The harsh portfolio!

While I like deep value strategy you provided, but some of the stocks aren’t that liquid . Taking Shri Jagdamba , ~1800 was volume today . while the price is just 845. Same goes for some more stocks.

Isn’t this a bit of a concern ?

1 Like

Hi Harsh…

Any change of view about Symphony? If i remember correctly u had told like it would be good buy around 800 levels…As u are tracking concalls too what’s your opinion now as all worst are behind it at present situation

Hi Harsh, Similar boat here. How are you looking at Manappuram now as competition is increasing and we’ve seen the pricing power also eroded to some extent. How do you see growth going forward.
Would love to hear your views.


I buy in chunks, building up positions in a period of 2-3 months. So far, liquidity hasn’t been a problem for me (also given my low capital base).

Yes levels of 850 is generally attractive, however I have been able to find other opportunities where growth is more clearly visible or I have more conviction. Thats why I haven’t bought the stock. But valuation wise, it looks reasonable at these levels.
I do track the company and really admire their execution over years.

I haven’t done anything on Manappuram over the last 6-months. Current valuations are very cheap and I don’t like selling things that are very cheap. The mistake that I made in Manappuram was of not selling last year, when it reached 2.5x P/B and I upgraded my sell price to 3x P/B as I thought growth will continue.

From near term perspective, it seems that quarterly profit run rate of 260-280 cr. should improve given improvement in MFI performance. If I assume a 280-300 cr. quarterly run rate and a 10x exit multiple, exit price should come around 130-140 (assuming business never really improves). Lets see if business ever revives. I am okay holding it for now as the management has turned around the ship multiple times in the past, from crises which were far severe than the current one. Right now, the only problem is in growth due to higher competitive intensity which at some point should normalize. But to add more, I need some visibility on business improvement or more attractive prices (Manappuram reached 0.4x P/B in 2013 downcycle).


Sir any rationale for sticking around with alembic pharma? A good business seems to be in difficult times, so why lose on opportunity cost?

I have found the concept of opportunity cost to be more useful in cos which are trading at very high valuations rather than all time low valuations. When prices have taken a lot of beating, one needs very few upside triggers as there is pessimism already priced in. Let me give some examples from my own investing journey.

ITC: We could have talked about opportunity cost at every point of time until early 2022. All of a sudden, prices moved up when broader markets are flat and made up for a lot of underperformance. Over my holding period, my IRRs have been around 25% in ITC which is because it looked like a value trap for the longest time, and I kept on buying it as underlying business was always solid.

Nalco: When I first created its thread (see below), share prices were at 15 year lows, aluminum prices were at decadal lows and there was gross skepticism around PSUs. It looked like a value trap, but that was only true in hindsight. It was a 4x in 1.5 years, although I could only ride 3x on it.

More recently, I have had a similar experience in Cochin Shipyard. I created my position at a time when it looked like a value trap. Who would have known at that time that in little more than a year, defense would be the flavor of season and Cochin Shipyard has made up for its underperformance at a time when broader markets have been flat.

I have also had very interesting experiences in highly valued cos and how they become a value trap. The whole HDFC family has lost its market fancy and my own IRRs in HDFC triplet (AMC, bank, parent) has taken a serious beating. During my holding period, there was never a time when anyone has doubted their growth, quality or longevity. Luckily for me, I have been able to sell at higher multiples and then buy back at lower multiples.

So its very hard to have the foresight of what markets will think of a company in the future, and trailing 1,3, 5 or even 15 year returns have no impact on future returns.

Now coming back to Alembic Pharma, its a classic cyclical where one can make money by buying through an industry downcycle. Look at EV/sales chart below to see how cheap Alembic is right now.

For cyclicals, the only thing which I have found working for me is to buy pessimism. And during upcycles, one makes their IRRs in very short periods of time. The only caveat is one has to sell in an upcycle (look at how I got stuck in Manappuram because I didn’t sell during the upcycle).

If you get time, read this thread and see examples of cyclicals like Wonderla, Nalco, Indigo, Inox Leisure, Maithan alloys, Ashiana Housing, etc. and how one should be buying through pessimism.

Hope this is useful.


Hello @harsh.beria93

So are you planning to add Alembic Pharma given how cheap it is currently.


Brilliantly written. I had similar experience with Indigo, Cochin Shipyard and ITC. However, I have not set up any process around it. I burnt my hands in PNB, KRBL ( but they taught me a lot about investment)

1 Like

Hi Harsh,
When you exited from ICICI Lombard, you mentioned that IL’s inability to scale Health Insurance segment prompted the call to exit.
As per company’s H1-2023 presentation, Health, travel & PA segment improved to 27% of the product mix vis-à-vis 23% for H1-2022.

GDPI for this segment grew from ₹2015 crore for H1 2022 to ₹2834 crore for H1 2023 (~40% growth). Although, the growth is mainly driven by Health-Corporate segment whereas Health-retail growth is muted and Health-Govt de-grew.

The company is making all the right noises regarding capturing market share in health segment. From the concall-
Within the quarter, we have outgrown the industry and standalone players for the month of September with a growth of 21.1%. This was driven by growth in business sourced through retail health agency vertical of 30.7% in Q2 FY2023.

