HI Hitesh,
How would you read if they go for equity issuance as told by our friend ‘Rasken’, which will ultimately dilute the eps… How would the market react??
q2 results out…Healthy drop in Net Profits due to changing in accounting policy of advertisement expenses.
Please go through the results link-
http://www.moneycontrol.com/livefeed_pdf/Oct2012/Thangamayil_Jewellery_Ltd_171012_Rst.pdf
A few questions to accounting gurus-
-
Deferred revenue expenditure of earlier years (11.51 crs) will be adjusted in next 3 quarters starting from q2. Right?
-
Since 2/3 of this item still remains on the books, why is the latest balance sheet not having anything under the head ‘other non current assets’ ?
Q3 results are out. Sales is up 41% YOY while net profit is down 55% YOY!! obviously market didn’t like this and the price is down 5% hitting lower circuit.
With my limited knowledge and skills, here is what I think are key reasons for less profits. One is high AD expenses another is decrease in gold prices. Both I think are temporary glitches and need not repeat in the next quarters. Sales growth is a big positive. I think the long term fundamental story is intact.
What I am wondering is whether the current correction in prices provide a good entry point? Would like some guidance from the senior boarders, especially Hitbhai!
Technical experts may guide on the technical entry point!
Thanks,Balaji.
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The dip in NP is primarily due to the increase in Other Expenditure from 501.32 to 1788.74.
****Quote
The company has mentioned that it includes Advertisement and Pulicity expenses of Rs. 1138.74 Lacs as against Rs. 160.18 Lakhs in the corresponding previous quarter. In line with changes in Accounting treatment and in accordance wuht Generally Accepted Accounting Standards in Advertisement expenses the company opted to write off existing Deferred Revenue expenditure of earlier years in three equal quarterly instalments in the current year together wuth fully charging of current year advertisement and publicity expenses in the P&L account of current year. Consequent to this, it has resulted in understatement of profit un the quarter and nine month ended 31st December 2012 by Rs. 614.61 Lacs and 1395.65 Lacs net of taxes resepectively in a comaprable bases.
****Quote Ends
Now, the logical question arises that…
Was the good performance of the past was due to this accounting jugglery?
or, Is it a normal thing and the long term story is intact?
Thanks,Balaji.
I am not sure how inventory is valued. I presume that it is at market value and this would explain the 7 + cr inventory build up which is very less. The fall in gold price has brought down the inventory value and the profit along with it. We can come to certain conclusion only if we know the details of accounting involved here.
The margins are going to fluctuate as they purchase the gold and is not pass on. When gold prices go up they will gain and vice versa. Best thing is their sales growth has been tremendous. So we will need to keep an eye on the gold price o get an idea about their expected profitability in future.
Stock has been consolidating at 180-185 levels… With midcaps starting to rally and gold prices slowly picking up is it a good entry point? Requesting senior members for their feedback…
**What is the difference between investing in Gold and investing in a Jewellery stock?
isn’t the stock price directly affected by the Gold price?
unless of-course the company keeps on opening new branches to increase sales.
seniors please advice.**
**
Hi Satyabhushan,
Let me try to reply to this one.
It’s very difficult to say what ppl look for when they are ‘investing’ in gold. Of all the arguments that i have heard/read about it, the one given by Mr. Buffet against it, is the most compelling one, please go through this section **“The Basic Choices for Investors and the One We Strongly Prefer” **between page 17 & 19 in his 2011 letter to shareholderhttp://www.berkshirehathaway.com/letters/2011ltr.pdf Link: http://www.berkshirehathaway.com/letters/2011ltr.pdf . That i hope would have answered a part of your question.
Coming to the point of investing in jewellery stock, one is taking a calculated call on the company in question. That the company will keep up it’s growth in revenue and profit by capturing more market share by way of offering better designs, offering reliable brand value, continuing it’s operational excellence etc etc… Of course the underlying assumption is ppl will keep buying gold jewellery irrespective of growth/decline in gold price in future.
So both are not the same, isn’t it ? PPl have bought gold in the past for consumption purpose (not eating, ok ?) even when the price rise wasn’t spectacular. So, let’s hope they will continue to do so in future too 
Here is the important section reproduced here:
Today the worldas gold stock is about 170,000 metric tons. If all of this gold were melded together, itwould form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At$1,750 per ounce a goldas price as I write this a its value would be $9.6 trillion. Call this cube pile A.Letas now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the worldas mostprofitable company, one earning more than $40 billion annually). After these purchases, we wouldhave about $1 trillion left over for walking-around money (no sense feeling strapped after this buyingbinge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make todayas annualproduction of gold command about $160 billion. Buyers a whether jewelry and industrial users,frightened individuals, or speculators a must continually absorb this additional supply to merelymaintain an equilibrium at present prices.
A century from now the 400 million acres of farmland will have produced staggering amounts of corn,wheat, cotton, and other crops a and will continue to produce that valuable bounty, whatever thecurrency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to itsowners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The170,000 tons of gold will be unchanged in size and still incapable of producing anything. You canfondle the cube, but it will not respond.
