Mirza International has almost doubled in the last 2 months, taking the valuation comfort away. The problem that it has to cope with from hereon is that exports that constitute at least 2/3rd of Sales are facing strong head winds, while domestic sales that are growing well constitute less than a third of Sales. Perhaps a case of the tail wagging the dog! These headwinds are perhaps getting reflected in Q4 results. Things will probably change going forward over the next 3-4 years with Indian operations gathering scale, but there is a possibility that the low hanging fruit may have been picked.
The issue of “guarantee commission” seems like an entry through the back door! The promoters are better off adding the guarantee commission amount to their remuneration, but perhaps there are restrictions on director remuneration. I can think of numerous co.'s where the directors have given personal guarantees for debt taken by the Co., but I can’t think of too many instances where they have been compensated for giving their personal guarantees by an amount almost equal to their remuneration! Perhaps the problem is also one of there being just too many Mirza’s running the Co., with some still to make it to the board!
Another concern is that most Sales to UK are made to a Co. owned by the promoters in their personal capacity, which then distributes the sales. Hopefully the mgt., with an eye on the market cap should correct some of these legacy issues going forward.
What is however, going well for the Co. is that the brand Red Tape is holding firm. With Bond Street gathers traction, the mgt. does seem to have the wherewithal to scale up the Indian operations with very limited capex.
Dis: Booking profits gradually.