What’s your review on corporate governance of RUPA looking at recent promoters issues ?
Would you please elaborate on the CG issue in Rupa?Afaik, its only a family run business where members are changing posts or leaving fror younger ones .
@Malkd What are your views on Krsnaa and Lux results?
Krsnaa’s result looks good both in terms of growth and cash conversion.
On the other hand, Lux has taken a hit both in terms of growth and cash conversion is really poor. Too much money is stuck in inventory and receivables.
Your views will be highly appreciated.
@naquib_alam
The thing about buying out of favour and underpriced bets is that they are priced that way for a reason ie in the short to medium term results etc may not go their way. One needs to buy them expecting pain in the short term… the company won’t suddenly turn into a gem in the short term due to our acquisition. We are probably at the bottom rung of getting info vs the management and institutions etc so we can’t expect to make easy money just by investing cheap… they are cheap for a reason. This is a huge mental block to get over… and a mindset of lowered expectations in the short to medium term helps.
One of the main advantages we have as retailers is our holding period can be as long as we want it to be. I’m not expecting anything great in both companies results for a few quarters since I’m expecting poor results especially for lux industries. So I’m not really too fussed about it… atleast not for a few quarters.
10 Likes
Deepak nitrite has been one of my favourite companies. This incident at vadodara has given me a bit of pause though. If the rumors that it has been shut down are true(and it’s looking more and more likely) then the lack of communication regards this by management is a bit suspect. Also given me pause regards their safety regulations which would break a key part of my thesis.
Since i bought a truckload at rs.500 selling here would solve a big problem for me… Ie I could put the entire amount into savings and straight away build my emergency corpus in 1 day instead of spending the entire next year building it organically …
I’m very tempted to do it but ive not pulled the trigger yet. Will give them a longer rope to see how management handles this. The smart move does seem to be exiting and figuring out a new entry point in a few quarters though…goes totally against my usual long term instinct… but it seems logical too since it would clear all my upcoming debt and it’d be a lot of money saved for a rainy day.
5 Likes
Hello malkd I would like to know if u track renaissance global .I am particularly interested in its branded business.earlier they were the normal b2b jewellery company but now focusing on branded jewellery.This year they did 500 cr turnover in branded segment including d2c of 123 cr through websites.
Management has downplayed the situation and led us to believe that all is well. But the rumoured shut down (may not be Rumour) has jolted the confidence and corporate governance is put to test. On my instinct , I sold two days back 30% ( Full qty bought around 600 level.) and has gone lower since then.
Waiting for further responses from the management to take a call on balance qty.
@Raj_A_A
Yup. I’m not very happy with this situation. In my case it makes a lot of sense to sell…infact this could be a good reason to do so since I’m very stubborn with my holdings and won’t sell anything otherwise even though i need to. Il elaborate a bit further…
I basically have ALL my savings in equity. I currently have no debt… however i have 3 big one off payments coming up over the next 6 to 9 months + monthly business expenses ie salary/rent etc. Let’s say this amount equals X. I currently have rs. 0 to service this X. The original plan was to save all of my profits from my business over this fiscal + dip into my business overdraft account and use that to cover X. The problem is this would require everything to go perfectly regarding contract renewals with colleges and enrollment of students. This puts everything on a bit of a tightrope since i have no margin for error and if covid comes back or i miss a few targets i wouldn’t be able to pay off X. Just by coincidence my entire stake in deepak nitrite = X. So by clicking the sell button i would be able to cover all of upcoming debts and would be immune from anything adverse happening over the next year + would be able to sleep better at night. I must admit… if i dint have X to clear i wouldn’t consider selling. However, considering I’m a bit let down by management communication it seems logical to do so. It reminds me of the quote regards climbing up a mountain only to roll back down. I’ve got a nearly 300 percent return betting on deepak turning from a basic chem company to a phenol + spec chem company and it worked out. The overall peace of mind in my personal life by selling makes it worth it for me. I’m very sure management will come out of this well and that a year from now we won’t even remember this fire situation. However, selling makes sense for me in this moment. I’m loathe to do it but in my situation it makes perfect sense. I need to remind myself that equity markets are also for making realised gains and that my own personal life needs to be derisked a bit too by covering the next year’s expenses asap since i took a huge risk by putting all my money only in equity(which worked out). I won’t be selling my wife’s stake in deepak since she has an emergency fund anyway.
