Covid testing by another manufacturer within India has continued southward movement

July : 378
August : 325
September : 230

Let us see where does it settle by the time Cupid gets ready to enter the market

[mrai74]

Quite interesting development in SHP

During last quarter smart small Retail (<2lac) has grabbed 3.58% (approx. 4.65 Lac) shares from various other owners.

As every other category has reduced their holding, retailers have increased, time will tell us if retail was smart enough in their decision or they got trapped in dumping yard.

[mrai74]

@Devis_Jain

raw material Latex Rubber prices decreased from Rs 114 per Kg to Rs 107 Per Kg so we may see improvement in margins in upcoming quarters.

seems rubber prices are in uptrend since 3-4 months, need to monitor effect of this on material cost for Q2 w.r.t. our company.

[Devis_Jain]

Cupid concall on 6th November.

361f4843-5821-4aec-b04b-f0a9de8ca550.pdf (706.5 KB)