My portfolio updates and investment journey

Q&A: Questions & Answers Portfolio Q&A
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Hi my name is Jaiprakash (JP) I am 42 years. I am an MBA with 17 years of experience in corporate world. My experience is mainly into credit ratings and investment research for global banks and corporate entities.

*Disclaimer: please note that I am not a financial advisor or nor a SEBI registered advisor or a research analyst. All the that I shared here is based on my personal opinion and my personal situation hence same may not apply to you. Please consult your own advisor before taking any action.

I have been investing directly into stocks since 2010 and I am reading valuepickr for a decade now. Until mid 2022 I was 90%+ invested in equities however, over the last one year I have increased my cash and bond holdings to 43%. The increased allocation of cash/bond holdings is reflection of my personal situation rather than having a market view. I have given below break-up of my current allocation to financial assets:

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Keeping aside my personal situation, I believe bonds are good investments from 3 to 5 years perspective given that interest rates shall come down a year ahead and we might be able to reap benefit of capital appreciation. Some of the AA rated bonds are trading above 10% yield to maturity.

Equity investments:

Below is break-up of my equity investment:

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Rationale:

Rategain Travel Tech (11% of portfolio, 29% profit): My first entry in Rategain was at 370rs per share in December 2021. My average cost price is 362.

I was invested in IRIS Business Services 3 years back. In one of the conference call, CEO of IRIS, Mr. Swaminathan, was talking about SaaS businesses and he mentioned about Rategain being India’s largest SaaS company. I became interested as one CEO is talking about other’s company. This was before Rategain’s IPO. I started reading about the company and its CEO/Founder Mr. Bhanu Chopra. I was realy impressed with his focus on profitability . Here is one of the video of him A product with fewer features can sell more: RateGain's Bhanu Chopra - YouTube talking at SaaS Forum 2015. You will get the gist in just first 3 minutes of the video.

Then I went through company’s DRHP and I noted that the company earns majority of its revenue from North America (primarily United States). US is innovation hub and if an Indian company is able to make inroads in the US then it means it has good and competitive products .

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Source: Company DRHP

Then I kept building position from 2% of portfolio (in 2021) to about 8-9% (in 2023 on cost basis) as I saw company delivering. Few other key triggers for me to add were very low cost of customer acquisitions and opportunistic acquisition of Adara. In addition management under-promises and over-delivers. My last transaction was in March 2023 and I am not planning to add to it any more given its size in my portfolio.

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Source: Company investor presentation.

Please note that I am invested and this is shared only for learning purpose.

Please provide your feedback as I continue to share my rationale for remaining stocks over the next few days.

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Thanks for sharing your portfolio and explanation of Rategain.
Waiting for similar rationale regarding rest of the stocks

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Thanks GRP for your response and thanks to all who liked my first post.

Investement rationale for Hindustan Foods (6% of portfolio, 46% profit):

Background - My first entry in HFL was in February 2018 at 60 rs (accounting for split/bonus impact). My profit % looks distorted as I trimmed and added through the period. My realised profit on the stock is 2.4x of current position. This stock used to be my largest holding (in 15-20% range) from 2019 to 2021. I kept trimming out of fear and thinking “aur kitna upar jayega”. Though it never reached my intended/targeted valuations of 3x sales.

I have a habit of reading at least 2-3 hours a day. I read all business, markets, and economy related news as much as possible. I came across this news dated December 2016 Sixth Sense bets on Kurkure snack maker Hindustan Foods. I started reading about the company and its products but I could not find much on this company but I could find that the company, Vanity Case India, which bought Hindustan Foods in 2013 is in contract manufacturing for decades. Its client list also included some MNCs. Then after few months in March 2017, I came across this article Nikhil Vora harvests 75-fold gain from Paytm stake sale. I further noted Mr. Nikhil Vora was head of research at IDFC. My Job was easy to just follow a renwoned, successful and a person with investment acumen.

