Sri Lakshmi Saraswathi - Looks undervalued

A 37 years yarn company founded by late SRI B. RAJAGOPAL NAIDU bassed out of Chennai. It imports natural cotton fibre from West Africa, Egypt, Turkey and Australia. The market it exports to are European markets of Belgium, France, Finland, Germany, Italy, Portugal, Spain and Switzerland, Hongkong, Czech Republic and United States.

Subsidary of SLSGroup:




  • Promotor and Promotor Group - 55%
  • Public - 45%
  • Ace investor Anil Kumar goel holds 6% of shares.



  • A company with 100Cr sales is available at 10Cr market cap. If they can clean their books rerating is imminent.


  • A Struggling company. Declining sales.
  • Loss making
  • Cotton yarn is cyclical

Not Invested.

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This is a very intresting pick. I have worked extensively with companies like this in one of my previous assignments. The thing is that the books are completely rigged because the promoters of such companies are more intrested in routing money to personal accounts through P&L and balance sheet rather than creating wealth through increase in market capitalisation. If you look at the profitability of the company, it is a joke. Think about it. If you were the promoter of this business, why would you run the show if you are making losses in 9 out of 13 years. Forget about net profit, for the last 4 years, they have been making cash losses.

But now, with the change in economic policy environment (accelerated further by demonisation, GST and action on shell companies) the promoters have very little incentive left to hide their profits. Infact the incentive to increase market cap by showing the actual profits and thus creating wealth, is higher than siphoning off the money to pay low taxes and show minimal cash profits. I am working on a study to identify many such companies across sectors and will share with the group here soon.

The market cap/ sales is at such pathetic levels simply because the market knows the fact about these numbers. However, over the next 6-8 quarters, if these companies start posting the actual profits, the wealth creation can be substantial. Even if the Market Cap/ Sales ratio moves from 0.1x to 0.3x, we are talking about a 3 bagger.

Please take note that the improvement in numbers will be gradual and not big bang, as all the adjustments done over the years have to be brought back to the books slowly, lest you catch the eye of IT folks. Will be keenly watching the Q2 and Q3 for any signs by the management to improving the quality of their reporting. Industry doing OK. NPM should be 3-5%. Will also try to do some scuttlebut here to figure out the facts.

P.S: The big issue here is the liquidity. Looking at the pathetic trading volumes, how do you take a substantial trading position. That is what I am grappling with currently.


Anil kumar goel picked another similar company Amarjothi which is also backed by Dolly Khanna. Ok just checked carefully actually Anil Kumar Goel decreased in Amarjothi which Dolly Khanna picked up.

Amarjothi generates lots of cash flows. Also, what many of us ignore , a big part of industry gets wiped off when commodity prices run up. 2012 was a living example . Would be interesting to know the portfolio % allocation of big investors to this counter considering the risks

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Agreed amarjothi has a lot cleaner books and are growing well,
but wonder what triggers have Anil Kumar Goel seen in Sri Lakshmi Saraswathi to go big.
This entire company is 10Cr market cap, to get even Rs 50 lakh worth share from open market it’s going to be liquidity challenge, obviously this would be tiny part of people with thousand crore plus portfolio.

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