If customer is asking for any paints, AP is losing here, this shows AP doesn’t have enough brand power,
AP needs to spend more on Marketing for brand recall,
or
AP needs to increase its dealer margin to match with other product.
Question is:
Is giving out product B at a margin of 35% feasible in the long run? That’s the bet AP might be playing, at certain point of time, product B has to reduce its margin. AP will start gaining market share again then.
Good Questions @Mani_Starter
In real world, it’s not easy to dislodge brands. Birla opus gives absolute insane margin to retailer (As per some reports it’s 10% higher than AP, Say ap is 3-8%, they give 13-18%).
Retailer may think this is not sustainable hence even if it requires, they sell both, but surely old retailer won’t spoil their relationship with AP.
Besides margin, asset turn is more important. Retailer value their spaces and for them ROCE is more imp than absolute margin.
How to analyze EPS growth in Microcaps? Can we ignore negative EPS growth against 20% or more Topline, bottom line & ROE? Request your views.
That would mean equity dilution has taken place. Many fast-growing small caps require frequent external funding for working capital or capex purposes if the business internally is not generating the required cash. So occasional external fund raising is fine in such cases, if the funds are getting used for right purposes. One has to combine it with other governance checks and take a call.
Thank you for reply. If business is generating 5-10 times CFO over its Net profit but there is no YOY or QOQ EPS growth then does it mean that business is generating cash but its not sufficient for its overall growth? Whether can we ignore negative EPS for newly listed IPOs, since they might have diluted while listing gain? Where can I get information about right usage of equity dilution? No one have asked the same in concalls,
Firstly, no business generates cash 5 to 10 times its Net Profit. It can happen due to one off factors in a year, but you should consider long term averages (minimum 3 years) to judge the cash generating capacity of the business.
For the rest of your question, dilution due to IPO is natural since the company is issuing new shares. When the company files for IPO with SEBI, it releases a Red Herring Prospectus which contains all the information about the business & the issue. Google for <Company name + RHP or DRHP> and you will find it. It contains a section ‘Objects of the Offer’ which will contain the intended usage of the fund raise. But the purpose of listing can also be beyond what the company wants to do with the money. Listing provides several other benefits too to the business & its promoters.
Lastly, remember that smaller the company and newer the listing, more is the caution you must exercise while investing in it. Risk is the highest in such companies.
Request someone to clarify on CFO analysis please.
I am interested in investing Semiconductor, Anti-drone, Solar, Transformer, Cloud based infrastructure, Defense small cap stocks but I observe many leading business are not converting profits into cash. Ideally in 5 years, there must be min 70-75% CFO against Net profits.
Am I missing something? Can we ignore cash generation during growth phase of new/smaller/capex intensive companies?
Or should I continue to ignore if any business is not generating cash over 5 years?
I am little curious to understand on why, when a company wants to invest more money in a wholly owned subsidiary, they do a rights issue. Why not a plain fresh issue of shares. What difference does it make, since 100% is already owned by them
Below is exchange filling of waaree investing some money into their Subsidiary. “Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, we would like to inform you that Waaree Energies Limited has made an
investment amounting to Rs. 300 crores in Waaree Energy Storage Solutions Private Limited,
a wholly-owned subsidiary of the Company, through rights issue.”
Even though the economic result is the same (parent funds the subsidiary), a rights issue ensures compliance with Section 62 of the Companies Act, strengthens corporate governance optics, simplifies audit/regulatory scrutiny, and keeps the structure flexible for future dilution.
Additionally, it’s easy record-keeping, as auditors, regulators, and future investors (if the subsidiary is spun off, listed, or receives new shareholders) can clearly trace that capital was infused in line with the law. It avoids any technical dispute later about whether the shares were issued “preferentially” or in violation of process.
Finally, today it’s 100% owned, but tomorrow they may want to induct a financial/strategic partner into the subsidiary. By consistently following the rights issue framework, they set a precedent that capital raising is done in a structured, shareholder-friendly manner, which makes future dilution possible.
These are all my assumptions, as there may be no right answer. If you need the company-specific answer, I suggest you ask them in the next conference call or email their investor relations contact, who can answer this specifically to Waaree.
Hi,
I have been facing the difficulty in joining the AGM via NSDL evoting facility. When I login, i can see this page.
but when i click any action link for any company (even at the time when the AGM is going on), i see error that no event is live.
ANy have any idea why i see this and any workaround to join AGM?
Use this link
The format of the Financial Statements as per Schedule II of the Companies Act does mandate to provide an exhaustive note on the same so that investors can understand the reasons behind differential treatment.
As for microcap investing, you can often ignore a negative EPS growth if it occurs alongside strong revenue, overall bottom-line growth, and a high ROE. Negative EPS can be a temporary consequence of a larger growth strategy. In these cases, the negative EPS does not reflect fundamental business weakness but rather a short-term hit pursuant to long-term expansion. A 20%+ top-line growth, quality of earnings, high ROE, industry and business cycle factors can be a helpful metric to determine microcap sustainability.
Your concern is valid. While strong cash flow generation is generally a marker of a healthy, mature business, a low or negative CFO is common due to high CapEx, inventory build-up, lag in converting accounts receivable to cash, high working cap requirements, significant R&D expense needs, etc.
How to roll forward valuation concept? At this point, people are using Sep’27 eps to arrive at valuation of xx. why cant we use Sep’26 OR Dec’26? please explain
Surely you can use Sep 26 or Dec 26. Those who are using Sep 27 want to make the stock look cheaper.
It’s the future bro, it’s speculation. People who make such predictions choose are only trying to come up with a value that suits their narrative.
now recently this company has given shares to employee as esop @ 73 ; 56 ; etc. But the stock is trading @1600 . Don’t you think that this gap is too much considering the locking period is generally 1-4 years, even considering the today’s price this gap is too much for anyone liquidating there shares in the market . Or can this be interpretation that it happens in the usual course of business.
Also another thing is that the company CEO Sachin, intially told that the company is going public because the employees need to liquidate these shares. Also you can see the director relative has pledged the share then disposed it later on (Is this something alarming or it is like "chalta hai " kind of thing .
Could you guide me how to look at this