In short: yes my confidence in management took a big Hit… but I’m sure they’ll bounce back over the next few quarters. However, I will be selling all of my holdings due to personal reasons. If DN is available at a discount to this price (sold at 1825) at the end of this FY(it could happen if the bear market everyone is predicting plays out) and if management handles this situation well then i will gladly enter again.
@Rahul_Singh
The only jewellery related company i track is vaibhav global. Don’t track any others unfortunately.
4 Likes
Its a brave call and nice to see that if there is change in thesis you are willing to sell. However I hope(!!) the news not to be true (As reported by media). Deepak’s management in last few years had been very outspoken about its ability to adhere to standards and industrial guidelines.
If at all there is an issue of closure then management certainly not done its job to inform the exchanges. I will also be selling my entire holdings as this is concerning.
Disclosure: Holding DN as of now.
@Dragon
I hope the news isn’t true either since as you mentioned it would be a huge black mark against what i consider blue chip management. If the money wasn’t needed i wouldn’t sell. Considering the huge relief this amount would give me and the fact that I’m sitting on a large profit it made sense to me. I must confess i get very attached to the companies(businesses) that i own and this was a very tough decision and it will probably backfire. However, i am confident that in this one case i will not have any regrets even if it turns out the news is fake since it was about time i cashed out some of my portfolio anyway. In a couple of days we ll know the seriousness of the issue and management’s response. Note that i also have a big stake in jubilant ingrevia and deepak + ingrevia took up nearly 30 percent of my PF together. So i had a lot exposed to the chemical industry and still do. It made sense to sell in my case… but it depends on an individual basis.
The question i asked my self before selling is would i buy more of deepak nitrite now at current valuations? And the answer was no. In every other PF company the answer is a resounding yes. So i made the call even though I’d like more information to be out first and i absolutely love the company and the way they handle business cycles.
1 Like
@Malkd : Thanks for the response
Just few follow up questions to pick your brain, I have following questions:
- Assuming the news about closure is false, DN is heading into Capacity expansion and I can see they easily grow at 24% CAGR for next 3-4 years and this makes valuations attractive. Given that they will use their Phenol for upstream/downstream products which have more margins than cyclical Phenol! why don’t you buy if this scenario plays out?
- Assuming the news about closure is true, At what point (Price) you want to buy DN although there an overhang of corporate governance issue?
As mentioned in my posts before i find deepak nitrite to be masters at handling cycles. I have no doubt investing here will lead to a 20+ cagr over the next five years. Assuming the plant closure isn’t true then il have egg on my face.
That being said right now the valuations are at peak cycle. Considering the environment we live in things could go wrong. Ideally I’d like to buy deepak back at current valuations when valuing the company at the bottom of a phenol and dasda cycle. That being said… this exit is temporary. If the news of the plant closure is false/sop and the effect isn’t huge on DNs bottomline il happily buy my stake back end of this FY when i have the liquidity available to do so.
I’m hoping the inflation and a bear market + plant closure let’s me buy the company back at a similar price point a year from now. For now I’d rather pick the option of encashing my amount here and covering my X expenses for the year as mentioned above. Ideally, I’d have just held onto my stake for the foreseeable. For the first time in a while I’m breathing with a huge sigh of relief though since i now have an emergency fund. So it was well worth it for me considering the returns I’ve got here over 2 years.
Disc: this is my own personal view and for personal reasons. I wouldn’t recommend anyone else buy or sell based on my reasons.
3 Likes
Management claimed that the fire was in storage facility, the news claims closure notice given pending validation of structural integrity . Now gov authorities have not differentiated between storage facility & factory but that does not really mean that the fire was in the plant. This response from gov is expected but it does not really prove that the management has misguided and the fire was in plant . I hope the management comes out with a clear communication.
Disc: Invested at present levels from past 8 months or so .
