Investing Basics - Feel free to ask the most basic questions

I’ll delete my post in 48 hours if I or any one else could not provide any reference.

I have a question on emargin buying… i bought some stocks on hdfcsecurities emargin and as per process i m supposed to get sms or email with link to pledge the stocks… i hav done it in past and it worked ok… but now recent one hasnt worked… i didnt get pledge request sms or email to pledge the stocks with in T+4 days nor on last day… and the next day they got squared off… now how can we ourselves pledge or what we can do if we didnt receive any sms or mail with link to pledge…pls let me know if anyone aware of process…

I recently went through the annual report of Eveready Industries and found that they have 1060.81 Lakhs in the Balance sheet.

Why is this amount not appearing as an exceptional amount in the PnL statement as a loss

Please let me know in case my understanding is incorrect

I think what you are asking is that why the Rs 1060.81 lakh impairment is not appearing under Exceptional Item.

It need not. From the Particulars the ‘impairment’ seems to of fiscal benefit receivable from Assam Plant, receivable from supplier and/or ‘etc’ :slight_smile: . So the corresponding entry of Rs 10.6081 cr could be adjusted against any of those items and may not be separately seen as it would get added up with other entries in that account head.

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I want to invest in companies that are highly leveraged as the leverage can generates higher returns (of course it can led to higher losses also). But how can I identify those companies which are highly leveraged but at the same time can effectively use that debt to generate higher returns than cost of the capital. How can I filter those companies. Is there any specific criteria. Should I look for debt to equity ratio equal or greater than 1 and interest coverage ratio > 3 and ROCE consistently > 20%. Or I should follow some other approach.

Please share your comments and suggestions.

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Debt has to go somewhere, so I think you can look at the balance sheet to know if the debt is reflected in assets, gross block, CWIP, inventories, receivables etc. Even interest and depreciation.

Also, I don’t think the assets increase if any will bring in profits soon. Profits may come but may be on a later date, for many reasons. You can check the competitors too, because too much supply can bring the profits down. So while the idea is good, it could be a long wait too.

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REC result…
Can anyone explain what are the items mentioned at VII (ii) a,b and c…How come H1 fy 22 EPS is 18.93 when profit was 5032 crore and this H1 EPS 19.66 for a profit of 3689 crore (whereas bonus shaeres also have been issued this quarter)??

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I am tracking a few commodities companies and EBITDA per ton keeps getting mentioned in the con calls. Can anyone pls help me understand the term and way to calculate it?

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How does one determine whether the management of the company is reliable to invest in the stock ?

I believe one could be matching their expectations (regarding profit , revenue etc.) with reality of what happened.

What are some other factors to take account of ?

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This is a qualitative aspect, so I am not sure if there are ways to reach a precise conclusion, although with regards to the business what they are saying can be quantifiable, like growth, margins etc.

One can look at interviews, conference calls and watch, listen to the management talk. One can understand and get the tone of management from them talking instead of reading about what they said, not that it is reliable, but it gives an idea.

Few questions like unlisted companies doing the same business as the listed business, appointing family members in key positions without them having sufficient qualification or experience, what they do in a particular situation - delayed orders (Mayur), no clarity regarding succession, CEO etc (Cupid), increasing remuneration despite having other options (Avanti), unrelated purchases (Venky’s), frequent auditor changes, RPT, interested about their stock price (Parag I think), poor/nil communication etc.

Few trustworthy points are dividend payout, buybacks, no key persons resigning, good capital allocation, transparency in communication, regular conference calls etc. One can even go by valuations - market trusts the management (Dmart).

These all are subjective and debatable, but gives a vague idea at the least.

The proof out of the pudding is obviously in the eating, and as investors belong to different groups, some stay for long term despite the business not performing for extended periods of time due to their trust, some may think of opportunity cost, some don’t find other opportunities so stay, it depends.

Just my thoughts.

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Hi,

Does anybody know how to download private company financials from the MCA website? I have registered (As a registered user) but whenever I click on View Public Documents and try to add selected documents to Cart for purchase, the website asks me to login again at this screen - Ministry Of Corporate Affairs - MCA Services

I already have a registered account but it looks like that a/c can’t be used to download public documents? On the above login page I can’t even see an option to register (And my existing login/password does not work).

I have been using Tofler for accessing private documents, but they really charge a lot more than MCA I think (MCA charges Rs 100/company vs Tofler Rs 300).

Any help will be much appreciated :pray:

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You can try this. Charges might be slightly less or similar.

