What Prof. Bakshi explained in an interview applies here
*Evaluating management is an art. You should watch what they do and not what they say. And when you do that, you should have some empathy for the entrepreneur who is running the company. He is not a robot programmed to maximise shareholder value all of the time. He is prone to making mistakes. He will have some attributes that you dislike. Is that a reason to reject investing with him? I don’t think so. Time after time I have read about objections from investors who are obsessed with what Munger calls as Kantian Fairness Tendency. The world is not a fair place. There will almost always be some unfairness if you invest in a business run by an intelligent fanatic. You have to maintain a balance. I try to do that by keep Ben Franklin’s essay on Prudential Algebra in mind."
To answer your question about rents paid by the company on properties owned by family members, if the management is delivering an ROE that is above the average ROE generated by other businesses in that sector, then why bother? (applies in most cases)
You have not mentioned the name of the company. However, in general IMO
AGM is a once-a-year event, and one may hold it in one’s own farmhouse purely as a matter of convenience. Note that most of the small companies are just glorified sole proprietorships, and there are a thousand ways in which the promoter can siphon off money if he wants to. Here, at least he is making a transparent disclosure. So, unless you find the amount paid is exorbitant, this should not be a problem.
You should see how much is the debt taken, in the context of its equity base and cash generation. A reasonable amount of debt is quite fine (in fact, even good) and it is not necessary that a company should become debt free before paying dividends.
And I agree that rents isn’t a big deal per se. But some things raised my concerns. For instance rent going up from 12 to 27 lakhs in a single year, their plant repair cost being 50% of the PAT.
Though I know this is a subjective topic and I also agree with what @barathmukhi said about management not being robots. Above all they are in the game to make money for their own good. But most aspects of the company and their capital allocation decisions since 2011 have been fantastic. So why would they risk everything for rent, repair fraud or remuneration.
Ofcourse with that said, I am still learning and this may be a wild swing for no reason. Appreciate your answers, will study more and try to make sense of the situation.
Because it is a liability.
Liabilities, which are either internal (shareholders money) or external (borrowed funds), are used to fund the business Assets.
External liabilities such as bank loan cost explicitly in terms of ‘interest charge’ that shows up on the PnL. Internal liabilities such as RESERVES (shareholders money retained by the business) does not cost explicitly in terms of ‘interest charge’.
Company like us gets interest only on their financial assets and pays interest on external financial liabilities.
Can anyone please tell me how and where I can get the daily returns, monthly returns, yearly returns data of different indexes , stocks etc. for last 10-20 years.
Fresh shares are issued, and total number of outstanding shares end up increasing.
Thereby, causing decrease in EPS. However, in some industries ESOP’s increase employee morale. Especially in those industries where man power retention is necessary. Think IT, PHARMA, or any other R&D associated ventures. In start ups as well a lot of esops are issued to retain talent and to reward them as the company grows.
There is write up in SRF thread and I came across this statement. Can anyone ellobrate? If you want to reinvest, it will be always after paying tax correct?
Once the vertical is demerged and a seperate company is formed, then even though it belongs to same group, still the re-investment for another sister company can happen only from Profit after Tax , that means after paying tax, while if the vertical remains inside the overall company, then even before paying taxes, it can be used for reinvestment. I think thats what it means.
I am wondering, any profit you make, you must pay tax before you re invest your profit. This is my understanding. is it wrong? is it only applicable for making investment in sister company?
Hi! Have you studied this company (Dr. Agarwal Eye Hospital) or do you have any red flags about it?
I tried to dig in through whatever I was able to find on the net since there is no seperate thread I believe for this company at Valuepickr.
The co. has changed it’s depreciation policy recently because of which the result for this quarter is much much better. (Apart from better sales and better PBT)
Not sure why the co. first recommended the dividend of Rs.3 and then nullified it?
Not sure why the promoters have pledged 99% of their shares when it does seem to have decent cash flow generating business and also has some decent ratings (Recent one was - CRISIL A Stable which was upgraded in mar’23)
Co. does not do any concalls or any investor presentation but has a pretty strong backing of the parent co. in which Temasek likes of investors have invested
Promoters have good experience of running the business and is quite a established name in few regions specifically and now trying to branch out PAN India and trying to gain the name/brand name
Their website is quite good and chatbot does amazing work interms of booking an appointment and aligning other issues/queries
Disclosure - I am tracking this one since I am bullish on this business as a whole and believe this can generate a good cash flows considering high margin business overall and increasing no. of customers (I mean who doesn’t have a pair of spectacles these days )
If I have three business units, and one business unit isn’t growing. I can use the cash flows of that business unit to redeploy in the business unit which is growing faster
If I demerge that business unit. Then I will have to pay taxes, announce dividends and then as a promoter infuse money into the other business which is growing faster.
Like what ITC did by deploying Cig cash flows to grow FMCG business
When the company says that they have incurred an inventory gain in this quarter. what it is that inventory gain and loss in that sense? Does -ve number denotes inventory gain or loss?
Thanks in advance.
Negative number that you normally see in P&L Account denotes increase in inventory, in absolute sense. It does not show inventory gain (or loss). When companies say they have incurred inventory gain (or loss), it is due to revaluation of existing inventories based on the accounting policy of the company, such as lower of cost or market price. You cannot get this from the P&L, you can derive it only if you have data for volume of inventory also, but that is not public information. You have to take the management’s word for it and if in doubt may be correlate it with external factors like commodity prices, competitor comments etc.
I just have one query, I have seen the pharma companies were doing really well a year before, let me know why most of the companies coming down, just see Aurobindo Pharma, or leading pharma giants, What’s the reason behind it? Can we expect some upward journey?
If a company buys another company, many times they pay more than the sum of all assets if assets were stripped and sold individually
That part which is overpaid is called goodwill. Goodwill is apportioned over the expected life as well as constantly at every year end checked for impairment
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