The harsh portfolio!

They might be an excellent acquistion candidate but its highly unlikely as promoter holding is 65%. Also at these valuations, it doesn’t make any sense for the promoters to sell out. They have invested >500 cr in content in the last 3 years, their current market capitalization is ~200 cr. Additionally, the promoters seem to be ambitious, given how much they are investing in different business lines.

Right, makes sense - promoters are likely to hold lions share. Thanks for answering!

I came across Shemaroo first through this Bloomberg video

My investment thesis was digital growth of regional content with Jio effect and was like worst case someone will acquire although not sure for how much! :wink:

As of today, I reduced weightage of Lupin by 1% (from 4.5% to 3.5%) and increased weightage of Ajanta Pharma by 1% (from 3.5% to 4.5%). This is because Ajanta has near term earnings visibility (~20% upto FY22 due to expansion in US generic markets). Apart from this, I am closely tracking the following companies which are close to my buy range:

  1. Maithan alloys - Detailed thesis can be seen at this link Maithan Alloys Ltd - #232 by harsh.beria93
  2. Avanti feeds
  4. INOX Leisure
  5. Vinati Organics

I will post the detailed thesis after creating a position in the specific company. The updated portfolio looks like this:


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I have created a 2% position in Biocon in the model portfolio on Friday.

Pharma sector has done badly in the last few years, but its inherently a very good business (low debt, high ROE, reasonable growth). In order to take advantage of the fall in the past few years, I have taken a basket approach and allocated ~14% of my portfolio to this sector. My pharma picks are:

  1. Ajanta Pharma (4.5%) - Rapidly expanding into US markets. Strong domestic market presence, good cashflows from Africa institutional and branded businesses.
  2. Lupin (3.5%) - trying its hand on biosimilars. Doing well in Indian markets. De-leveraging by selling its Japanese generic unit. Problems with FDA compliance
  3. Divis Lab. (2%) - Biggest Indian contract research manufacturer and API manufacturer. Strong revenue visibility in the next 2-3 years on back of capacity expansion. Valuations reflect this.
  4. Biocon (2%) - Has the largest pipeline in biosimilars of all Indian pharma companies. If stage 3 trials and approvals go well, topline can become 2-3 times in the next 5-years. However, there are numerous risks (a) FDA compliance (Biocon has done well in this so far), (b) Biosimilars is a long gestation business (5-6 years to go through the three stages of approval in US, it is easier in Europe though), c) valuations reflect optimism in pipeline
  5. Natco Pharma (2%) - Niche player specializing in hard-to-make drugs. Diversifying into foreign markets and agro-chemicals business
    The updated portfolio is shown below:

Today, I initiated a 2% position on Avanti feeds.

Avanti feeds makes shrimp feeds and have a domestic market share of 45-50%, with industry growing at ~10%. The margins of the company is very volatile because of dependence on prices of fish meal and soyabean which are commodities. Long term average margins is ~12%, its current quarter margins are ~7%. They have passed out the raw material price increase to the shrimp farmers, so margins should come back to the long term mean in a couple of years. They have also foreyed into shrimp processing business which is a growth driver for them. The feeds business is well consolidated with three key players (Avanti, Waterbase, CP foods) accounting for > 80% market share. The sector has done very well in this cycle (starting 2012) with companies generating >30% ROCE. They have recently started selling their shrimps in China, and also want to sell their feeds in Bangladesh.

Key risks:

  • Outbreak of disease (this killed the shrimp sector in 1998 and is a key monitorable)
  • Dumping from Ecuador to US due to China slowdown can lead to temporary revenue hick-up.

The updated model portfolio is below:

With the recent fall in prices, I am slowly increasing risk in my portfolio. A lot of commodity and cyclical businesses are trading at very low valuations. My thought process at this point is to increase my portfolio allocation to the more risky commodities/cyclicals. I am doing this by using 1% cash left in the portfolio and reducing the position size of Reliance Industries from 6% to 4%. The cyclical positions are shown below:

  • Shrimp exporter (2%): Avanti feeds
  • Airlines (6%): Indigo
  • Real estate (9%): Kolte Patil (5.5%), Ashiana Housing (3.5%)
  • Commerical vehicle (1%): Ashok Leyland
  • Steel (1%): Maithan alloys

Basically, I have added 1% position size in Real estate (0.5% increase in Kolte and Ashiana). I have created 1% position in Ashok Leyland and Maithan alloys. The rationale for them are:

  • Ashok Leyland - CV is a highly cyclical business, @amey153 explains this beautifully in his blogpost . Key risk for me is the capital allocation policy of Hinduja group, which is probably why the stock is down 24% today. Also, they lost their key man to Eicher last year. But its trading at low cyclical valuations and should do well when CV cycle turns (sometime in the next 3 years)
  • Maithan alloys - Detailed rationale is posted here Maithan Alloys Ltd - #232 by harsh.beria93

The updated portfolio is:

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Among the real estate picks, have you considered Sobha Ltd? Would be great if you could share the rationale behind selecting Kpatil and ashiyana. Thanks!