At the time of writing this post, P/B ratio has further moderated to 5.7.

Given that the interest rates have increased world over and in India, the investment portfolio float is more valuable now than this time last year (ignoring the short term MTM losses).

Does this stock catches your fancy now that the major concern of growth in health segment is resolved, or will be sitting out waiting for P/B to moderate further to 4 as you have mentioned previously?


As you have pointed out, most of health portfolio growth is coming from corporate business which is actually not very difficult to grow (vs growth in retail). However, its still good to see their increasing growth trajectory.

When I had initiated my position in ICICI lombard, it had come down to 6x P/B which based on their past track record was on the lower side. At that time, my rationale was:

A key point of my post was they should maintain 20%+ ROEs for me to pay a premium multiple. After that, in one of the concalls Lombard management had clearly guided they will be investing excess profits to drive growth and wont be maintaining 20%+ ROE in the near to medium term. For a sub-20% ROE business, I was not willing to pay premium multiples especially at a time when HDFC bank was available at 3.5x multiple, and growing at 20%+ rates. I find that logic to be still valid.

When I exited ICICI Lombard, I shifted my money to Sundaram Finance as Sundaram was available at 2x P/B and CV upcycle was clearly visible in monthly nos of CV cos. Below was my rationale:

I find the above logic to be still valid. Since my exit in ICICI Lombard, their price has not done anything while Sundaram has moved up by close to 50%. Now the question is what to do now?
Valuations of Sundaram is still around its longer term means during a CV upcycle. So its fairly valued with potential growth, so I will continue to be invested in Sundaram rather than switching back to Lombard. Lets see how future pans out!

I bought my last chunk in July at 700 and prices are now further down by 20%. One lesson that I learnt from my investments in Lupin was that when things go bad in pharma cos, it takes a lot of time to get resolved.

In some ways, problems faced by Alembic are similar to that of Lupin. Both invested a lot in R&D and capex focused towards US market and then failed FDA inspections. I still have some hope for Alembic as they have failed on inspections towards injectables where they dont have past expertise, so in a way they are learning over time (or that’s what I want to believe). So if they can fix that, there’s a lot of operating leverage possible. Thats why I stay invested, also there is a cyclical recovery play whenever US generics market revive. One thing I like about Alembic is despite all their woes, 70%+ gross margins have been maintained. Lets see how future unfolds.


Very nice analysis…
Just 1 query…
What r your views on Chola invt &Finance vis a vis Sundaram Finance?

1 Like

I have looked at Chola in the past. Business wise, the key difference b/w Chola and Sundaram is that Sundaram has been very conservative and not moved beyond their core expertise of CV financing whereas Chola has built a more diversified book. However, we should also note that on a like-to-like basis, Chola’s asset quality is inferior to Sundaram. Lending is a field where I am ultra conservative as its an opaque business (also seen in my other investments like HDFC, HDFC bank, Sundaram, gold financiers).

The reason why I chose Sundaram was that it was trading at its cyclical low valuations when we were already in a CV upcycle, so risk reward was very favorable. At the same time, management started talking about increasing market share. I like the setup when a conservative management guides for growth, and are available at low multiples. That was clearly not the case with Chola. My job is to try and identify good risk reward opportunities, rather than getting enamored by high growth and then paying a high multiple for the same. Even paying a high multiple on HDFC family has not served me well :wink:


Looks like mean reversion is playing out for hdfc twins as explained by you :smile:


Mean reversion is much more prevalent than people give credit for. In past few months, some mean reversions have affected my portfolio positively: Amara Raja Batteries, Cochin Shipyard, Nesco, ITC, Atul auto, HDFC twins, etc. Also, there are a number of companies where mean reversion hasn’t played out yet: Kaveri seeds, Avanti Feeds, Alembic Pharma, Manappuram Finance.

The good thing with this diversified approach is that some ideas are always working and some ideas are not. As long as my underwriting logic is correct, mean reversion will happen at some point of time.

There are two more companies where I have been building positions in the past month - Godfrey Phillips and Chamanlal Setia. Both are again mean reversion plays, I will add them to the model portfolio and explain my rationale once I have built my position.


Very true. Even, Janes O’ Shaughnessy observed " the most ironclad rule I have able to find studying masses of data on the the stock market is the idea of mean reversion".

1 Like

I think similar thing is sought to happen for sharda crochem.

In the last quarter they lost 82Cr. in Foreign exchange.

@Chins Harsh has been dabbling in mean reversion approach for a while now. Might be a good pointer to use his help to avoid some initial mistakes in your recent experiment.

It’s nice to see you are building position in Chamanlal Setia…I feel it will catch up with KRBL and LTfood sooner than later being a smaller player. But whenever sector is showing lot of positivity smaller player will reward higher.
Disc: Invested in KRBL from last 2 months and Added Chamanlal recently.

1 Like

Thanks for tagging me @vibhor_vaish. I’ve been working with Harsh on companies like Punjab, Suyog, Avanti, Aegis and others. Admire his style a lot! :slight_smile:


Appreciation of Mean Reversion runs into Recency Bias.

1 Like