The above helped me in screening the stock. While my simultaneous research on Vanity Case led me to know that company has over three decades of experience in contract manufacturing. Based on some articles I could note the hunger in the management (Mr. Sameer Kothar). Sharing below some excerpts from a 2004 article from business standard https://www.business-standard.com/article/beyond-business/the-gennext-makeover-104100101071_1.html :

“ while the Rs 250-crore Vanity Case Group of Companies continued supplying a wide range of skin care products to a host of Indian and multinational cosmetics brands, the young Kothari wanted a quick makeover. …… And since he could not launch his own cosmetics brand in India for fear of competing with his heavyweight clients, he’s grabbed the next best opportunity.

He has turned Vanity Case into a one-stop shop for product design, formulation, manufacture and packaging for almost all FMCG products such as powders, creams, shampoos, etc.”

Then this excerpt was the key trigger for me: “However, the success with third party brand launches has finally pushed Kothari to think about introducing a brand of his own. If all goes well, Vanity Case will launch its first brand in Dubai, tentatively named Mayfair.”

My Immediate thought was that Mr. Sameer has lot of hunger of launching his own brands and with Hindustan Foods they will not have conflict with existing clients given new company. So I gave my first buy order around 30 rs. Order did not execute, I retried with higher, very high and lower and very low quantities but my orders did not execute. Then I realised company was in some ESM/GSM category. I did not do anything for 6-9 months and stock tripled. Then when it came off of ESM/GSM and price also cooled down from ~90 to 60. Then I entered. The company was loss making. I bet on management hunger, their experience , and piggy back on successful investor (Nikhil Vora). Though my initial thesis of launches of its own brands went kaput, I was impressed by company’s focus on contract manufacturing, GST benefits, Mr. Sameer Kothari and continued large investor interest.

Company has never met my valuation target of 3x sales (no PE as it was loss making). I kept building my position with entry of Convergent Finance Convergent leads Rs 100cr investment in Hindustan Foods - Times of India , Westbridge and Jawalamukhi etc. Management met most of the guidance they provided. During my journey, new segments of OTC healthcare product is added, shoes got added, and beverages got added.

To move into next orbit they need to do a Syngene (R&D for FMCGs), they need to be a single sourcing place (backward integration), they need to be forward integrated (distribution like Varun Beverages). Opportunities are immense but what is there on hand itself is huge now.

Before I close it will be injustice to not talk about Mr. Sameer Kothari, his humbleness, his vision, his openness. Please do read Annual reports of last 4-5 years. I will keep some excerpts below to entice you more into reading them.

Mr. Sameer though acquired the company Hindustan Foods, he gave full respect to Mr. Dempo Srinivas. Mr. Srinivas remained Chairman of the company for several years even after being acquired by Vanity Case. Mr. Sameer treated him like guruji. In fact during one of the AGM meeting during COVID Mr. Srinivas gave opening remarks and Mr. Sameer played a very ancillary role as if he did not exist. I am your fan Mr. Sameer Kothari just in case you read it someday.

Now coming to some annual report excerpts:

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Source: Annual Report 2016-2017

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Source: Annual report 2021-22

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. My last transaction was in July 2023. I may buy more, exit or partly sell the stock without any prior intimation.

Please share your feedback as I continue to write rationale for remaining over the next few days.

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Hello Mr. JP. Very interesting thread and insights. I am curious to know why you don’t have a tilt towards Financials / Banks in your portfolio considering you yourself have decent corporate world experience doing investment research for global banks.

I do see Bajaj Finserv with about 7% allocation but other than no other traditional large bank considering most now trade at decent valuation (likes of HDFC, Kotak, etc). Curious to hear your thoughts on this and how you see them as investment?

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At around covid Hindustan foods came in my screener but as they say excess analysis is paralysis ( something like this) so I never bought it only to see it going new highs

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Thanks Chaitanya and Girish for your replies and comments. Thanks blp for your like.

Chaitanya I cant tell you how tempting both the banks are for investment. However, I am in equity allocation contraction mode. I want to take my cash and bond % to about 50%. There are some bank specific irritants in the short-term for HDFC (merger consummation), and Kotak (management succession). Also there is general political risk (loan waivers given upcoming elections?). I am mentioning this as I noted you asking anti-thesis on banks in many threads. However, they are attractive on medium to long-term basis. Kotak is complete way of playing financialisation of the economy as it has most stake/control over their profits from its non-lending subsidiaries like insurance, AMCs etc. I like Insurance and AMC kind businesses as they participate in upside and don’t give up much during downside (from P&L perspective). Sorry for making khichdi here but I wanted to write all what was I in my mind.

