The harsh portfolio!

Kovai Medical has a land bank of 27 acres to build on? This land is in Avinashi Road in Coimbatore where most of the new development is happening in Coimbatore. Many new luxury hotels are on this road. This hospital is quite close to the airport as well. A cent here should go here for say around 20-40 lakhs and probably on the higher side. Would it be worth it for another hospital to buy this much land and compete with them?
However, not sure if they can scale to other cities? They are expensive but still have good doctors so they are a very busy hospital.
I have been sitting on my hands watching this share go from 100s to where it is now. I didn’t buy at that time because they had too much debt.

4 Likes

Hi Harsh ,

I see that you are holding ITC as largest position in your portfolio. Can you share your investing style - are you doing sip or buying in dips in general and also in case of ITC?

Thanks!

I sold my 2% stake in Care Ratings as I don’t have clear visibility on their future growth trajectory. It seems CRISIL has gained significant market share from everyone else as evident in their growth in last few quarters. This leads to buildup of a 2% cash position which I will deploy soon. Updated folio is below.

Core compounder (44%)

Companies Weightage
I T C Ltd. 8.00%
Housing Development Finance Corporation Ltd. 4.00%
NESCO Ltd. 4.00%
Eris Lifesciences Ltd. 4.00%
Ajanta Pharmaceuticals Ltd. 4.00%
HDFC Asset Management Company Ltd 4.00%
Aegis Logistics Ltd. 4.00%
Gufic Biosciences 4.00%
HDFC Bank Ltd. 2.00%
PI Industries Ltd. 2.00%
Shri Jagdamba Poly 2.00%
LINCOLN PHARMACEUTICALS LTD. 2.00%

Cyclical (42%)

Companies Weightage
Kolte-Patil Developers Ltd. 4.00%
Sharda Cropchem Ltd. 4.00%
Avanti Feeds Ltd. 4.00%
Aditya Birla Sun Life AMC Ltd 4.00%
Manappuram Finance Ltd. 4.00%
Alembic Pharmaceuticals Ltd. 4.00%
Amara Raja Batteries Ltd. 4.00%
Ashiana Housing Ltd. 2.00%
Ashok Leyland Ltd. 2.00%
Heranba Industries 2.00%
Kaveri Seed Company Ltd. 2.00%
Control Print Limited 2.00%
Sundaram Finance Ltd. 2.00%
Time Technoplast Ltd. 2.00%

Slow grower (4%)

Companies Weightage
Cochin Shipyard Ltd. 4.00%

Turnaround (2%)

Companies Weightage
Punjab Chem. & Corp 2.00%

Deep value (6%)

Companies Weightage
ATUL AUTO LTD. 1.00%
Jagran Prakashan Ltd. 1.00%
D.B.Corp Ltd. 1.00%
RACL Geartech Ltd 1.00%
Shemaroo Entertainment Ltd. 1.00%
Modison Metals 1.00%

Hi!

About ITC I have been holding ITC for the last few years, I increased the position size to 8% in 2021 as valuations became very cheap and there was absolute ridicule around the stock. Business wise, they have done reasonably well. This being said, I sold some ITC shares in past few months to bring position size back to 8-10% and rebalance to other positions.

About general investing style I am value focused bottom up investor who likes to incorporate multiples styles within my portfolio. I hope not to make blunders at a portfolio level, and perform reasonably over cycles. Reasonable outperformance over long periods of time makes for unreasonably good track records, thats my attempt!

14 Likes

Hi @harsh.beria93!

I notice that you have a pretty spread out portfolio with the highest allocation being 8%. Can you elaborate how you decide your portfolio allocation strategy/concentration? Do you want to limit the max drawdown in your PF or do you target a particular CAGR over a number of years? Also do you have a core vs satellite portfolio strategy or do you hold everything in a core portfolio?

Its always a trade-off between concentration and diversification right? What guides this balance for you?

2 Likes

I made a follow up presentation on the agchem space where I categorized cos by different criterias like: complexity of core molecules, end selling markets, business model and level of backward integration. I compared 6 cos in this presentation (Punjab chemicals, India Pesticides, Meghmani Organics, Heranba, Bharat Rasayan, Astec). Key takeaways are summarized below.

Molecule complexity: Punjab Chemicals ~ India Pesticides >> Meghmani ~ Heranba ~ Bharat Rasayan >> Astec

End markets: Punjab Chemicals ~ Meghmani ~ India Pesticides ~ Bharat Rasayan >> Astec >> Heranba

Business model: Punjab Chemicals >> Astec >> India Pesticides >> Bharat Rasayan ~ Meghmani >> Heranba

Backward integration: Heranba ~ Punjab Chemicals ~ Meghmani >> India Pesticides >> Bharat Rasayan >> Astec

The presentation is also available at the link below. I will be happy to discuss further as this space is seeing good growth and valuations are also reasonable.

