The Anti-Portfolio

[vikas_sinha]

Bought kalyani cast tech, about 3% of folio, they are manufacturer of shipping containers, SME so risky, sold little of Kpi green, shilchar and ceinsys in that order.

Kalyani cast tech is in process of expansion, recent budget announced a subsidy for containers manufacturing but scheme is still to be launched. They will face capital requirement issue due to large size of expansion. Actual profit might come under pressure due to this while waiting for ramp-up.

Promotor key man risk is there, he is from railway and concor background. Expansion is via a gati shakti logistics terminal, which would additionally accommodate manufacturing of wagons and containers. Low level of disclosure overall, even location already acquired (leased?) is somewhere unknown in Gujarat.

Disc: unqualified to advise, hence please do your own research.

[Shripad]

Dear @vikas_sinha, SJ Logistics’ promoters seem to have a clear sense of direction and appear to be taking measured, calculated risk..one step at a time. The message in the concall was also quite clear and encouraging.

However, very recently I noticed one point in the recent communication and wanted to understand your perspective on it. In the update sent to SEBI on 11 February, the company mentioned that it would discontinue voluntary reporting. Interestingly, the very next day the company announced the Q3 results.

As small retail investors, how should we interpret such development? If voluntary updates are discontinued, it is possible that any major positive or negative developments may become visible to retail investors only through the periodic results. Will this create a major gap?

Another aspect I am trying to understand better is the receivables position, which forms a significant part of their balance sheet for logistics companies. In the concall, management mentioned that receivables are largely linked to the nature of the business and the credit cycle with large clients, but I would be interested to hear how you interpret the current receivable levels and whether they should be seen as normal for this stage of growth.

Since you have invested in several smallcap companies in the past, do you see this pattern reducing voluntary disclosures and relying only on mandatory reporting as fairly common among SME companies?

Looking forward hearing your thoughts on this.

[anjeshv4]

SJ didn’t announce Q3 results. They just provided a business update. The stock fell hard the day they announced forgoing quarterly reporting. Bear market so it was assumed results must be bad. So Company had to come out with business update to try to soothe investor nerves.

[Shripad]

My bad…you’re right. They have only shared a business update and have not officially declared the results.

While this may help reduce the company’s compliance burden adn they are still very much within legal framework, it could create a communication gap for small retail investors. During this period, we will have have limited visibility into performance, which can increase uncertainty. Very recently started investing in such small cap so I don’t know if this is good or bad and how shoud we read it.

[anjeshv4]

You are not wrong. Extreme short termism has crept into retail these days. The Middle East crisis has meant that SJ is falling every day despite being dirt cheap already. Limited communication is assumed to mean bad business. The only way to ride it out is to have a stomach of steel. Technicals don’t work in microcaps with low liquidity. Once the tide turns, these stocks will go up like rockets too. Provided the business does decently.

[vikas_sinha]

Re-cap of the holdings with short SWOT thesis, ordered by holding size. My analysis is very shallow and may be quite wrong.

1. Ceinsys - This one was popping up in screens, but the peppy numbers seemed to be too good to be true. Finally, @phreakv6 commentary triggered the buy. Lost some precious time but enough left to still play out. Panic around Jal Jeevan mission is mostly overdone, it’s accounting for 25% of revenue, the states that it is operating in have not reported corruption and receivables are being timely serviced. It’s another thing that JJM is now in its final phases but enough to make good money for the next 2-3 years. Tech segment was anyway rapidly overtaking the Geospatial part of the business. Tech sector de-rating might be a factor though. Also top level management circus made things bit messy.

2. Axiscades - I heard about this one from a friend who is very interesting in defense related investing, having some friends in the forces. Liked the numbers, again saw @phreakv6 commentary and bought it. This one gave some rapid gain in a slow market. So, this does electronics and aviation kind of work. Not that deep into it. Tie up with MBDA puts it in the European arms, specifically missile, domain. Quite promising, also close to HAL with the Tejas and Su-30 upgrades, but that is likely to be a stretched timeline.

3. E2E - Early enough entry but long wait time here now. It’s taking them almost a year to ramp-up sales to match their capacity build out, despite the AI hype. In an asset super heavy business, they can draw some comfort from the support given by LnT. AI compute center ownership seems more suited to deep pocket investment banking sorts.

4. KPI green - Longest held till now, disliking the greater emphasis on asset heavy IPP projects, they used to be mostly CPP contractors. Financial environment looks not that favorable to build asset heavy company books. Some of their gulf related dealings don’t look that good. Solar super growth seems to be getting stuck due to grid and storage bottlenecks. Such a situation may have lesser impact on EPC than other solar players. There is still green hydrogen, ammonia, methanol essentially required by steel, fertiliser, cement etc to control carbon emissions. EV, AI etc adoption is also positive. EU border carbon tax can also be a kicker.

