@jatin/others
Please understand VP Core Team uses its discretion to “intervene” in debates, when its deemed necessary. When it is deemed unnecessary, we will choose to be silent - please allow and respect that space for us. Sometimes it’s prudent to avoid adding fuel to the fire - in both directions !
Seeing so much of hullabaloo over 1 quarter of results, we choose to point out a few things - if only to interject a dose of realism, prevent panic reactions, and cluttering of this thread with the same issues over & over again. These are our complete views at the moment - so we also reserve the right NOT to be drawn into further defending our individual/VP position.
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Most/All the issues that have been raised by folks recently (post the Q1 results) are “old” issues; nothing new has been brought out which has NOT been discussed and debated before the investment call by VP - which means in our collective wisdom we had taken the call on the Personality and assigned a suitable discount factor to the personality type, while assigning a Premium to his execution ability
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Merger issue existed before as well. We had made the call with the full knowledge that Merger may or may not happen. Even without the merger happening we saw the distinct visibility of a 25% CAGR over 2-3 years. Merger happening is a bonus - not factored in our Valuation case
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200 Cr Cash Issue : If I am not mistaken it has been clarified by Management that the cash lies with a State Bank subsidiary (SB of Travancore?) Kochi branch many months back ??
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Once having made a Call we like to keep faith and give the business a reasonably long rope to show walking the talk. Just 1 Quarter of results/newsflow or some event trigger does not sway our FAITH. We question the FAITH only after 2-3 quarters of non-performance or deteriorating performance. Keeping FAITH is the most important trait you need once you have done solid homework, have slotted the Management Quality & Business Quality, and invested for the long term
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Having spent extensive time on the Business/Competitive space/Industry, we find this is a high quality sustainable business that is capable of investing capital towards earning high returns for a number of years, with a long runway in front. The business is led by an exceptional Jockey with exceptional focus on executional efficiency - with manic or as Prof Bakshi calls it fanatic focus & energy.
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Such exceptional, maniacal folks we don’t run into everyday. Yes there are personal quirks - that are sometimes not defendable as completely rational decisions, but these kind of folks believe they know best - it is their way and they believe this is the way to do it - they don’t care much to listen or explain their rationale. The key question to ask when faced with such a personality/business situation is what do you value more, and in the context of the overall possibilities, can you live with the idiosyncracies (unless you have reached the conclusion there is an intent to defraud - in which case the decision should be clear right, there is no debate). Do you think these are IGNORABLE? Are these interfering with actual business performance on the ground? (A good contrasting example to my mind is the Hawkins case - where business was getting hampered quarter, after quarter, after quarter)
In our case we took a lot of time to take a considered decision - with all the anamolies right before us - and decided to keep faith in the business led by what we believe is otherwise an Excellent Management - but where “Managementspeak” probably needs to be adequately DISCOUNTED. We have an internal figure for that discount we cant reveal …ha ha… -
Normal growth in the business is a given for us, but there are a few “Optionalities” Kitex business throws up that most investors need to focus on. Execution on white label opportunities in the US market, and its own private label branding attempts. These will gradually unfold over next 1-2-3 years - and that is what we want to closely track. So far Kitex has been executing on home ground, Executing well in uncharted territory is the key monitorable for us - which will confirm or deny our main investment hypothesis.
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End of the day Investing is an ART form. There is no holy grail. Nothing really right or wrong. Take the decision based on your comfort level. If you are comfortable stay put and keep faith. If you are not comfortable, decide to exit. If you had invested based on the VP call at 300+ levels , there is no reason to complain anyways We absolutely reserve the right to be proved completely wrong and foolish in our call of keeping faith in the business and the management - for the moment.
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There are other things to focus on and investigate in the sustainability of the Kitex story. For example, there are more players (existing & emerging of some scale) in India of supplying infantwear to the same customers - can we list a few names, please… We will urge Members to shift focus to that and refrain from too much of what we call opinion-bazi - one way or the other.
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By all means keep track of the events/facts, bring out NEW (disturbing) facts by all means - that will be a skeptic’s job well done - that someone like Dheeraj continues to do - that’s his singular contribution to this community - we welcome more like him. And as promised whenever we are at Kochi next we will take up all these issues with Management - and revert with Management’s way of handing the objections and its responses.