There may be cockroaches in merged HDFC NBFC entity which has now come into a more regulated environment. Its very difficult to grow your loan book at past rate with current book size and if you try to maintain that rate then you are bound to fail. Market is very clever and had anticipated all these thing 3 year backs because of which there is hardly any return from HDFC stock.

My belief is that with the current size of HDFC we should moderate our growth expectation and accordingly valuations.

Discousre: Invested with tracking position

I do like the business model and the long-term potential of the business but when I hear that they are the only ones doing continuous pyrolysis for tyres I am not sure if its the case or if there is any MOAT – a quick Google search reveals that anyone with good funding can buy such machines so how good is the claim that we did some R&D and came up with continuous pyrolysis in 6-8 years.

Any thoughts from anyone?

I had very interesting conversation on this topic with Harsh Beria. Some interesting arguments which came out of that conversation as below

1. Good investible business has to be scalable and scalability comes via market share gain. At the same time scalability is of no use if business model is not granular
2. Therefore good capital allocators tries to achieve – 1) Higher gain in market share and 2) Better granularity in business – per unit of unit of capital employed
3. Ajanta pharma is may be only global pharmaceutical company which focusses only on formulations. There is always a tendency to diversify in CRAMS or API or other segments. Ajanta Pharma decided to solely focus on formulations and extended that idea over 50 geographies which made their business model granular without entering in CRAMS or API saving per unit of capital employed
4. Suprajit eng with just two products since inception managed to create granularity in their business model because of the versatility of the mechanical control cable, which finds application in two wheeler, 4 wheelers, tractors, CVs, outdoor power equipments, construction, aviation, defence, medical, marine and many more industries. Capex requirement for mechanical control cable is one of lowest in auto component industry and they have cracked the code to etch out 16% EBIDTA margin from the product as humble as cable. Therefore focussing on only one product – mechanical cable for almost 30 years ( from 1985 to 2015 ) helped Suprajit to achieve desired granularity with lower per unit capital employed
5. Cera focussed on only sanity ware and bath ware but built consumer franchise unlike most of the building material companies ( more than 60% ) to achieve scale and granularity with lower per unit capital employed
6. Almost 55- 60% of the Vinati’s Revenue comes from ATBS but ATBS is very diverse molecule and find application in various industries – water treatment, oil field, construction, textiles etc

Therefore focussed aggression does not mean business model is not diversified but it means – making business model granular by focussing on …… ( trying to find a right word )

The positives i could relate to during my last check were as follows –

1. new ceo – with good turnaround history at previous company
2. new r n d head – good history at previous entity
3. new cfo – from previous arun kumar group company. Ideally would have preferred a new face
4. new mid level management – as seen on linked in , they are actively hiring guys from api companies esp hikal / etc. would love to see hiring from divis / dr reddy / auro.

It would take a while for company to develop new products. Debt is on higher side considering the scale and capacity company has.
P.s – Have a tracking position. Waiting to buy to some better results. Expecting that in FY 25 onwards.

@mohammadarshad27 as per screener the EPS, Net Profit etc are down by ~10% and the sales is up only by 6% YOY, how can we consider this as good numbers, can you please explain, I am new to the market.