By the way on your point of covering global banks, I used to have over 60% of my portfolio in financial services until 2017. I was into Yes Bank, Bajaj Finserv, ICICI Pru Life, HDFC Life, AB Capital, Edelwiess, Care, ICRA, BSE, MCX and there might be more which I may be forgetting. Too much for circle of competence :slight_smile:

This brings me to my Rationale on Bajaj Finserv (7% of portfolio, 60% profit):

Background - My first buying in Bajaj Finserv (BFL) would have been at 80 rs (accounting for split and bonuses) in 2013. My portfolio was tiny but I kept adding BFL until 2016/2017 price range upto 300 rs. Stock weight reached to 30% of overall portfolio by 2017. I stopped adding too much to it and started trimming on rises and adding on dips only. My last transaction (buy) was in December 2022 at price of 1517. My profit % looks distorted, my realised profit is ~2x of current outstanding position.

Early in 2012, one of my friend in office called me to his desk and said JP I calculated the NIM (net interest margin) of Bajaj Finance which is coming over 20%+, is this correct? I have covered 100s of global banks over a decade and highest NIM I came across during that time was Brazillian banks at around 10-12%. Indian banks were doing margin of 3-5%. We recalculated and found that number to be correct. It was shocking for us to see NIM of 20%+. What we did? Nothing. I don’t know why we did not act on this knowledge, not sure if we found stock expensive (3x price to book). Please note Bajaj Finance was not part of our coverage and it was just random exercise (may be because stock was doing well).

A year down the line in 2013, I came across Bajaj Finserv which was recommended by Mr. SP Tulsian Go long with Bajaj FinServ advises SP Tulsian on CNBC TV18. I looked at the valuations and found that stock was available at 1x price to book. I thought I will exit when it reaches above 2x p/b. However, everytime I analysed it I found this business good to better and better to best. This news RBI bans zero interest loans on EMI to credit card holders - Times of India was another trigger for my bullishness. In Sep 2013, RBI banned 0% interest offerings by banks. It was easy to guess the winner - Bajaj Finance, subsidiary of Bajaj Finserv. I said to myself I have never seen such a great franchise (diverse, highly profitable, fast growing and innovative). This was the only company in general insurance space which had combined ratio below 100% which meant it was profitable post underwriting expenses and claims payments. General Insurance was growing at a fast pace. Its consumer franchise (Bajaj Finance) was anyways doing extremely well. So in 2014 I added large quantity during Diwali Muhurat Session. The only risk now on my thesis was Bajaj Allianz’s call option of buying stake in both life and general insurance. However, that option lapsed in 2016 (not quite sure on this) then I went berserk and allowed BFL to go to up to 30% of my portfolio by 2017.

Some other things which helped me in my early years is that stock was not going down despite some market corrections. Then IPO buzz of HDFC Life kept the stock in good stead. More recently its life insurance business also started performing well. In Q1 FY2024, BFL has launched AMC business which shall add to diversity as well as reduce lending related cyclicality. My current stance is not accounting for any success in its marketplace business.

In 2019, when every NBFC was gaining in stock price on the news of applying for bank license, Mr. Sanjiv Bajaj, Chairman, made it clear that they will not apply for the license. I was really impressed with this clarity and not getting into bandwagon. Having covered banks I understand the burden a bank has. However, recently I have noted RBI coming to guard banks with various tweaks in the rules. Though I am much more interested in non-lending businesses who is to complaint with Rajeev Jain at the helm. He says we are in the business of risk not lending Bajaj Finance: We Are In The Business Of Risk, Not In The Business Of Lending - YouTube. Also when your answer to all the success/problem is ‘Rajeev Jain Bro’ then what to worry :slight_smile:

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more , exit or partly sell the stock without any prior intimation.

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Thank you JP. These are such valuable and amazing insights. Makes me look at lot of things from a very different perspective. Eagerly await more posts on this thread and your investment rationale for other stocks in your portfolio.

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Thanks JP for sharing your portfolio and investment journey. Your in-depth knowledge n insights on investment rationale of Rategain & BajajFinserve have truly enriched my understanding. Please do share your rationale for the rest of your stocks if possible. Cheers!

