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One stock which you had mentioned: Cartrade Tech. Where do you stand regarding it?

I have been looking into it lately, and things are found compelling are:

  • its revenues come from PaaS, its an asset light model
  • market leader in online car sales, be it by auction, P2P, B2C, 2W, 4W
  • Has a strong cash pile. What remains to be seen is whether the management is good at allocation.
  • Its Unique Visitor growth is 47% YoY

This bodes well. I find it v.v.difficult to decide the buying range. Hence, I am forced to go by chart patterns alone, trust the market. It has consolidated for past 7 months, right through the rate hikes. That also indicates that the froth, post IPO, has settled.

However, it will be a while before the stock price starts going up. I feel it might be a good idea, to wait for a 52W high to break for entry, and tide out the time correction.

What is your stand on CarTrade Tech?

Q2: Nykaa

There is hue and cry aroud Nykaa being 1600 PE. Well, even HuL would be 1600 PE if it spent most of its earnings on future growth: brand acquisition, advertisement, kiosks, stores, personell etc. But, it doesnt do it, cuz it does not have a wide uncaptured market share and competition at heels.

Nykaa is debt free, profitable (by a whisker), has leadership position, and a good ethical management, a disruptor and here to stay. This makes it an ideal candidate for me to invest.

Just that, valuation needs to be put to perspective.

Pls throw some light on this as well.

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Hello Amit,

I see you are constantly in a flux regarding valuations of various companies. There are many ways to tackle this - simple is to just stay away from over valued companies. But, it’s not so simple actually.

I think you are regularly evaluating & learning. All the best.

You will not get straight forward answer from me, sorry for that. But if you can understand these, you will be a better investor in due course.

I will digress & write my thoughts first & then offer my opinion.

As I often write, there are infinite ways to make money in stock market, below is one of many from investor’s point of view. A trader’s point of view will be completely different.

I’m invested in highly over valued companies like Dmart, Page, Nykaa, Kotak, Delhivery, PB Fintech. I have not touched these companies to trade in & out from a long time. - as a policy (result of market lessons), I’m sticking with them.

  1. I’m not in a hurry to get over sized returns in short period of time.

  2. I believe in the vision of the managements running these companies (CEO of Delhivery is from my alma mater as well, not that this matters much - I’m just bragging) & the opportunity size these companies are running after is mammoth.

  3. I will let time, patience & execution be the judge. I will only monitor.

  4. From my experience, it is better to buy high quality companies and wait for 1-1.5 years of time correction if bought at expensive valuations and then let the compounding work.

  5. Most people in the search of alpha will trade unnecessarily & will have returns far lesser than what holding a Page over a 5 years would have given.

  6. See the stark difference in the behaviour between Lux & Page. When valuations are being sliced through, Page has actually re-rated through the last year. Of course, if some one keeps buying at absolute top every time, then it’s his/ her issue. Any one can show bump in revenue by relaxing the trade receivable days, worsening working capital & cash flows. But this is not sustainable as 1 down cycle will wipe you out. Running a business is immensely difficult. That’s why some companies get 25 PE while others get 60 PE.

BUT, if some one is just starting out with small capital, I would INSTEAD suggest learning technical analysis or learn the art of evaluating small cap multibagger skills from super seniors like @hitesh2710. For example, a trader in Lux would get better returns than an investor in Page if technical analysis is properly executed.

Example: It DOES NOT make sense to invest 10,000 INR in DMart or Page and hold for 15 years. For compounding to work wonders, the initial capital or the capital at work must be large enough. That’s why the strategy to be followed must vary according to the individual’s circumstances.

PRICE - Most people irrespective of how they call themselves is a slave to the short term stock price movement. So, it’s better not to JUDGE people of other investing styles. Our communication must at all times be with Mr. Market. Take lessons and move on. Long threads on twitter, analysis paralysis will take a U turn if a stock falls 15% in a day. It applies for me or for any one.

CAGR is what matters, rest everything is academic & excitement.

If the business model is strong the returns will eventually follow but with a “lag” depending on the level of over valuation.

Nykaa: I’m comfortable with 8 times EV/Sales FY24E. If some one can identify a stock at 15 PE with attributes to reach 45 PE then such a stock will give much better returns than Nykaa. No questions asked. But this is not something I’m good at nor want to do. In the current environment, there might be many such companies actually hidden.

I also look at valuation at this way, most of the times - Will Nykaa or a company X exist by FY2026? If yes, what are the sales or earnings likely to be? What valuation would you give 2-3 years down the line if a company is growing at 30% and is profitable? At that valuation, how much are my returns? Are these returns OK for the risk I’m taking today? Personally, 2x in 3-4 years is what I’m happy with.*

For example, I expect Dmart to report 80 EPS in FY2026. In September 2024, I’m happy with giving 80 times 2026 based on its average historic valuations. I would get roughly 40%-50% in 2 years & I’m elated with this. If there is a material risk to these earnings or to the mortality of the company, I will re-evaluate & sell or stay put.

