I had asked specific queries to the lead manager, mainly why some of the factors I laid out in my report attached in the first post were not considered risk factors by them.
Attached is the response to each of my queries. Query no 4 was already covered in RHP so I told them no need to respond.
Thanks Sid for trying to drill home the importance of this …
somehow its not apparent to many…
I loved this quote from my Guru Mr D
Once any businessman takes other people’s money- equity and debt, the meter starts, returns + accountability. Is he enriching himself at the cost of his financiers?
We all are looking out for promoters who can balance their ‘hunger’ with a sense of trusteeship of all resources available to them…that separates the Mariwalas/Danis from the mercenaries;)
https://www.sptulsian.com/article/88746/quess-corp
I don’t get it despite pointing so much negatives still he gives thumbs up for this issue.
Agree @magnet ! Fortunately or unfortunately analysts can see beyond relative valuations of a grossly over-valued Teamlease (Angel Broking, Asit Mehta have “subscribe” calls on precisely this logic). Fortunately for ValuePickrs because investors taking the opposite view are what create market inefficiencies for (hopefully) us to exploit…
Yeah, I would have thought the same had I not read Charlie Munger’s Psychology of Human Misjudgement. Incentive cause bias could well explain it. If I get commission for every Rupee of subscription, I may be predisposed to recommending it, irrespective of its merits.
We all know the Mariwalas of Marico… But who are the Danis? Apologies but this is the first time I am hearing this name.
Danis have built what is probably one of the strongest moats in India amongst all businesses. You have been their consumer too. They started what is today India’s largest paint company - Asian Paints!
Thanks!
I am loving sharing of good quality interaction on this board. A point of curiosity - You exclude dividends while calculating D, external capital issued by company. Is it because the cumulative dividend figure is nominal?
I excluded dividends because they weren’t easily available (for the time I wanted to spend 
). But after I did the above gymnastics I found that dividend that was paid was small and will not change the conclusion.
http://www.indianivesh.in/Downloads/636027996668593750_Quess_Corp_Ltd_(QCL)_IPO_Note_29062016.pdf
Another subscribe recommendation.
How come they saying negative cash conversion cycle makes it attractive?It should be avoid na.
I don’t know what they really mean. Page 2 has the following graph and it is unclear how they arrived at this.
But here’s what the disclaimer on page 8 says:
So they probably hold shares in some form.
Although I’m wasting space in writing this but sometimes you got to waste space!
This has been a very informative thread presented with humor, backed by facts, balanced in discussion of opposite view and sheer joy to read.
Thanks @diffsoft, @rohitc99 and @ayushmit!
Regards,
Rupesh
Just a quick newbie query - How does Thomas Cook gain on Quess doing well on two counts (actuals profits and it’s scrip value on bourses)? It has a 70% stake in Quess, isn’t it?
In situations like these does it make sense to own the parent company’s shares (TCIL) or the child company (Quess).
Sorry if the query sounds inappropriate. I don’t want recommendations but want to understand how to invest for long term.
I suppose, by saying double, you are saying that profits are consolidated by TCIL and the value of its investments go up. Well Quess earnings are consolidated, the value of the investments of the consolidated entity do not go up. Valuation of TCIL standalone’s investment in Quess should get reflected in the way TCIL is priced by the market…
All I can say is that each will have to be evaluated on its own merits (which is saying nearly nothing 
).
Thanks krishnaraj for doing he hard work on behalf of minority shareholders.
Im sure eveeyone has read the post of prof bakshi on tje intwligent fanatics where mr isàac’s name also appears. I guess he has all the qualities of an intelligent fanatic except integrity. His behavious is like that of a spoilt kid who throws all kind of tantrums and blackmails his parents (tcil) into meeting his unreasonable demands wirhout doing any hard work to justify thw same (it would still be understandable if the behavior was by a kid but…). But we do expect better from the parent. In this instance the parent agreed to the unreasonable demands. Not only did they agree, they took the money out of the pocket of their domestic help (who is totally dwpendent on them and does not have much say like the minority shareholders) and gave it to the brat. This is a mockery of the corporate governance standards.
