Thanks for the kind words. I am very poor in selling and generally give the benefit of doubt. But I have cut allocations to both Navin and Neuland when they had run up ( To my dismay Neuland doubled from my sale price ). I am yet to figure out a framework to selling . I think beyond a point investing is all about managing the emotions effectively.
Regarding stock selection I try to follow the following framework while analyzing :
Quality of business Quality of Management Assessment of risk Valuation Margin of Safety.
But there have been several instances of not adhering to this framework and paying the price in the past. So it’s a continuous learning process and the endeavour is to become become better and better as time goes by and learning from your experience.
P.S : I have paid my tuition fees many times over to the market
I was impressed by their capabilities in ADC , HIPO APIs etc. There are very few companies like Cohance and Piramal with ADC capabilities which is slated to grow at c. 20% + as a therapy (One of the highest growth).
They have solid international manufacturing foot print including Swiss, France, China and the Netherlands .
Their operating profit margins are on an improving trend and should be 20%+ from the current 17% levels.
They are saddled with high debt and Goodwill post the Carbogen Amics acquisition.
The company with strong capabilities like ADC and HIPO is available at an EV of C. 6500 cr with improving fundamentals .
There are risks involved like high debt , management not keeping up with commitments etc. But I think the negatives are captured in the valuations.
Sundrop Brands :
Sundrop brands have 3 power brands Viz: ACT 2 | Sundrop | Delmonte in it stable post the merger with Delmonte foods .
The merger synergies are yet to play out which I believe will be value accretive.
They have very poor margins and low return matrices which management has guided will improve.
I believe the products and brands are strong and Sundrop is a debt free company in FMCGspace with a market cap of c. 3000 cr.
Vintage Coffee :
Vintage Coffee is a play on the capacity expansion .
They have been constantly increasing their capacity from 4500 MT to 6500 MT and now another 4500 MT is upcoming.
They are presently operating in CIS countries and South East Asian countries . Plans to expand to US, Australia and NZ.
It has been consistently growing YOY and valuations seems to be reasonable at a forward level.
P.S: These are my thoughts. I might be completely wrong , as have been often in the past . Please do your due diligence. I might exit the positions without prior notice if my thinking changes .
About Vintage Coffee,
for next 2 qtrs they will not have volume increase or revenue increase as they are 100% utilized and there profit will grow from next FY,is my assumption right? or there will be uptick in there revenue due to other factors in immediate qrts? please help me with your views?
Yes , they are running at full capacity. But management in the concall commented that Q3 and Q4 should be better than Q1 and Q2 . In any case even if they maintain the Q2 run rate they should be doing substantially better on YOY basis.
They seem to be ramping up capacity on a fast clip. In the call they maintained that the additional 4500 MT facility will come on line by March 2026 and will start contributing immediately (Q1 FY 27).
i think very few people have this as an investment. I am among those few, have been invested since many years probably since i was a newbie and liked FMCG sector, which by the way i like even now…and found out RJ holds a stake in this company which was then 1500 cr company…this was maybe around 10 years back…so a cagr of around 7% out of a partially borrowed conviction for me…I didnt sell it for few reasons earlier that it was a kind of subsidiary of a large US based conagra and india was not so ready for processed food then and i anticipated with time it will be and more conagra brands will be launched here…turned out conagra cashed away…but I remained…then PE drama and delmonte buying…it purchased a company almost as big as itself which became its subsidiary but not a decent mention anywhere in websites when i last checked… not sure whats in mind of PE…no one knows…i still remained because of reason similar to yours…not good at selling, no proper selling framework…and a believer in Indian FMCG…less exposure to smallcaps…and not a big allocation to this…so i simply let it be…
Good to find someone to discuss this company with…what do u think about the PE which invested in Sundrop and why do they immediately purchased delmonte instead of improving Sundrop first? what do u think is their vision of sundrop and delmonte and how does the synergy of both brands would work? Even maybe an year after acquisition, in public available information, i could not gather anything decent about how synergy is working, growth rate improvements of each brands, strategy etc. …for example if we compare acquisitions by Tata consumer…every thing is crystal clear (as clear as it can get for a simple retail investor like me) about new brands like capital foods, organic india, soulful…
This company has so far been one of the wishful investing basket for me and what i have seen in last decade or so is all my wishful basket stocks have fared poorly…a 7% cagr has still been a savings grace compared to even losses in some of this basket…maybe because this company is inherently part of the good old simple FMCG sector…
The reason for my entry into Sundrop brands were as follows:
The power brands of ACT 2 , Delmonde and sundrop.
The low market cap of c. 3000 cr vis-a-vis the opportunity
The possible merger synergies with Delmonde .
Sundrop brands has very poor EBITDA margins compared to larger peers like HUL , ITC , Dabur etc. I think adding more brands and SKUs like in the case of Delmonte should help improve margins if they are able to get their act right. This means they have to right size their distribution and go to market & Increase reach (Currently servicing only 5 lakh retailers).
Parts of their portfolio is tilted towards healthy binging /healthy oils etc which is catching up as a trend in India.
As regards to their PE management , I believe they are ultimately held by a consortium including Samara Capital, Convergent etc which are funds with investments including More Retail ( along with Amazon) among others. With the acquisition of Delmonte even Bharti group has a substantial share holding. My experience with PE owned companies have been mixed in the past. But I wouldn’t attach much weight to it. Ultimately it depends of the Managers who run the show to deliver the results.
I plan to give it a run of atleast couple of quarters to see the direction of the company and then decide .
The majority of sales would be from Sundrop, I guess. As such, Vegetable Oils, even branded ones, have extremely low margins. I guess it’s almost impossible to have margins above 5% as it’s an extremely competitive space. Similar to the wheat flour business, where even the biggest brands have negligible margins.
Act 2 while a great brand is limited to kids. I dont think i have ever made popcorn at home, its more of a movie-going habit. Delmonte is a good product with excellent salience in its target market. That’s the only bet, the company has I guess.
Studied it at the time of the merger and decided not to go ahead with it as 2 out 3 brands I felt the upside was limited.
Quality of Management 