At this point there are so many other companies that WILL give much better returns than DMart, but I will not waver as my monitoring time & risk is much higher.

Car Trade: I have exited long back & not actively tracking & I’m not sure if the management can withstand competition from Cars24 backed by Tata etc. A used car is a commodity. Same car if placed on multiple platforms, a user will buy from some one who is offering for less. Cars24 might have a lot of money to burn. If Car Trade withstand and be different can then the stock could offer superior returns. At this price, the stock is roughly 5 times EV/Sales? Probably, fairly valued? Not sure.

Disclosure: Stocks mentioned are not recommendations & I’m not SEBI registered. I have a position in the stocks mentioned. The earning estimates are mine are obviously are prone to error/ changes.


For Nykaa, all the birds are in the bush and everyone has to keep guessing about their quantity and timing. For the near term (3~5 Yrs), PE is and will remain ill-suited for for Nykaa’s valuation. Being a growth business, the focus shall be on topline’s growth, which generates enough cash to support all the initiatives. With time, embedded levers shall expand OPM towards 16~20%.

Any thoughts on the customer stickiness (repeat purchase behavior) aspect for the ‘Fashion’ vertical?

Factors such as Family/friend feedback at the store, impulse buying, touch, and feel play a major role while buying fashion products. Virtual tryouts cannot overcome these factors. The online marketplace will always remain on the back foot on these aspects.


Hi Surender

With regards to Fashion -

Both Amazon & Myntra being the first movers played volume game & so are prominent in value segment. Nykaa I believe had time to understand their business models and is consciously choosing to attract higher segment population, relatively. The price elasticity, demand is far more secular & also better unit economics to cater to this segment. This segment is also more sticky & do not switch apps in search of coupons & small discounts.

Also, Fashion app is curated & carries latest collection within a brand (say Biba) than a Myntra.

That’s why the AOV of Nykaa is double (I think) of the other 2 apps.

Rural - Rural also contributes sizable portion of revenues and for them online is better option than to travel to near by city to buy.

Having said this, going out & checking before buying segment will remain dominant and company is aware of this and was always conveying that they will also open EBOs etc. Offline retail is a must.

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Just one question regarding Nykaa and higher segment. Do you expect there is enough juice in the TAM for higher segment or do you expect Nykaa target lower segment in search of growth ?

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TAM is a moving target and can double in 10 years. Whether the company can gain market share and grow efficiently is something we should bother about. Even a little market share gain over a decade can add up.

We are a growing economy with aspiring people, so people will upgrade as & when they move up the social ladder. Companies just need to stick to proper business model and do no hara kiri.

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@richdreamz @jamit05 - In context of your liking of Nykaa business as a niche retailer in Beauty/Fashion and Page in undergarments/sports wear, what are your thoughts on Footwear, specially 2 new entrants - Metro Brands (from top, business model looks more inclined towards like a Page as licence owner of Marquee brands, although they have inhouse brands as well) and Campus Activewear - Well established fast growing Indian Sport’s shoes company with good back end integration & distribution/retail presence.

Lastly, Vedant Fashion - again a niche dominant Ethnic/Wedding player.

Would be nice to know both of your thoughts on these three in terms of their business model, risks in model, strengths/weaknesses and valuations. It would give a perspective on how to look at such niche retailers.

Disc: Invested in Nykaa.

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Hi -

I have looked at all of them but I did not want any more retail/ apparel exposure in my portfolio, so did not seriously consider. The below are my cursory thoughts.

  1. Why invest in Vedant (V) or Campus (C) at 70 times forward PE when Page (P) is available at 60 times? Metro (M), I believe is at 60 times. In my opinion these three are no where near Page’s quality. It’s very important to know if a company deserves such high valuations. It may as well, but there is no track record yet.
  2. I think there is a lot of narrative in Campus, I do not see any moat - opening trade narrative is active here I believe, just like hotels etc. There are dime a dozen in active footwear. It’s only a matter of time before the moat is eroded & valuations do not offer any scope of further re-rating.
  3. I prefer Trent (T) or Relaxo (once growth of 20% restores in Relaxo (R)) than the above three, any time - both are very expensive too. Anyway, I did not want to further invest in retail as Nykaa (N) & Page are already there.
  4. Vedant story is good but any retail company linked to fashion/ trends/ niche will get disrupted one day while a banian/ inner wear is a staple. Too niche. People probably won’t wear Manyavar jeans or Manyavar T shirt. There’s already a lot of competition there, so even in future, chances of Manyavar expanding to such categories & finding success is less.

Disclosure: Not invested in C,V, M, T, R but in N, P.