It’s a business opportunity for such intermediaries to provide documents from MCA and charge slightly higher. So don’t think it would be any less.

The below one is quite expensive but is a good option: -
https://www.zaubacorp.com/

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How to interpret QoQ and YoY results:

I see that different publications report company results in different ways. I come across news saying that company X posted strong growth or profits jumped whatever percent and i notice that they chose to talk about YoY growth to arrive at the rosier picture, whereas in reality they posted losses QoQ.

Saying if the results are good or bad shouldn’t be subjective or open to interpretation :slight_smile:

My rough guess is that this interpretation may be dependent on the sector which a stock belongs to…eg. we know that a particular quarter is known to be weak.

How do you then decide what’s more important? A 12% YoY growth or a 32% QoQ loss for a given company?

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I don’t follow much, but from what little I know, when TV channels report such QoQ news, I guess this is to bring some cheer or excitement, particularly for the trader community and not to investors, or to entice new people to participate in the market.

Although a few stocks can rise and fall, whose story is done and dusted in a year, in 4 quarters, there exists a lot of stocks whose businesses are years old, sometimes decades old, where investors have been present for much longer periods than a typical short term trader, or even a positional trader. So for these long term investors folk, a few quarters is nothing, as they follow the story, and are not easily excited or deterred by quarters’ performance.

On the other hand, if I am new and I happen to see a TV channel or some other publication, where some excellent numbers of stocks are provided, I might get interested, and I might participate in them without knowing anything. Attracted to numbers, so to speak.

Of course, there exists some stocks, I cannot recollect them by name, that a lot of hype or optimism is built so quickly that, for a few quarters the stocks rise with no limit, and also fall rapidly. These stocks are not necessarily pump and dump stocks, but genuine businesses with unexpected huge tailwinds, which are temporary or not yet matured in nature, but prices go upwards very fast. Also, if the story is indeed true, there is a chance that if one waits, one could miss a good opportunity.

Even what I have said is generalized, and each stock should be looked in confluence of many factors, and looked at independently too.

Just some thoughts and some inferences.

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Definitely.

For example, clothing, fashion etc companies do well in Q2 & Q3 as these are festive seasons; specially after November, sells pick up due to marriages season.

If you take a look at Redington, their Q3 numbers have been better than other quarters, as people also buy electronics during Diwali and all.

Though I do not follow, it could be interesting to compare numbers of beverages companies during different seasons. (I feel there should be more sells in summer).

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Another example of the same.

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hope this help!

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Query regarding Purchase of stock-in-trade

I am not an accounting expert so get confused at times because of accounting treatments. Please find below a snapshot of a jeweler retail company for Q2 FY23.

The sales have increased slightly YoY, but profit has decreased from Rs 10.8 crs to Rs 8.3 crs YoY for Q2 FY 23.

On looking at expenses, there is considerable increase in Purchases of stock-in-trade (Rs 401 crs vs Rs 312 crs YoY).

Queries:

  • Is this purchase of stock-in-trade basically unsold inventory of finished products of last quarter and carried forward to this quarter?

  • Is purchase of stock-in-trade not same as inventory?

  • If there is considerable increase in purchase of stock-in-trade then does it mean that the management expects higher sales and hence have increased the stocks?

  • Since stock is increased this time then does it mean that there will be comparatively less expenses in next quarter and hence more / increase in profits?

  • How is purchase of stock-in-trade different from finished goods?

  • Any reason why management opted to buy such high purchase of stock in trade? If they had less purchase of stock in trade then there would have been more profits.

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Here is my understanding, which shall answer all the above questions:

  • Purchases of stock-in-trade: Includes cost spent to procure ready goods that are traded by the company.
  • Inventory: Includes all the elements of in-house manufactured goods - Raw Materials, WIP, channel stock (stock-in-trade), and Finished goods.

P.S: No accounting expert. Just another DIY investor.

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Haven’t previously participated in any merger. There are two mergers upcoming on my portfolio: HDFC-HDFC Bank and LTI-Mindtree.

Lets talk about HDFC-HDFC Bank. Here holders of 25 shares of HDFC will be allotted 42 shares of HDFC Bank. This means that 3 shares of HDFC Bank is equivalent to 1.786 shares of HDFC. So, if someone has 2 shares of HDFC, he will get 3 shares of HDFC Bank, and will get cash worth 0.214 part share of HDFC in his registered bank…

Is the above understanding correct?

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