1 Like
It’s been 2 days since i sold deepak nitrite and while I do feel a lot of regret i also haven’t had a better night’s sleep in 2 years. As mentioned before i run an education based business and due to covid nearly the entirety of the last 2 years were a writeoff. I had about X in savings pre covid and had i not taken a few risks my entire savings would have been wiped off by end of 2020. Through some shrewd and lucky investments, business decisions and cost cutting(cut my business expenses by 2/3rds) I’ve now managed to enter FY23 with a portfolio of 5X instead of being wiped out since i invested every rupee earned into my PF and my business and had zero debt instruments. Over these 2 years I’ve barely had a chance to breathe. Selling deepak nitrite brings my PF down to under 4X… however, i now have that money saved in an idfc first savings account @6 percent interest. I DO NOT want to live the last 2 years flying by the seat of my pants again. So with the money from DN and the money il be saving over the next few months this will be my plan going forward:
-
Idfc savings account with Amount equals all my business expenses for 1 year. This way even if my business takes another covid hit or for any other reason il be able to survive a whole year without issue. Will use this money for personal expenses too and make it a priority to top it up in the first week of April back to the full amount (along with maximising PPF)
-
Current account with overdraft of 5 lakhs + 1 months business expenses. This would ensure i don’t need to dip into my savings at any point and handle monthly business expenses easily.
-
After all of the above is set all profit will go into equity. However, this year i have a lot of big expenses due which I’d pushed ahead over the past few years. So will finish those off by end of this year with my business profits. By January 1st i should finally be done with these one off expenses and can invest into companies again post that. Note that considering the huge tax hit I’ve taken with deepak i am considering a bit of tax loss harvesting by selling my stake in vaibhav global(50 percent loss) since i doubt il ever sell such a huge amount of my PF again over the next 5+ years so i can take advantage of cutting a loser now even though I’m not too comfortable doing that. this amount would help me cover some of the upcoming expenses this year too.
All things considered… Sure, i may need to push my financial goal target ahead by a year or two(i am in my early 30s so in the long run this won’t matter) but this protects me , my business and even my portfolio since i wouldn’t need to dip into it at any point in the future. I am very bullish on deepak nitrite and even vaibhav global long term but considering all of the above selling at 3x to enable the above makes sense.
I dint really care how much they fell tbh… it’s just that if my luck turned business wise i might have been forced to sell at an even lower price in a few months if things dint work out as planned since everything would have to go near perfect for me to do the above organically with monthly business income… and I’ve become a bit paranoid post covid since one cannot take things for granted when it comes to business.
Apologies for the long post. I’ve found that noone really talks about selling a company anywhere with a personal reason attached and it’s usually about “growth has slowed down” ,“recession is coming” etc. If i was already in the position i want to reach in(with idfc first savings + current account + upcoming expenses cleared) i wouldn’t consider selling Deepak or Vaibhav. I wanted to elaborate on how real life and financial planning and just the requirement of a good sleep can lead someone to make a selling decision too. Expect my bets to get even more concentrated and “riskier” next year once i have all of the above in place since i would then be very anti fragile and would actually afford to place them without worry.
36 Likes
“I’ve now managed to enter FY23 with a portfolio of 5X instead of being wiped out since i invested every rupee earned into my PF and my business and had zero debt instruments.”
This looks like an extremely bad situation to be in, glad you managed to get out with flying colors.
For the benefit of the all the followers, can you elaborate on how you managed to get your self in this situation, so basically what not to do how to plan better your learnings from this explain and how you managed things when all looked lost!!
It’s the life one leads when running a business. Making money out of nothing is tough and there is no safety blanket of a salary. Spent 3 years investing in my business from 2016 and 2019. 2019 was an inflection point. And then 2020 hit and covid came out of nowhere. I got married that year too. My wife has her own business and it handled covid well… also, I’ve never had debt… so it’s not like it was the end of the world.
Since then i let go of a lot of staff (helped them get placed into other companies) and shut a few offices to cut down on rent and made my business very very lean. To do this i have to do majority of the work for the next few years (I’d spent 2016 to 2019 decreasing my workload and then had to hit the reset button). Now everything is back to 2019 levels with my costs being cut to 1/3rd… so things are looking up. Infact most of my competitors were riddled with debt and could nt handle the classroom headwinds downturn and died out so things are even better than pre covid right now.
But I’ve grown a bit wary since covid and want to prevent that situation from occurring again. I’ve realised that one needs to analyse ones own finances the same way one needs to analyse a company ie debt free, working capital for short term, savings for the long term and growth instruments for alpha ie equity. These past 2 years have helped me understand how client stickiness(relationships with colleges, schools) and network effect etc work and made me understand bottoms in business cycles first hand.