5. Shilchar - Very prudent financially and otherwise but not the faster one to scale up capacity. Anyway, supporting the grid for solar and AI, EV etc will take many more years of build out. Patience is the key here.

TBC…

[vikas_sinha]

Cont’d…

6. Sky gold - Amid all the jewellery hype, just thought of riding one. Organic and inorganic growth are strong, bit debt heavy though, but they are addressing that now. Gold will always be attractive enough. B2B is good enough, lot of risk is taken out of the picture.

7. Waaree energies - Better to stay with the biggest. Even if solar storm happens, it is likely to favor the bigger ones. Modules, cells, wafers, ignots, everything is planned for, huge BESS too. My one and only precious mid cap. I bought this because their growth plans were so huge and their size provided comfort.

8. Zen tech - I thought this was just another drone maker, but I was very wrong, made a bit late entry. Their military simulation expertise is quite good, but the market might be limited, it’s not likely to be a big export theme. Venturing beyond Army to Naval and Airforce simulation is smart step but Airforce might be tough market. They are good at RnD, anti drone seems to be a very good choice. But it’s going to be a crowded market, still undergoing rapid development, and looks like not enough strategic emphasis on large scale or indigenous purchasing. Promotor is bit over ambitious, so performance is very much lagging behind guidance. Strategically speaking, only Pakistan and China are hostile enough to trigger a conflict. The de-escalation with China is to the extent of both sides not using loaded weapons on the frontlines. Pakistan escalation ladder can be quite steep. All participants are nuclear armed, likely nobody will fight for prolonged periods, drones are more useful in a war of attrition. This may be the strategic thinking of the defense establishment in keeping a measured response to drones. Being cash rich is good. Zen projected threat perception of all important establishments like govt legislatures, sensitive offices, strategic infra, to be covered by anti drone systems, but this may be a bit price sensitive generic sort of category.

9. Oriana - The smarter version of KPI green. Asset monetization, keeping the balance sheet light, bringing deep pocketed investors to the table for funds. Claim to be doing everything from solar EPC, to green hydrogen, to BESS, bit hard to believe fully.

10. Freshara Agro - Picked this up from the noise around SMEs, found it at a good level with luck. Data suggests that overall export volumes of pickled gherkins is flat since around 2021. Freshara is still able to grow and have a decent future guidance. European acquisition might play out well enough. They seem to be trying different types of produce. Exploring more markets can get more growth. Pickled and brined products are popular in Europe (western world in general) at least where I have tried some, but Indian cooking style is quite different.

TBC…

[vikas_sinha]

Bought Afcom holdings and FlySBS, both have the same owner, Afcom is into air cargo and FlySBS into business jet charters. Each 3% of folio.

Sold some of Ceinsys, E2E mainly and little from Axiscades, KPI green, Shilchar, Oriana, Tembo, Freshara, Bluejet etc.

Afcom is expanding at a decent pace, they are getting good volumes because of the problem with gulf airports, it’s easy to track their flights in real time, economics might be the only grey area.

FlySBS is also growing at a decent pace, though they maybe adversely affected by the gulf crisis since that’s a frequent flight destination.

Both are SME, so risky. The owners have a background from Deccan Chronical newspaper and have tried the business before with failure leading to pending legal issues.

Disc: unqualified to advise, hence please do your own research.

[vikas_sinha]

Cont’d…

11. Sai life sciences - I don’t have much knowledge to comment here. Picked this up from several sources and finally bought after seeing the comments from @phreakv6. C(R)DMO might be a strong theme backed by sourcing away from China, like because of bio secure act etc. Guidance is about 30% growth but looks conservative, lumpiness of business is a given, but their diversity is a big cushion.

12. Kalyani cast tech - Dismissed it initially as too small a player in the huge container market. But the promoter seems to be doing well aligned with the government policies. Starting with forging railway parts, then focusing on containers, now scaling up with gati shakti terminal in addition to increase in containers capacity and plans to make entire wagons. Bit too ambitious, especially for a tiny company, but the promoter knowledge of railway freight ecosystem is perhaps a strong point. Government statements on indigenous containers scheme is that factory subsidy is not the right way. It is going to be a structural support strategy for the whole ecosystem starting from special cortana steel manufacturing to running bharat shipping line etc or something along these lines. They might struggle a lot given such ambitions. Bigger players are in plenty to grab any opportunity.