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Thanks a lot for encouraging words Chaitanya and Mehul. Also thanks to all who liked my posts.

Now rationale on my second largest holding, C.E. Infosystems also called as MapmyIndia (MMI) 9% of portfolio with 31% profit. My first buy was in June 2022 at 1362 and last transaction (buy) was in June 2023 at 1203. My average cost is 1208.

If I have to imagine a technologicaly advanced country or state then:

  1. I imagine 100s of drones above my head - used for delivery (food, grocery or courier?), used for security (remote surveillance of telco towers, ATMs, societies/apartments, country borders), used in Agriculture for spray of pesticides (locust control), topogrpahy mapping, land registrations, calamity relief operations and I can go on and on… What is required for this? Map led solutions and controls ?

  2. I imagine sitting in car which is aware of sharp curves ahead, speed limits, battery levels, charging station proximity, alerts me on one of my friend in my vicinity (bit wild imagination though). If I reach a new place it suggests me of best restaurants, things to do etc.

  3. I imagine as a owner of millions of IOT devices installed for measurements (flood, no-water, temperature, speeds, tsunami, earthquake), emergency detection or responses (fire, gas leakages, smokes, sprinklers), maintenance or repair requirements of these devices or machines/plants they survey or secure. How do I get to know locations of these sitting at once place? Geo Tagging ?

  4. Before I take you in my imagination world again. I will talk about my real life example. In 2016 and 2017 when I used to take Uber from my home, 2016 prices used to be around 100rs however after a year they shot up to 250-300 range. Then someone suggested me to move 100-200 meters from my place and then book. Woaaaha eureka moment - prices were in 125 to 150 range. Now can you link this to MMI? If you don’t believe me here is the article of year 2017 Uber's new pricing model charges some passengers more - The Economic Times and I have put an extract from the article below for your reference.

“…. someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same. ”

Based on my location Uber was able to determine the in-elasticity of demand and kept on increasing the prices, however, when I moved 100-200 meters away nearing a main road where tendency of people was to take auto or bus was higher when Uber prices were higher. This meant demand was elastic in this area and price sensitive.

Now back to my point, imagine if you are a retailer (like Go Fashion), QSR chain (Jubilant Foods), taxi aggregator (Uber or Ola), food/retail aggregator (ONDC, Amazon, Zomato, Swiggy), fintech player (Bajaj Finserv already using for credit risk mapping) you can have your pricing strategy, risk assessment (credit and P&C insurance) and store opening based on Geo spatial data. GST filing is also Geo tagged.

a side note: recently I noted when I track the delivery person’s route on Zomato it shows discount coupons? is this a new use case for MMI? advertising? is this this the new real estate/metaverse?

  1. My logistics business, fleet of cars and trucks are tracked from one place, my drivers use efficient navigation systems. I could see where traffic is more and what time so I can plan my timing and routes accordingly. I am aware of tolls charged so I can include that in pricing and increase transparency for my customer. Just another wild imagination - can I align RFID tags with geo movements for tracking and ensuring fakes/duplicates do not get into the system (pharma/vaccines, food export/import use cases?).

  2. I as an auto OEM (Tata Motors, MG Hectors) able to monetise customer spendings happens in and around the car (hotels, resorts and restaurants). a side note: “Apple just makes its devices but it is able to take part in all the transactions happen on that device with up to 30% cut? I think there will be a time when car will be the new mobile and later a new house” .

In my imagination I touched upon drones, logistics, defense, autos, fintechs, geospatial data analytics (pricing strategy, store openings etc.), electric cars, IOT devices and millions of electronic devices (Alexa is in smart watches which uses MMI maps). All of this together and individually has not even scratched the surface.

Mr. Rohan Verma, CEO of MMI, said an year back or so (not exact words but similar), when 1 billion population started talking to each other over phone in early 2000s look at what happened, mobile phone revolution. Imagine if billions of machines started talking to each other.

MMI is first mover, has a comprehensive stack (drones, mapping, IOT devices), has a dominant market share (90%+ in auto navigation), adding new customers (Harley Davidson in Q1 2024), acquisitive (management not dormant) and only Indian players can own mapping and surveying. Foreign players can only license, Google seems to have partnered/licensed with Genesys International and Tech Mahindra.