My investments from now on will reflect this(my current obsession with the likes of Bajaj consumer and Manapurram etc). Ive also spent 1000s of hours Reading books like antifragile, outliers, tipping point etc and it’s helped me shape my philosophy. A few years from now il need to worry about buying a house/kids etc and I’ve realised i need to be able to handle all of that alongside whatever surprises life throws at me. Hence why an emergency fund, dividend paying companies and bonds/wintwealth like instruments have slowly started making sense to me since i need to protect myself from the vagaries of a business with fixed income and emergency funds.
My plan has always been to make sure my business and my investments are my priority and that im financially free in 5 years. I’m slowly realising that the actual aim should be to live a happy , tension free life for 10+ years and let wealth creation happen while I’m doing the same. Basically, I’m very confident regards the investments i make… but there always a curveball waiting around the corner that i need to plan for and hence why im adjusting my risk tolerance accordingly
19 Likes
Appreciate your sharing practical aspects. From what I understand that you shared…One one hand your business is just started to look better…was on verge of collapse an year back…and on other hand you mention financially free in just 5 years…just thinking how is it practically possible with business not doing that great and as you mentioned your responsibilities set to increase with house being a major expenditure lined up…
For this to be even remotely possible either the business should throw truck loads of profits or your investment corpus must be very high compared to multi year expenses factoring even inflation…
Pls note question is not to doubt anything, it is just to understand your plan & perspective which you have been so good at explaining all the way… thanks
@Investor_No_1
Financially free is just a mindset for me. It’s a large enough corpus wherein if I were to put it into debt instruments @7 to 8 percent a year I’d be able to replicate a large enough salary so that i can take my foot off the pedal and hire people and run my business on auto pilot at lower margins so that i can then pursue another business etc without the worry of going bust. And yes… i would hit that corpus with current costs at 1/3rd since i don’t need to put anything more into my business for some time + investing 90 percent of my profit saved each year growing at 20 percent cagr in risky concentrated investments. The next 5 years should be relatively inexpensive cost of living wise since thats how me and my wife have planned it… ie major investments like kids and house(instead of rent) and travel etc would be only post that. Note that my wife has her own corpus being built (as tracked here in portfolio 2) and both of us have a similar mindset so with our powers combined we should reach that point before our huge expenses come in. As people who have left fixed salaries behind years ago and only run our own businesses the main priority for us is to build fixed income salaries in 5 years so that we de risk our lives as much as possible.
That being said 5 years is a long time and there could be a lot of unforeseen events so I’m setting a more realistic time frame of 10+ years and a cagr of single digits(matching inflation) since il have to build emergency and debt funds from now itself and ensure i reach that point without going bust with Black swan events in both my business, general life and in my portfolio. Il be charting this journey each year here on this forum so let’s see how it goes 
6 Likes
heyy malkd was planning to offload my stake in irfc it is 2 or 3% below my buying price was thinking about putting in ptc or oracle what would you recommend.
thinking Ptc as i am already I.t heavy expleo and intellect ,Oracle as i find it a safer bet given the current enviroment and i think has downside protection.(Cant be sure with us tech sell-off)
Also @rshankv would love your thoughts on oracle given the current market enviroment regarding I.t stocks?
@raku
I think the issues at PFS are going to demand a huge margin of safety with PTC since there really seems to be a huge threat of PFS blowing up. In a bear market these kind of corporate governance issues will only add to the pessimism. Il personally consider adding only near rs. 50 or so. I am demanding a huge MOS here.
Oracle is a safe but boring buy. The play is dividend and safety. Again, there are plenty of options available right now. Only if an unreasonable offer is made here near rs. 2000 to 2500 or so will i add more. Already have a sizeable stake in my wife’s Pf under rs. 3000 and I’m not too fussed about adding more right now.
I’m hoping all these predictions of bear market play out since I’m forced to sit on the sidelines till the end of the year and I’m crossing my fingers hoping i get companies at those unreasonable prices around then.
Note that PTC broke a huge support around 78 rs. Today. Hence why I’m even more convinced we ll see rs. 50 to 60 now. It is a dividend play with some long term optionalities at the end of the day. To be safe take dividend at the lower rung ie rs. 4 (not rs. 7.5) since they may have issues in the short term. Hence why im keeping that range as my target
1 Like