13. Balu forge - Heard a lot of about this one and forging companies in general. Seems like a pretty decent bet even without any defense sales, good growth plans maturing. Some tax raid, some gulf related business dealing, old capex of relatively tiny size, raise some red flags. Forging and machining are a strong theme, looks like energy intensive manufacturing being outsourced by Europe facing a difficult situation.

14. Tembo global - Doing too many things, capital intensive deployment. Solar energy plant being one. New pipes factory asset turnover seems to be not that much. Defense products execution needs to be seen. Currently business is chugging along fine though.

15. Afcom holdings - Again quite popular discussion topic. Afcom is expanding at a good pace, they are getting good volumes currently because of the problem with gulf airports, it’s easy to track their flights in real time, economics might be the only grey area. The promoter is bit too ambitious in his guidance and falls short, they were supposed to be up to 5 but only have 3 737s operational yet. FY28 onwards maybe very crucial time because huge 777 freighters may burn their hands. The owners have a background from Deccan Chronical newspaper and have tried the business before with failure leading to pending legal issues. The newspaper itself entered bankruptcy.

TBC…

[vikas_sinha]

Cont’d…

16. FlySBS - Same promotors as Afcom, is also growing at a good pace, though they maybe adversely affected by the gulf crisis since that’s a frequent flight destination, but also possibly a chance vacated by scheduled carriers. There are a little over dozen air charter operators as per CARE report from FY24 on their website, FlySBS being among the smallest then. Half of the operators are focused on international and half on domestic segment, Reliance and Air Charter services being the biggest. FlySBS is focused more on international segment. I believe UHNI folks will grow faster though they may migrate to more tax friendly shores, which would likely mean travelling back and forth. Premium products seem to be in short supply, most carriers are focusing on the lower end of the market. But in some markets the demands are different, for example, the longest nonstop flight from Singapore to New York was mostly operated in a pure business class layout (maybe also to save fuel). Additionally, some airports developed under UDAN scheme do not have scheduled flights but allow flexibility for charters, such as Gangtok. Reputational risk exists in passenger transport, any accident and business can be disrupted.

17. EFC - Bit of unethical promotors but it’s all in the game. GCC office space demand is keeping up well but AI threat is possible like with many white collars jobs. AI slop re-work going on at Amazon demonstrates that just like moving from chip assembly level instructions to a C like high level language compilation, humans can essentially be part of the process of this generational change. Reliability of Enterprise grade software is very much more important than vibe coding hobby projects.

18. Websol - Ultimately it looks like they have low capacity utilization but are expanding anyway. Good thing seems to be that at least there are plans to move on from outdated monoperc to topcon. Cell based ALMM rules starting from June should help. Promotor has misguided and that is a negative. Technically, lots of experience may lead to better execution of their bigger upcoming projects. KUSUM relaunch and rooftop solar projects can be positive. Gulf energy crisis should be a trigger for more emphasis on renewable resources. Pakistan is energy surplus and even becoming a hub of bitcoin mining using cheap Chinese panels, though it’s very haphazardly done without any government planning. Cuba is addressing its energy crisis due to US embargo with Chinese panels again.

19. Rajesh power - Trying to get into the transmission theme, focusing on the evacuation from the solar dense region of Gujarat, Rajasthan and Madhya Pradesh. Most of the bigger players like the MNCs are at way too expensive valuations, perhaps deservedly so. They seem to be well diversified in transmission, distribution and storage.

20. Jeena sikho - This is a bit doubtful one. On the other hand blatantly deceptive marketing aside, which they have taken off air, many prefer alternatives to standard allopathy. Some find it to be effective when regular medical practice fails. There are many businesses of questionable ethical practices, I see no harm if they operate like a spa for some mild relief. It’s like taking honey and ginger tincture for a strep throat, or an orange peel facial scrub or isabgol instead of dulcoflex or hemp extracts for various reasons etc.

TBC…

[anekmmm]

Thanks for giving your rationale for buying …appreciate your continuous updates in times of turmoil.

Please post the latest holding percentages, looks like many changes since your post in Jun. Thank you.

[vikas_sinha]

Cont’d…

21. SJ logistics - Picked this up from the noise around SMEs. Seems to be quite long in the business. Access to market funds can be a great growth driver for competent management. They seem to be scaling up operations well by owning (leasing?) shipping vessels quite rapidly. Current gulf crisis partially cuts through their domain of operations but this can impact both ways and hopefully goes away soon enough.

22. Raymond realty - I just bought this because of the demerger special situation. Promotor maybe doubtful but Raymond has a solid brand reputation.

23. Bluejet - Plans for growth are long way away but business is lumpy and short term rebound is not out of question. Export data shared by knowledgeable folks showed drastic decline in advance of results, so it was a wrong decision to stick to this one. But now there is not much to lose anyway. Promotor is evasive and prone to making up excuses.