Competition will come so need to keep an eye.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock without any prior intimation.

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Again a great piece of information. Small curiosity, in your Rategain analysis you mentioned about IRIS . What happened to it after that. Are you still tracking any anti thesis regarding

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Thanks Girish for your comments. Thanks to all who continue to like my posts.

Girish on IRIS, COVID and reporting oversight bodies delayed certain regulatory implementation. I think biggest opportunity for them is ESG reporting in US which encompasses 1000s of companies, which has been delayed for a year or two. Another thing is that it was difficult for me to understand how good their products are. They rely on partners to get their product integrated, direct sales seems to be limited. So I am not sure if there is any product pull.

However, there is no denial that the size of opportunity is good. Also they mention that they don’t have marketing muscle. One of the founder, Mr. Bala, will sell 2lakh shares (over the next 1 year), he holds 11 lakh shares. Very rare to see such disclosures and also in so much advance, kudos on transparency. Mr. Swaminathan, CEO, also seems to be a very good person, I think he did not take salary for many many years.

I think what can elevate their business to next level is, assisting the companies in preparing reports (data entry in India) and complement them with its own products (basically a BPO set up complementing its products). However, given the sensitivity of compliance I am not sure how feasible is this.

Disclaimer: Please note that these are my personal views and should not be construed as buy or sell recommendation. I am not a SEBI registered analyst.

Now my rationale on ICICI Lombard General Insurance (ICGI) (8% of portfolio, 5% profit)
Background: My first buy was in July 2020 at 1307 rs, my last transaction (buy) was in March 2023 at 1160 rs. My average cost is 1293 rs.

During COVID I was keeping eye on the companies which do not lose sale despite lock-downs and such severe humanity crisis. I found ICGI’s revenues were broadly stable or marginally growing, so I entered the stock in July 2020. I also added it aggressively from mid-2022 as I expected it to benefit from higher interest rates and auto recovery.

I looked at general insurance companies in the US. I noted that the market cap of large companies in US is anywhere between USD50-470 billion (ICGI is ~8 billion). Total return (including dividends) of these companies is 20% or above for last 10 years vs. S&P 500 ~10%. You can check total returns here https://www.financecharts.com/stocks/PGR/growth/total-return . Also below graph shows that these companies have handsomely beaten S&P 500 over the last 5 years.

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Source: google finance.

I feel some of the large Indian GI companies can do in line or better than US companies on a long-term basis. India is very under-penetrated on health insurance while motor insurance will continue to grow with increased number of vehicles.

I believe we have not even scratched surface on fire/construction/marine/cargo insurance. Ask yourself is your home insured? If not that shows under-penetration or lack of awareness.

Company is focussed on profitable growth. They exited crop insurance in 2019 when everyone was very hot on it (ICICI-Lombard exits crop insurance business - Times of India). Management is active as they acquired Bharti Axa operations couple of years back. They are targeting to improve combined ratio to 102% over the next two year which shall improve profitability somewhat.

So far company has been a drag on my portfolio but I expect ICGI and Bajaj Finserv to do well when market breadth gets narrow (a period like 2018). Its like having Rahul Dravid on Australian pitch. Financial services is an area where bigger keeps getting bigger.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock without any prior intimation.

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Thanks Mr Jaiprakash for the rare insight into IRIS. Did they mentioned about the pledged shareholding . Don’t you think it’s a red flag .

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Hi Girish, thanks for your comments. Definitely pledge is red flag however we should put everything in context. If promoters are honest and they use the pledge to benefit the company (for loans or borrowing) then you have to think about it. Nevertheless, I shall never keep high allocation to companies which have pledge (high for me is anything 3% or above) as not everything is in promoters control especially market movements and resulting margin calls on pledge or subsequent selling by lenders for recovery.

Now my rationale on Syrma SGS (7% of allocation, 68% profit)

Background: My first buy was in September 2022 at 292 rs. My last transaction (part sell) was in July2023 at 496 rs. My average cost is 280.