I took a top-down approach, I wanted exposure to real estate players in markets with relatively low inventory (Hyderabad, Pune, Bangalore) and clean corporate governance.

  • Kolte is a play on Pune real estate market. They have done reasonably well during this downturn and have decent corporate governance. They undertake new projects by doing joint ventures with financial investors, hence not taking too much debt.
  • Ashiana caters to a niche space (senior citizen housing) and is responsible for property maintenance services which provides an annuity stream of revenue. Ashiana is one of those rare non-leveraged real-estate players (d/e < 0.2) with really good corporate governance (have a look at this playlist)

Both are available at ridiculous valuations and can give decent returns when sector turns and if they are able to execute their strategy.


I have been reshuffling my portfolio substantially during this market fall. The broad idea is to replace existing portfolio companies with other companies which in my assessment can generate higher returns in the future.

Today, I replaced Reliance Industries (4% position) with Balkrishna Industries (2% position) from the portfolio. This generates 2% cash which I am looking to deploy quickly. The model portfolio is shown below:

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I have added AIA Engineering in the model portfolio (position size: 2%). AIA makes grinding media which finds its application in cement and mining industry. It is a market leader along with Magotteaux (Belgium based). AIA is exposed to the mining and cement sectors, although the cyclicality of AIA is lower as it manufactures indutrial consumables. They are trying to move up the supply chain by offering integrated services to mines. They dont have much debt on their balance sheet (d/e < 0.1), have high ROCEs (>20%), and don’t have any obvious corporate governance issues. Its fairly priced at current prices, and I might increase the position size if prices or growth becomes more attractive.


As of today, I have done a switch from AIA Engineering to Wonderla Holidays in the model portfolio, maintaining a position size of 2%. The reason for this switch is below:

  • I was earlier valuing AIA on their accrual profits without realizing that AIA only converts 70-75% of their accrual profits to cash profits. This required me to revalue the business and I realized that AIA was trading at slightly higher than fair valuations
  • Wonderla on the other hand is definitely undervalued in my assessment (detailed post here).

I understand that this switch may not work out in the near term as Wonderla parks are currently closed. However, over the next 5 years, with a 12% growth rate (with stabilization of Hyderabad park and start of Chennai park), I expect share price returns to be in excess of 25%. This attractive risk reward is why I have made this switch. The model portfolio is shown below


In-line with past updates of increasing allocation to cyclical sectors, I have sold my position in Mahindra Logistics (2%) and added NALCO (1% position). This builds up 1% cash which I am looking to deploy very soon.

The reason for this switch is below:

  • NALCO has a normalized PBT margin ~ 18%. For the last 2 quarters, PBT margins have been negative due to pressure on aluminum prices. Aluminum prices like most commodities is cyclical. FY13, FY14 period was the last bear cycle, followed by a cyclical uptick in FY15, followed by cyclical downtick in FY16 & FY17 and a cyclical uptick in FY18 and FY19. Over long term, the company trades at P/sales ~ 2 and it goes below 1 during cyclical downticks. Currently, company is trading at P/sales ~ 0.6 (market cap ~ 5600 cr. with cash of ~2800 cr.) Valuations are reflecting poor future prospects. In the next five years (i.e. by FY25), a cyclical upturn in aluminum is likely. When that happens, sales will go beyond the last peak sales and is likely to cross 12’000 cr. I will consider selling at P/sales > 2 i.e. 24’000 cr. (~128 share price). Current stock price is ~30. This gives me a favorable risk reward. Plus, its a debt free balance sheet with 51.5% GOI stake (i.e. not too much scope for further equity dilution)
  • Mahindra Logistics: The growth is supposed to recover after corona stabilization. As company is rapidly expanding into new business (i.e. cold storage, warehousing), I am comfortable giving it a growth rate of ~15% for the next 5 years and a normalized PBT margin ~ 4% (Global leader C.H. Robinson has long term EBIT margins ~ 5.5%). Looking five years ahead (FY25), with 15% topline growth, revenues will go from ~3200 cr. (taking into account corona impact) to ~6500 cr. At 4% PBT margins, PAT ~ 195 cr. PE ~ 20 will give Mcap ~ 3900 cr. Current Mcap ~ 1800 cr.

In essence, I have a better risk reward in NALCO compared to Mahindra Logistics. Also, I have certain doubts about accounting in Mahindra Logistics (details here)


I must say there are few conflicts which I observe in your portfolio. First I would like to compliment the way you analyze in depth the value of a given company/business. Mostly you are trying to buy mispriced bets which might be of higher value in the future. But I fail to understand why do you have more than 25 stocks in your portfolio, what is stopping you from keeping it focused to say around 10-15 stocks and you can further classify them as core/opportunistic/cyclical/value… This might help you in two ways …1. you will have less moving parts to worry about and also you will have more time to read and observe the current names. With your thesis playing out on a story you can evolve from their and replicate it elsewhere with high conviction.
Also do read about how a portfolio starts replicating a indexs performance once the constituents go north of 10-15 … I did read a long article on the same with decent size data …will share if I find it.