End of list.

[vikas_sinha]

Latest folio status

CAGR approx 30% since September 2017, approx 7.5 years. Currently about 15% below peak which was being hit strangely most of the past year. The decline starting only towards end of 2025.

One big hit was due to taxes. My direct investment journey started as an NRI, a category not serviced by discount brokers in mid 2016. ICICI brokerage charges were like 1% each on buy and sell side, also funds took 3 days to be credited post TDS. At the start I bought only handful of stocks like Tata motors, ICICI etc. When thinking of more active investing a Zerodha account was opened, operating in my father’s name, exactly at end of 2017.

The purchase of 3 houses in my name while liquidation of shares held in father’s account, messed up tax saving opportunities. About 7% of folio value was paid for capital gains tax. So, tax planning was really inefficient, clubbing my father’s income and my gains always led to tons of avoidable surcharges. So, I gifted myself my own shares to keep it simple. What is lost in the process is the long-term folio performance tracker history provided by Zerodha.

Absolute value curve since the new account is operational,

Past few months performance curve as per zerodha (it fails to compute since the entry spike is huge):

Portfolio

Notes -

1.There was yet another accidental exit from E2E, subsequently reversed, which has messed up the buy price.

2. KPI green and Sky gold have given tons of bonus shares, cost of which is zero as per tax law followed by the Value Research portfolio logic.

The Older account data for reference (now closed and transferred to the new account):

Absolute value curve:

Performance curve as per zerodha:

[Kushal12]

Thanks for sharing your journey. 30% compounding over 7 plus years is some achievement!

Are you going to stick around with the list or did the recent correction made you re-think/ reconsider some of the names? Have been coming across a lot of churning these days given the prolonged price and time correction we’ve been facing for about 18 months now. And the end does not seem to be near.

Do share your thoughts as we have quite a few names in common.

[vikas_sinha]

The current list is a product of the prolonged correction. Some of the biggest holdings faced issues. Ceinsys was hit by JJM corruption related panic and perhaps AI related issues too. Around 25% of folio was solar focused, there the decadal theme started to turn sour. Zen couldn’t keep up to targets even though defence was booming. Shilchar exports dampening and wait for growth was slow. E2E was also progressing slowly.

The overall market correction provided many alternatives, hence the churn in past month. I simply don’t have the depth to build outsized positions, like the ones listed above (only Axiscades kept positively surprising, even then a little pruning is prudent). So, I started spreading the risk, going from 17 to 23 stocks.

It started with the trigger of special situation in Raymond realty. Then Rajesh power, because solar etc required grid capacity (even though the basic issue is minimum base load factor of old coal generation is ~60%, not flexible enough to give room to solar peak output). S J Logistics simply because it was cheap. So, my thought process was to look at high growth and cheap stuff. Freshara was somehow down even after news of acquisition, perhaps lucky here, time will tell.

An exception to the trend was Sai life sciences, strong business with high valuation. Perhaps Balu forge, Kalyani cast and Jeena sikho are not explicitly cheap but then the SME discount is a factor too.

I see the situation as a great buying opportunity, great business still have higher valuation, but they are not my choice actually.

I even doubled down to buying the same business twins in the Afcom and FlySBS. So, most of my buying, churning is done, even though it’s a literal feast in the markets. I don’t want to be spread too thin.

Trying to make sense of what I see, valuation is still not in momentum zone for a strong rally. I estimate another year’s stagnation. All stocks are not alike and the current crisis may impact international logistics shipping and aviation, perhaps worse than others. I am willing to buy lower quality, trying for higher returns with higher risk. Hence position sizing is relatively small to manage losses.

My belief is that small cap are in a better position than in the past, SME listings have provided good opportunity to pick some good ones. Patience may be required and short term crisis may arise. As a famous investor said, something along the lines of: regardless of market conditions etc, keep focus on business earnings growth.

[RohanPicha]

Hi Vikas Sir,

I saw that you have had Kanchi Karpooram in your portfolio in the past and had attended its concall. Do you know how the management operates what are the points to look for here?

[vikas_sinha]

Yes, my first concall, theirs too! Management is mostly honest and prudent and tried to clarify main points regarding the large expansion coming up. To me it was just a commodity boom growth story and their watered down projections meant I sold out majority of the holding during the con call. It’s a pure commodity company with huge cycles and details of international effects can be difficult to comprehend. So, after waiting for the good results of next quarter I sold out completely.

[praveen_a]

Hi Vikas ji any change in portfolio during the West Asian war period

[vikas_sinha]

No changes since the previous update!

[Arash_Mishra]

Good PAT, do you have some idea on why rajesh power is down despite being @ 16PE