In one of the video Ishmohit (SOIC) mentioned that knowledge is cumulative and my buying in Syrma was based on cumulative learning - linked to Dixon Tech, which I bought in 2019. Dixon was making TV sets, Phones, LED lights and security cameras with leading market shares (in some cases up to 30%). For any company in India consumer business having market share of 5-10% itself is huge ask. First thing came to my mind was economies of scale with such market share. I also thought I can play consumer appliances and discretionary spend story through Dixon which was reasonably valued in 25-30PE range. So I entered Dixon for 15-20% compounding returns over next 4-5 years. In April 2020, Indian government announced the much popular PLI scheme. Suddenly my senses woken up, I did some rough calculations on the opportunity size just for mobiles. My numbers were whopping. I added Dixon aggressively. I said in my mind this company will have revenue of 1 lakh crore in next 10-15 years (4k crores in 2020). Also I thought this should trade at 50-60PE given the growth. Rest is history, everyone knows Dixon story. I sold Dixon fully in January 2023 after shocker results and weak guidance, the point was not just the results and guidance but the point was amalgamation of 100PE with it.

Now how is this linked with Dixon, I was closely following the sector given the opportunity size. With Dixon, Syrma was compared too much during its IPO. The key difference in both was EBITDA margins, Dixon was in broadly in 4-6% range while Syrma was 2x of that. Syrma’s high margin is due to its design capabilities. Its high share of ODM in overall revenue mix vs. Dixon mainly led to it.

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Source: BOBCAPS, publicly available report - http://www.dsij.in/productattachment/BrokerRecommendation/SYRMA%20SGS8.12.2022.pdf

There are other areas where Syrma was better than Dixon but it traded at lower PE than Dixon. Further my confidence was boosted by the fact Mr Sumeet Nagar’s Malabar Fund invested in Syrma during IPO - https://www.youtube.com/watch?v=99T-Cta8gf8&t=1231s . My earlier successful investments like Affle, Indiamart, and Saregama were also overlapping with Malabar Fund. While in February 2023, Gautam Trivedi from Nepean Capital also talked about their investment in Syrma (he/his fund invested in Hindustan Foods long back so another alignment of thinking with good/great investors or fund managers. To stay convinced I continue to find reasons, to a certain extent it leads to confirmation bias also (but I don’t mind it). Disappointment in Dixon’s Q3 FY 2023 numbers led me to totally shift my Dixon holdings to Syrma.

Other factors which helped my rationale were, management seemed honest as they reduced IPO. Pre-IPO placement was at 290 vs. IPO price of 220. They mentioned that they wanted to reflect the market and wanted to be a long-term partners with stockholders and benefit together. When most promoters and early investors are trying to squeeze every penny from market, it was a good gesture. I found company has been guiding for very high growth (30-40%) from past several quarters and continue to do so. I have extracted below excerpt from Q4 FY 2023 concall of the company, which provides rationale for high growth:

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Source: company concall transcript filing on BSE.

I note that company has been very acquisitive and they had provided good rationale for it. For their recent acquisition of medical devices company Johari Digital, they mention that getting approvals and developing products would have taken many years so they went ahead with acquisition.

Now I will end this with my final thought: whenever a industry has a tailwind we should look at the whole value chain (vendors, suppliers, distributors and customers) and as many players in it.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more , exit or partly sell the stock without any prior intimation.

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Excellent work JP. I learned a lot from the way you shared your conviction points for each of your holdings. Can you please help me by sharing bonds that you have subscribed to so I can start building my debt portfolio?

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Superb portfolio .Selection of scrips really good.

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Thanks Ayush and Ravin for your comments.

Ayush please note that I am new to bond investments. Also I am not a financial advisor or SEBI registered. Hence, please do your own due diligence. There are of of course limitations to bond investing such as investment ends up getting concentrated in NBFCs as they are only mostly traded. Liquidity also remains a issue. I have not included instrument level information as it tedious to include.

I look at credit rating, group (eg. I put Chola over IIFL and IIFL over edelweiss), if I want to concentrate on particular group/NBFC then I look at NPA and Capital ratio for my comfort (screening).

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Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more , exit or partly sell the stock/bonds without any prior intimation.