I was a shareholder and expected better from tcil. Sadly the facts are quite clear in thia case. Knowing the facts how can i continue to be a shareholder?
In the Columbia investing forum, there is a presentation on Quess & Thomas Cook by Ajit Issac
http://www.bengrahaminvesting.ca/Outreach/2016_Conference/Issac.pdf
In that presentation, they make the point of claiming focus on 4x payback period and desiring businesses that grow at 4x GDP. The PPT has an interesting slide on their domestic competition by vertical which includes Adecco, Teamlease, Aparajitha and so on. Given the strength of local and global competition, I am unable to figure out the source of their confidence.
Hi Krishnaraj, Can you help me with where in the RHP is query no. 4 covered? Thx
I am not at my desk now. Suggest you search for MFX possibly under risk factors.
Let me know if you still can’t find it.
Warm regards,
Disclosure: not invested
As the valuation boldly marches to a 100 PE multiple, I was curious to know what happens, so looked at Q4 and full year FY 17 results before looking at the Press Release.
Here’s what I observed:
Q4 FY 17 EPS was 10% lower than Q3 FY 17 EPS, even as year on year results were not comparable as there was an IPO in between.
Gross Debt to Equity is now up at 1.36, but partly misleading because it controls the Manipal acquisition but has not accounted for it that way, and that could change the debt equity picture, though not by too much.
Segment results Q4 vs Q3 grew slower than Segment revenues by about 2%
A plan to raise equity capital of about ~ Rs 800 - 1,000 crores at current valuation, indicating further dilution of current earnings
Here’s what the Press Release said:
Quess delivers solid FY 17 results with EBITDA up 47% in FY 17 vs FY 16,
EBITDA margins up 0.96 % in FY 17 vs FY 16 and
A significant uptick in cash generation as cash flow from operations turned positive.
Clearly Quess has a very different view of its performance than how I saw them . We all expect that, but maybe I should broaden my view as well (as someone quipped, losses are same as profits except for a tiny minus sign, so don’t get so worked up). But then I want to say that there’s something seriously wrong about the metric Quess uses to measure its results; which is EBITDA (leave alone the fact that it has compared two incomparable periods). It’s not because we know depreciation / amortisation is a real operating expense, but because Quess is primarily growing through acquisitions with hard cash, not generated from the business, but from borrowings and now equity. Use of EBITDA will mislead in such a case giving an indication that operations are actually improving (despite absence of D and A) where as it may be solely due to acquisitions. Let me illustrate. Imagine I run a business with 10% EBITDA margin and I want to show I am improving operations by improving EBITDA. If I am not acquiring any business, I will improve EBITDA by improving operations, say by reducing some operation costs, increasing pricing etc. But if I am a serial acquirer, my EBITDA will move up and down based on the EBITDA of the businesses I acquire, without doing anything to my current non-acquired operations. If I acquire a high EBITDA business then automatically my overall EBITDA will improve.
But what is more worrisome is when an acquirer focuses on showing EBITDA improvement as a yardstick to measure the business, a metric that completely ignores the price paid for acquired businesses. I can buy a high EBITDA business and show improvement in operations, but how will I know from EBITDA whether I overpaid / underpaid for the business. Even more deceptive could be to show a positive cash flow from operations from a negative (or high free cash flow), even as that cash flow arises from acquisitions. The price paid will be sitting in cash flow from investing. Further, it appears Quess does not amortise the Goodwill arising from acquisitions and as a result it could well a magnifying effect on earnings.
In summary EBITDA as a performance measure for a acquisitive entity misleads not only its operations but also its use of capital.
A better way to get a sense if a share owner’s money is earning enough for the price he paid is to measure return on opening equity. Return on capital employed may also work but not if the manager issues equity to extinguish debt.
Warm regards,
