“Dead Companies Walking” by Scott Fearon is a captivating and insightful book that delves into the world of failing businesses. The author, an experienced investor, shares his first-hand encounters with companies on the verge of collapse and explains how recognizing the signs of a failing business is crucial for successful investing. Fearon provides real-life examples of companies that seemed promising on the surface but were actually doomed due to mismanagement, flawed strategies, or unsustainable practices. Through engaging narratives, he offers valuable lessons on how to identify and avoid investing in companies with inherent weaknesses. The book serves as a cautionary tale for investors and business leaders, emphasizing the importance of understanding the true health of a company and making informed decisions to navigate the dynamic landscape of the business world.
Building upon the insights from “Dead Companies Walking,” this thread aims to analyze Indian companies that may face challenges and may struggle to survive in the near future if they continue on their current trajectory. By examining key indicators and trends, this space seeks to provide valuable insights into potential risks and opportunities, offering investors and stakeholders a deeper understanding of the ever-evolving business landscape.
How to identify the Dead Companies Walking?
“Dead companies walking” is a term used to describe companies that are in serious financial trouble and are likely to go out of business soon. These companies often have significant debt, declining revenues, and other financial difficulties that make their survival uncertain. It’s important to note that the status of a company can change rapidly based on various factors, so any analysis of such companies should be based on up-to-date financial information and expert insights.
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Declining Revenues and Profits: Consistent drops in revenue and profits over multiple quarters can be a sign of financial distress.
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High Debt Levels: Companies with high levels of debt relative to their earnings might struggle to meet their financial obligations.
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Negative Cash Flow: If a company is consistently generating negative cash flow from its operations, it may indicate ongoing financial troubles.
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Liquidity Issues: If a company is unable to meet its short-term financial obligations, it could be in danger of going out of business.
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Legal and Regulatory Issues: Companies facing legal and regulatory challenges, such as lawsuits or investigations, might experience financial strain.
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Management Changes: Frequent changes in top management positions or key executives can be a sign of internal instability.
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Industry Trends: Companies in industries facing significant disruption or obsolescence might struggle to adapt and survive.
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Credit Rating Downgrades: A downgrade in a company’s credit rating can indicate increased financial risk.
To identify specific companies that might be in financial distress or could potentially be considered “dead companies walking” in the Indian market, you would need to consult financial news sources, reports from credit rating agencies, and financial analysis platforms. Keep in mind that company statuses can change rapidly, and it’s crucial to make investment decisions based on accurate and up-to-date information.
https://www.goodreads.com/work/quotes/41705972-dead-companies-walking-how-a-hedge-fund-manager-finds-opportunity-in-un
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No.1 can be the oil lubricant companies like castrol / gulf oil.
Just to start the discussion. Others may add to this list.
dr.vikas
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Hi @realist,
You can start with CMI Ltd. where a good going business suddenly gone burst due to promoter bought big manufacturing plant without considering financial consequences.
Next live example is Compuage Infocom Ltd as their business is running on loan, and debtors started non-co-operation, so company is in the process to go burst. I don’t know exact reasons as management stopped providing updates to investors, don’t know what will happen next, but I choose to not invest & stay aside and just see & learn.
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Dead Companies Walking - Entertainment Network (India) Ltd
Entertainment Network India Limited (ENIL) has been on a concerning trajectory of negative profit growth over the past few years. In FY2016, ENIL posted a net profit of ₹109 crores. However, this figure dwindled to ₹11 crores FY2020 and in FY2022, it dropped to a net loss of ₹36 crore. The company’s margin for the corresponding period has decreased from 31% to 16%. To gain a deeper insight into this trend, let’s delve further into the company’s operations.
ENIL operates across three key segments:
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Radio Broadcasting: ENIL stands as the proprietor of the Radio Mirchi brand, the largest private FM radio network in India. Operating across 63 stations in 14 states, it boasts a broad reach of over 63 million listeners.
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Out-of-Home Media: Under the Times Square brand, ENIL manages a network of digital billboards and street furniture in major Indian cities.
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Experiential Marketing: ENIL extends a suite of experiential marketing services, including event management, content creation, and social media marketing.
The company primarily derives revenue from advertisement through radio broadcast activities. However, this core revenue stream faces two major headwinds. The business demands significant capital and operational expenditures, consequently eroding profit margins. The audience shift towards ad-free, on-demand, and personalized music experiences on mobile apps has posed a substantial challenge. This trend, prevalent in developed countries, is steadily gaining traction in India, with consumers favoring free apps like Spotify or its premium version for paid services.