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My rationale on Tips and Saregama (allocation of 6% each). My apologies, I don’t have accurate data for Tips and Saregama for profit % calculations.

Background - I bought Saregama in February 2021 at 100rs and Tips at 40 rs. I kept pyramiding and kept trimming at different levels. My last transaction in Saregama was in July 2023 (sell) around 450 rs while for Tips in August 2023 (sell) was at 324 rs).

First time I was attracted to Saregama was on account of a Varinder Bansal’s (Omkara Capaital) video (I was not able to find link of that video). He talked about the RPSG group and related perception of people around the group and attractiveness of Saregama. I have followed CESC (RPSG group) for years and I know that they did not create wealth for a long time. So I was sceptical for the first few months.

However, I continued to follow Saregama’s results and conference calls. I noted company was growing well on top-line basis while bottom-line was growing at 30-40%. Also in couple of concalls Mr Vikram, CEO, was providing guidance of 20-25% growth of music business for next several years. I liked the fact that he was very clear that he will not put money (marketing and sales) behind carvaan business.

I noted how I am listening to music now, mostly on YouTube. YouTube is on mobile as well as TVs (smart) now. When I used to take public bus everyone was on their phone either watching short videos or listening to music or some content. So everyone was streaming something. Then in June 2021 Bill Ackman bought stake in Universal Music Group (UMG). Everyone who is interested in understanding music story should watch this presentation by Bill Ackman and team: https://www.youtube.com/watch?v=BpeHWiRuu2k . Music is heard when we are eating, sleeping, studying, happy, sad, music keeps running in the background even if we are not listening to it. In the whole value chain content owners (music labels like Saregam/Tips) make most of the money. I doubled my investments in both the companies post Bill Ackman’s rationale for UMG. Saregama and TIPS both combined accounted for 20-25% of my portfolio that time.

I checked US based Warner Music Group company had a market cap of USD17 billion (vs. combined market cap of Tips/Saregama was less than USD1 billion) and it was trading at over 50 PE. Saregama and TIPS both were 20 or less PE. UMG currently trades at 36PE and has a market cap of USD47billion.

I remember we used to pay 100 to 300 rs for one movie songs cassette in 90s and early 2000s. So about 15 to 40 rs per song. Now we can listen to 100s of songs on Spotify with plans in range of 100-179 rs per month. Usage has gone up, cost per stream has gone down (for customer), platforms (distribution), has gone up, you can play on TV, Phone, Alexa etc. If current ad supported listeners move to paid subscription then the per song monetisation for music labels will go up by 50-70% (as per Saregama concalls).

The risk for me in this is consolidation of distribution, ie. If top two or three platforms (like YouTube, Spotify etc.) garner over 90% market share then it will be difficult for Saregama and Tips to negotiate with them. As of now I am seeing a somewhat sensible behaviour where music labels are not minding losing one of the distributors for some time while negotiating. But they have always come back to these music labels.

I want to spend some time on Tips. I was bit sceptical on increasing my allocation in Tips as Mr. Ishmohit (SOIC) was big on Saregama but not so on Tips. I went through Tips concall, they were more bullish than Saregma. I looked at repertoire of Tips and they have best of the 90s songs whereas Saregama was heavy on 60s,70s. I liked Tips’ conservative accounting of 100% content cost write-off within first year, Saregama takes about 6 years to write-off.

I am not able to choose one, Saregama owing to its aggressive new music acquisition will continue to have good pricing however Tips will thrive on 90s songs and its remakes.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more , exit or partly sell the stock/bonds without any prior intimation.

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Good rationale approach sir, could please share what currently studying, which has intersting elements for growth

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Thanks Venkatesan for your comments. I have about 5-6 stocks under R&D, I shall share them as and when I build rationale on them.

My rationale on PB Fintech (6% allocation, 52% profit).

Background – My first buying was in July 2022 at 557 and my last transaction (sell) was in July 2023 at 775.

From its IPO till early 2022, I thought this is the most pathetic tech business. What’s the point of having online platform? Comparison? and then having some people to call customers to buy insurance, not much different from existing direct agent sales business! I thought it’s a charade of a tech business in the form of hidden physical presence and I thought it will never be profitable as they will need lot of people to continue to grow.