47 Likes

As of today, I have increased my position size in Punjab Chemicals to 4% from 2% earlier. This brings down cash to zero.

Brief thesis: Most Indian agchem cos are strong in insecticides, particularly in pyrethroids and organophosphates range of molecules. In past few years, a lot of capacity has come up in these molecules and I expect realizations to be impacted going forward. With this context, I find Punjab and IPL as differentiated as they are not reliant on pyrethroids or organophosphates. Instead, they are making niche molecules where they are the only major producers out of India. As a result, both IPL and Punjab have been able to get dominant global market shares in their core molecules.

For context, Punjab’s largest products are Metconazole, Metamitron and Diflufenican. Their exports shares in these products are shown below:
Metconazole: 40%
Metamitron: 65%
Diflufenican: 100%

Recently, Punjab launched prosulfocarb and thiocyclam. In prosulfocarb, the other significant Indian co is IPL and in thiocyclam, there is no one else from India.

If we were to look at margins, IPL’s margins are the highest in this industry, whereas Punjab’s margins are much lower. On a gross margin basis, Punjab’s margins are much higher than industry averages, however the same is not reflected at the EBITDA level. I feel with scale up, Punjab’s margins can go to 18-20% levels in next 3-years. If that happens, Punjab can make 150 cr.+ profits in next 2-3 years which makes for an interesting risk reward situation.

The reason for me choosing Punjab over IPL is both are trading at similar multiples, but there is a larger scope for margin expansion in Punjab vs IPL.

Core compounder (44%)

Companies Weightage
I T C Ltd. 8.00%
Housing Development Finance Corporation Ltd. 4.00%
NESCO Ltd. 4.00%
Eris Lifesciences Ltd. 4.00%
Ajanta Pharmaceuticals Ltd. 4.00%
HDFC Asset Management Company Ltd 4.00%
Aegis Logistics Ltd. 4.00%
Gufic Biosciences 4.00%
HDFC Bank Ltd. 2.00%
PI Industries Ltd. 2.00%
Shri Jagdamba Poly 2.00%
LINCOLN PHARMACEUTICALS LTD. 2.00%

Cyclical (42%)

Companies Weightage
Kolte-Patil Developers Ltd. 4.00%
Sharda Cropchem Ltd. 4.00%
Avanti Feeds Ltd. 4.00%
Aditya Birla Sun Life AMC Ltd 4.00%
Manappuram Finance Ltd. 4.00%
Alembic Pharmaceuticals Ltd. 4.00%
Amara Raja Batteries Ltd. 4.00%
Ashiana Housing Ltd. 2.00%
Ashok Leyland Ltd. 2.00%
Heranba Industries 2.00%
Kaveri Seed Company Ltd. 2.00%
Control Print Limited 2.00%
Sundaram Finance Ltd. 2.00%
Time Technoplast Ltd. 2.00%

Slow grower (4%)

Companies Weightage
Cochin Shipyard Ltd. 4.00%

Turnaround (4%)

Companies Weightage
Punjab Chem. & Corp 4.00%

Deep value (6%)

Companies Weightage
ATUL AUTO LTD. 1.00%
Jagran Prakashan Ltd. 1.00%
D.B.Corp Ltd. 1.00%
RACL Geartech Ltd 1.00%
Shemaroo Entertainment Ltd. 1.00%
Modison Metals 1.00%
20 Likes

Hi harsh, Can you plz throw some points on future prospects of Amara Raja Batteries. Lead acid batteries is a decaying industry.

I have shared my thought process on allocations before, you can read more here.

Also, this debate about diversification is rather meaningless. Our time should be spent more on improving our understanding about businesses or in formulating new investment strategies. There are people who have built meaningful track records with 5 and 5000 stocks, choose anything which resonates with you.

Also, given that I am running a long only folio, I cannot control absolute drawdowns. If market goes down, my folio will go down with it. However, I can control my own allocations on stocks on the basis of current risk reward and try to minimize mistakes.

Hi Ravi,

I feel its wrong to assume that lead acid batteries is a decaying industry. If we look at underlying industry trends, lead acid batteries are still growing volumes. Any my thesis with Amara Raja is that their margins will improve with lead prices coming down as their competitive positioning is the same (or even stronger) than the case 5-years back. I have shared my thoughts at link below.

5 Likes