Admittedly, when people a century from now are fearful, itas likely many will still rush to gold. Iamconfident, however, that the $9.6 trillion current valuation of pile A will compound over the century ata rate far inferior to that achieved by pile B.
What advice.
**
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Mr.Satyabhushan,
Apart from Mr Raj has said,if you buy physical Gold,it will be added in your Wealth for Wealth Tax calculation,where as gold stocks are exempted from same.
Thanks a lot, Mr Raj and Mr. Hemant.
yes you are right about choice between stocks and gold, as i am a novice investor the risk on my shoulders is quite high. What i have decided … i will invest in stock let my wife invest in gold and let time decide the results.
and hope… the popular saying " Your wife is always right does not become a reality" 
Its been two and half years since this thread is active… there have been lot of changes in this company. After a two years of sluggishness again it seems to be on the right track…
It is in turn around stage from last two quarters and posted good numbers in Q2FY16.
What went wrong
Aggressive expansion by leveraging debt
Gold price reduction and there by lesser realizations
industry and govt policy changes
Inventory pile up and when the gold price reduced went into losses
Corrective measures taken by company
Cost cutting by various means -
Investing in technology ( SAP & iQlik) and reduced inventory
decrease in adverstising spend
No new stores until current stores stabilized
Cost cutting in operations and mfg - Employee strength is reduced
improvement in Working capital and inventory turns
Reduction in debt
Positives
30 stores with 25% Market share
Good brand recall in its own territory
Gold prices are stabilized around 25K to 26K
Favorable policies by govt
Same sales growth is good even though ad spend is reduced
Volumes are growing but realizations are less so far. since prices are stabilized, realizations will go up
last two quarters shown turn around
Dec Qtr is biggest and expected to post a good net profits
Negatives
Competition is high and no new stores planned for now
Others who are monitoring closely please post your views.
Disclaimer: Not invested yet.
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Now the gold price is at highest level hence inventory will show a positive outcome. Currency printing globally will keep gold prices high and favourable govt. Policies related to skill India will increase the prospects of this company.
On 21st july, radhakrishna damani has done a bulk deal through his financial firm. Read on capital lobe by deepak shenoy and checked ne bulk deals.
Disc : Not holding
Thangamayil had an excellent Q1 with sales going up 50% and PAT up 114%
Company is now back on growth plans with opening a store each qtr. Guiding 1500crs sales this year.
This has been an amazing turnaround story.
Company seems to be breaking out of 4 years consolidation
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is anyone still tracking this? I am quite impressed with the shareholder communication and the way the company turned around their operations in a tough phase…they were extremely transparent about their issues and had a clear plan laid out to do so…it has the highest inventory tunrs in the sector along with the highest sales per square feet as compared to its peers…the company is expanding stores after a long hiatus and that should aid to topline growth going forward…
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Yes…They are adding some 15 stores in the next three years which will add upto 25000sq ft in sales space. one of the store will be of large format in Trichy…
Looks good - Management is focused.
Was thinking on this industry and also met their competitors - one thing which came out is that the same store sales growth for these players will be roughly in the range of 5-8%. People are talking about shift from unorganized to organised - but my personal feeling - unless we define who classify under organised/ unorganized, it would be difficult to understand the intensity of the shift. Till the time, growth will only come from store expansion or inorganic route.
He is talking about 1750kg inventory to start in FY20 and will turn the same by 4x - approx Rs2000cr revenue at current price.
Disc: Invested -
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OLD BRIDGE CAPITAL MANAGEMENT PRIVATE LIMITED bought 4,89,427 shares @ 410 Rs in today’s bulk deal.
Promoter BALUSAMY RAMESH sold the shares to meet the demand.
Check out last second record: https://bsenotifier.com/bbdeals/bulk/NSE/2017/11/16
Kenneth Andrade, Founder and Chief Investment Officer of Old Bridge, known for identifying businesses early in a cycle.
Disc: Not holding.
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Hi, could you elaborate regarding this share holding communication.
just started tracking this company;.
thanks
please go through the annual reports from 2012 onwards…the management is very candid…they cut their salaries including directors when the company made losses and stalled their expansion plans to only focus on inventory rationalization…they were caught on the wrong foot due to regulatory issues (banning gold imports, metal loans, 80:20 rule etc.) which were not under their control…the fact that they came out stronger post crisis with lower debt and far better inventory tunrs speaks volumes about their execution…
i also think they have following the right retail model for growth with a very concentrated approach…the worst seems to be behind them and the management now hedges 60% of their inventory through gold metal loans which should lead to reduction in interest costs…with 15 stores to be added in the next 2 years , this could be an interesting story if the management continues to execute well.
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Hello Sagararya
Please help me with source of information 15 on new stores., I understood from Ba Ramesh interview , he said one store per quarter that comes to 8 stores.
Disc : Just exploring