The digital billboard sector’s growth prospects are dimming as companies and political entities opt for online marketing strategies, which offer targeted segment engagement at more economical rates. Additionally, the experiential marketing sector faces fierce competition from new-age AI tools capable of generating content rapidly and at reduced costs.
The company’s financial results over the past five years stand as a testament to the pressures brought on by the aforementioned challenges. Without a pivot towards a lower capital expenditure model and a strategic shift towards the digital realm, ENIL’s ability to generate shareholder wealth and attract both new-age customers and investors remains questionable. The company’s survival and growth may hinge on its agility in adapting to the evolving digital landscape and seizing opportunities that align with changing consumer preferences and market dynamics.
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Dead Companies Walking – Hinduja Global Solutions Ltd (HGSL)
Hinduja Global Solutions Limited (HGSL), a player in the business process outsourcing (BPO) sector headquartered in Mumbai, India, has been recognized for its strategic focus on niche sectors and offshore delivery model. Nevertheless, recent developments have cast a shadow on the company’s once-bright path, raising concerns that it might be treading the path of a potential “dead company walking.”
At its core, HGSL’s business model has been built on several pivotal principles that contributed to its ascent as a leading BPO provider in India:
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Niche Sector Specialization: HGSL strategically concentrated its efforts on niche sectors, leveraging its robust track record and deep understanding of customer needs to deliver tailored solutions.
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Offshore Delivery Advantage: With a strong presence in cost-effective locations like India and the Philippines, HGSL’s offshore delivery model empowered it to offer competitive services, differentiating it from its peers.
Challenges and Emerging Storms
Despite past successes, HGSL now faces a series of challenges that have sparked concerns about its future sustainability:
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Low-Cost Rivals on the Horizon: Intense competition from BPO providers in countries like China and the Philippines, known for their cost-effective services, has resulted in dwindling profit margins, prompting questions about HGSL’s capacity to uphold its competitive prowess.
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Technology Revolution and AI Disruption: The rise of automation and artificial intelligence looms as a disruptive force, potentially replacing traditional BPO functions, and forcing HGSL to recalibrate its approach to stay relevant.
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Turbulent Financial Performance: HGSL’s financial performance has encountered headwinds in recent times, characterized by low growth in sales, eroding operating profit margins (OPM), and escalating recurring expenses.
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Burden of Debt: The weight of substantial debt compounds HGSL’s financial predicament, further straining its financial health.
An Uncertain Horizon
The amalgamation of these challenges forms a stark narrative, underscoring HGSL’s precarious position. A stagnating revenue trajectory, coupled with declining OPM and mounting debt, necessitates the swift implementation of a strategic turnaround blueprint. However, the most formidable threat lies in the encroachment of core operations by the wave of Artificial Intelligence. This confluence of circumstances paints a picture where Hinduja Global Solutions Ltd. stands on the precipice of becoming a potential candidate for the status of “dead companies walking.”
HGSL’s journey ahead demands a comprehensive and decisive response to the multifaceted challenges it confronts. While the company’s past successes, well-established brand, and investments in innovation inspire optimism, its ability to navigate these turbulent waters with precision and innovation will determine whether it can reestablish its footing and navigate towards a more sustainable future in the competitive BPO arena.
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Most road construction companies in medium term.
@realist …You may have missed an important point of financial shenanigans…which is more common in Indian context. Where, cash is taken out from the company (i.e doing well) through ‘related party transactions’ and ‘capex’ route more delicate way, without affecting the PL account.
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Dead Company Walking: Unraveling Vakrangee’s Struggles Amidst Evolutionary Shifts
Vakrangee Limited, a technology-focused entity, serves as a provider of an extensive range of financial and non-financial services to the rural population across India. However, recent trends in the company’s performance have sparked concerns regarding its ongoing viability, prompting speculation that it may be traversing a path toward becoming a “dead company walking.”
A pivotal factor contributing significantly to Vakrangee’s current struggles comes from its outdated business model. This model, unfortunately, has triggered a noticeable decline in the company’s customer base. At its core, Vakrangee’s operations revolve around delivering financial services to rural clients. Regrettably, this particular market segment is experiencing contraction due to the expanding accessibility of formalized banking services in rural regions of India. Consequently, Vakrangee’s incapability to swiftly adjust and align itself with this ever-evolving landscape has precipitated a consistent erosion of its customer numbers over time.
Concurrently, the company finds itself grappling with a challenging financial scenario, compounded by two concurrent pressures: the diminishing count of customers availing its services and the escalating competition from alternative service providers.
Considering the amalgamation of these formidable challenges, the prospects of Vakrangee achieving sustained profitability and generating substantial shareholder wealth appears to be bleak.
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