On Monday, 12th September 2016, when the Sensex crashed like a ton of bricks, Brahmal Vasudevan, the whiz-kid founder of Creador Capital and Latinia Capital, was spotted on Dalal Street. Brahmal tried to keep a low profile. However, he was not successful because my super-sensitive radar spotted him and tracked his movements as he made his way through the gold-paved streets of Dalal Street.
Brahmal stopped at the counter of Veto Switchgears, a micro-cap with a market capitalisation off Rs. 248 crore, and picked up a lot of 130,048 shares for his personal portfolio. He paid Rs. 1.54 crore for the purchase at the rate of Rs. 119 per share.
To everyone’s surprise, Brahmal again turned up at the Veto Switchgears’ counter a couple of days later (16th September) and bought another chunk of 93,470 shares. This time he paid Rs. 1.25 crore at the rate of Rs. 134.50 per share.
Stellar track record at picking multibagger stocks
Brahmal Vasudevan and his ace team at Creador and Latinia enjoy such a formidable reputation for picking multibagger stocks that we simply cannot ignore any of their forays into Dalal Street.
|Stock||Date of purchase||Price paid (Rs)||CMP (Rs)||Gains (%)|
|Chola Finance||February 2012||160||1201||695|
|Repco Home Finance||April 2013 (pre IPO)||170||824||412|
|Somany Ceramics||February 2014||115||613||380|
|PC Jeweller||February 2015||244||484||75|
|City Union Bank||July 2016||120||137||14|
|Ashiana Housing||February 2015||220||146||(34)|
One can see that out of the six stocks that Creador Capital/ Latinia/ Adria have invested in so far (some are now exited), three are super-duper multibaggers with gains in excess of 300%. Two stocks are relatively new but have already notched up respectable gains. Only one stock (Ashiana Housing) has disappointed owing to the slowdown in the realty sector.
It is notable that the common theme in all stock picks is that they are all “B2C” companies i.e. companies that cater to the ultimate consumer.
According to experts, B2C companies are better investment candidates because they are able to provide value-addition and wrest higher margins for their branded products from the ultimate consumer as compared to other companies (such as ancillary companies) that supply to other manufacturers.
Blockbuster Q1FY17 Results
Veto Switchgears Q1FY17 results were stunning to say the least with a quantum jump in revenues and profitability:
|VETO SWITCHGEARS & CABLES LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs CR)||248|
|EPS – TTM||(Rs)||[*S]||7.48|
|LATEST DIVIDEND DATE||22 SEP 2016|
|BOOK VALUE / SHARE||(Rs)||[*S]||41.28|
[*C] Consolidated [*S] Standalone
|VETO SWITCHGEARS & CABLES LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||JUN 2016||JUN 2015||% CHG|
(Source: Business Standard)
Scorching growth expected in FY16-17 and onward
Why Brahmal Vasudevan developed interest in Veto Switchgears becomes evident when one sees the interview of PV Sharma, the CFO. The salient points of the interview are as follows:
(i) Hefty growth of 25% CAGR for last 7-8 years:
The Company is witnessing good and sustained growth. It is growing at 25% CAGR for the last 7-8 years.
It recently started overseas business in Dubai in the name of Veto Overseas FZE and achieved Rs 60 crore sales in financial year 2015-16.
(ii) Ambitious sales & PAT Targets for FY 2016-17:
For 2015-2016, the top line target was Rs 170 crore and the PAT target was Rs 15 crore. Against this, the Company achieved top line of Rs 176 crore and PAT of Rs 17.30 crore.
In FY 2016-2017, the guidance is top line of Rs 280 crore with PAT of Rs 26 crore. Looking at the market scenario and domestic industry growth, the targets are likely to be achieved.
(iii) Growth outlook for FY17-18:
For FY17-18, the Company is aiming at achieving 30% growth.
The turnover target for Dubai business is Rs 120 crore and Rs 160 crore from India.
(iv) Huge capacity utilization potential:
The present manufacturing output is only one-third of the capacity in the Haridwar plant. The turnover can be tripled with the existing capacity.
(v) Robust demand scenario:
The Company has just introduced LED lamps and is receiving good response from consumers.
The Company is focusing more on electrical accessory business rather than fire and cable business. It has four verticals: Switchgears, fans, led and CFL lights and wires and cables, all of which have robust demand from consumers.
(vi) Rapid expansion to different geographies and increase in dealer network:
The Company is present in 10 states in India and intends to expand its presence across India. The existing dealer network is 2500 and it is focusing on increasing the same to 3500 by the end of 2017.
Buy recommendation of DD Sharma
DD Sharma, the veteran stock picker, was amongst the first to recognize the potential of Veto Switchgears as a potential multibagger.
In December 2015, when the stock was languishing at Rs. 100, DD Sharma recommended a buy on the basis that the Company is a strong regional player with a reputed brand. He also emphasized that the promoters have a 70% stake in the Company. He correctly foresaw that there would be “exponential growth” in the Company and promised a target price of Rs. 140, which has been achieved.
Buy recommendation of Ashish Maheshwari of Blue Ocean Strategic Advisors
Ashish Maheshwari recommended a buy of Veto Switchgears on the basis that the “major trigger” will be that all the unlisted group companies will get merged with the listed company. Veto’s turnover and profitability will be multi-fold this year and the stock has the potential to double in one year time, Ashish Maheshwari opined.
Ashish Maheshwari speaks of Chennai Petroleum & Veto Switch Gears as investment options considering a 6 month windowhttps://t.co/rZRpRXPxVA
— ET NOW (@ETNOWlive) August 12, 2015
Heavy stake by Nirmal Bang promters
As of 31st March 2016, the promoters of Nirmal Bang, namely, Mindset Securities, Kishore Bang and Suman Bang, collectively hold 335,880 shares worth Rs. 4.53 crore at the CMP of Rs. 135. Their holding as of 30th June 2016 is not known.
Buy recommendation of Nirmal Bang
Nirmal Bang recommended a buy in October 2015 on the basis that the Company is increasing pan-India presence and is consolidating its business.
Buy recommendation of HDFC Securities
HDFC Securities has also expressed optimism about Veto Switchgear’s prospects. It is emphasized that the consolidation is likely to lead to a quantum jump in revenues and profitability and that the aggressive expansion plans auger well for the prospects of the Company.
Buy recommendation ofManagement meet note by ICICI-Direct
ICICI-Direct has issued a management meet note in which it has explained all the salient points about Veto Switchgears. It is pointed out that Veto is a dominant player in Rajasthan and that it is looking to aggressively expand across the Country.
One can confidently say that Brahmal Vasudevan has got himself a top-quality stock which is on the trajectory of rapid growth in sales and profitability. His portfolio can be expected to sparkle in the near future owing to the hefty gains that Veto Switchgears will contribute to it!