Then in early 2022 I started hearing about PB from people I follow. Amit Jeswani talked about it in April 2022 here https://www.youtube.com/watch?v=F8nmBsYSz64 (at 42 minute) and here in June 2022 https://www.youtube.com/watch?v=OZADGK7vYt0 (at 36 minutes). Amit Jeswani has explained all the rationale from 36th minute to 42nd minute, which later on I also discovered :blush:. Mr. Ishmohit was also studying it during the same time –

image

Sourced from twitter page of Ishmohit.

When these people study or talk about businesses, I take note of it. Though I was very reluctant, I started listening to conference calls. First thing I noted that loss for March 2022 ending year had 833 crores of loss, but it included 500-600 crore of ESOP charge. I had a bit of a sigh of relief that all the losses are not business related but bit of accounting also. I took a token position (1% of portfolio) as stock was downhill all the way (from 1300+ in November 2021 to my first buying of 557 in July 2022).

I continued to follow the company and I had a eureka moment in August 2022. When I noted following:
image
Source: Company transcript Q1 FY 2023 call. https://www.bseindia.com/xml-data/corpfiling/AttachHis/63891711-e1ab-4fa2-8fff-26d615f1b572.pdf

So the PB’s agents were doing 10 Lakh a month kind of premium with a follow up on online queries. My excel/calculator started working; that means one agent on average does over 1 crore of premium annually. On a take rate (commission) of ~13%, per agent revenue is ~13 lakhs. We know in India for a similar skill set companies must be paying around 8-9 lakhs annually. So per agent PB was highly profitable. Any Insurance company hiring agents will have similar cost but premiums per person will be low.

Post this eureka moment I tripled my position to over 3% by October 2022. However, stock kept going down around 360 by November 2022. So I had no courage to build position, then stock moved up so I built my position further in range of 450 rs to 540 rs to take up the position to ~5% by February 2023.

So my initial thought process of PB Fintech being a not so good business changed with two things 1). Why customer comes on PB platform? The main thing is there is no push but a pull, customer needs the product so when a PB agent or their call center makes a follow-up then conversion rate is very high vs. a cold calling agent from direct insurance companies. 2). Owing to high conversion rate productivity of an agent is very high so highly profitable proposition.

PB has its own call center support (300+ employees), offline agent support (1000+ employees), and about 1 lakh point of sales persons. Now think how someone can replicate this without bleeding for years? PB has created its own brand over the past many years.

Online insurance penetration will continue to increase so PB shall continue to grow at 2x-3x of industry growth. I personally put industry growth in 10-15% range. So PB will grow topline (at similar take rates) at around 20-30%, while bottom-line will grow at much higher rate owing to operating leverage (fixed costs and relatively stable marketing costs). I have not looked at their paisa bazaar much but that is also coming up well and provides optionality.

For such business I would have kept higher allocation but I note that ONDC kind of platform; Bima Sugam may impact its business either shaving off growth or shaving off take rates. Keep an eye…

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.

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Thanks everyone for reading my content and for being so generous for all the likes.

My rationale on Nasdaq ETF - ICICI Prudential NASDAQ 100 Index Fund (6% allocation, 17% profit).

Background: My first SIP in the fund was in October 2022, when Nasdaq was ~10400. My last SIP in Nasdaq was in August 2023 when Nasdaq was ~13700.

In mid-2022 when many of the tech stocks fell 50-70%, I was very interested in buying them individually, particularly the likes of Amazon, Facebook, Alphabet, Spotify, Microsoft etc. However, when I looked at direct options available, it was very costly and sounded complex.

So I decided to go for dumbest/simplest solution of having exposure to innovation i.e. buy Index or ETF Fund. There was some issue with ETFs so I could not buy them (I think due to SEBI ban) so I opted for Index fund.

Story is simple, most of the innovation is and in future will be listed on Nasdaq. I believe this is the best world index with 15 years CAGR of 15%. As per my personal opinion, if one needs to hedge himself/herself on tech disruption then Nasdaq is a must have in someone’s portfolio. In addition, this provides me hedge against rupee depreciation. Its worth noting that over half of gold’s return in the last decade is driven by currency depreciation. Gold in USD denomination has given about 2-3% CAGR for the last decade.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.

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