It will be very useful for me if you can tell me the conflicts that you see. I maintain a very detailed account of the kind of bet I am making (shown below). My corpus size allow me to be flexible with my investing decisions i.e. I don’t need to own only high quality businesses. I am happy with lower quality if risk-reward is in my favor.

I haven’t come across any research that shows owning a large basket of stocks leads to market performance. What you are probably referring to is the number of stocks an investor needs to have adequate diversification, which is very different from tracking error. You can have a 1000 stock portfolio and have a large tracking error from the underlying index. Past academic research have identified a few factors such as quality, company size, valuation, etc. that can help explain excess returns. In order to harness one factor, we need a large basket of stocks (atleast 100), that’s the fundamental attribute of long-short strategies that try to harness a given factor.

Coming back to reality, my thumb rule is to keep 20-30 stocks with largely diversified cashflow (geographic, industry, etc.). This provides adequate diverification and I can track them reasonably well. Plus, I will be glad if you can help me identify unidentified risks :slight_smile:


Hi Harsh,

Keen to know what updates you’ve made in the last one month to your portfolio since the last update.

Also are you looking at any other cyclical opportunities apart from Nalco like Paper which could have a quicker turnaround?

I have made no updates to the model portfolio since the last update. There are two of my portfolio companies which are more than fairly valued (PI Industries & Divis Lab). I might bring down their weightage and increase weightage in certain other companies (details below). I will update the page once I initiate a transaction.

About the paper sector, I haven’t studied it. I have been studying metals (both ferrous and non-ferrous). At appropriate valuations, I might consider adding Sandur Manganese and/or Vedanta. Other companies which I have been studying are Syngene (which can be a replacement for PI Industries), Cochin Shipyard, INOX Leisure and Vedanta.

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This is somewhat surprising. You already have 14% exposure to pharma. You already have Divi’s which is somewhat similar to Syngene (I may be wrong). PI is into Agri/speciality chemical space. Especially, agriculture/farmer/rural is the focus of the government now. Monsoon forecast seems to be good. Why are you thinking of replacing PI with Syngene?

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I haven’t done it, so lets not jump guns. Syngene is a contract research organization and is not exposed to the usual vagaries of pharma. However, it is in a more regulated place compared to PI. If I had to choose between Syngene and PI as a business, I will go for PI because there is no FDA, plus the fixed asset turnover is higher for PI making it more capital efficient. However, this is also reflected in valuations, with PI trading at a large premium to syngene. Also, I may start trimming down my position in Divis (at a given price) and Syngene can be a replacement. However, given the limited listing history of Syngene, I am unable to convince myself to pay a fair price for this business. I generally like to buy a business once it has seen atleast one full market cycle to know how the manager behaves in tough times. Given that we have a long history of Biocon, I am somewhat comfortable with the management.

I cannot care less about this. I bought PI a few years back not because I had a view on monsoon or the government focus. For me, PI is a decently run business with a large tailwind of outsourcing of drug/chemical manufacturing by innovator companies to places with labor cost arbitrage. However, I also respect valuations. My general rule for a decently growing company is to start cutting positions if I cannot envisage decent returns over a 5-year period, assuming my growth assumption fructify. That’s why I might cut some positions in PI.

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Thank You Harsh. I am new to investing. I asked because I am tracking Biocon, Divi’s, PI and some other pharma stocks. Booking profits and investing it in other companies which may give better return in future is an important part of investment - which comes only with experience - I guess.

As of today, I have added 1% position in INOX Leisure which brings the cash back to zero.

My long term growth projections for INOX is about 15-18% over the next 5 to 7 years based on data below:

  • Plan to add 830 screens to the current screen count of 574 in next 5-7 years (increase in screens: 13.6%)
  • Long term ticket price increase: 4%
  • Premiumization: 1-2% (based on increased contribution of F&B sales and advertising revenue)

The normalized OPM are ~14% which gives me an fair enterprise value of ~2.2 times based sales. Lets do some crystal gazing!
FY19 revenues were 1664 cr, FY20 revenues will be close to 1600 cr. (taking COVID into account), FY25 revenues at 15% CAGR ~ 3200 cr., Enterprise value ~ 7040 cr. (P/sales: 2.2, share price: 685). The current share price of 190 gives an attractive risk reward. As company is unleveraged, there is a low likelihood of bankruptcy.

Key risks:

  • Rapid expansion will lead to repeated equity dilution (in my estimate the SSG ~ 12-15%, anything more than that requires dilution).
  • A shift to OTT

The updated portfolio is below: