Hey buddy can you send the conact number of the person at nuvama wealth who is doing this. If any link too. Thanks!

I am quoting or referring to the American Express episode in the Buffet biography, Buffet, the Making of an American Capitalist

American Express was a company divinely suited to the time. America had entered the space age, and its citizens were in a futuristic frame of mind. Few products symbolized the attainment of the modern life as aptly as those of American Express. Air travel having become affordable, the middle class was embarking on the Grand Tour, and the traveler’s check had become its passport. (“Checks That Never Bounce,” Reader’s
Digest gushed.) Half a billion dollars of the company’s scrip was in circulation, accepted as readily as money itself. Of equal import, by 1963 one million people carried the American Express card, introduced, merely five years earlier, in the innocent era in which citizens thought it necessary to travel about with hard coin. Time heralded the advent of the “cashless society.” A revolution was at hand, and American Express was its beacon.
And then the bottom fell out. The trouble began, as it often will, in a remote and seemingly minor colony of the corporate empire—in this case, a warehouse in Bayonne, New Jersey, that was owned by an American Express subsidiary. The warehouse, in the normal course of its less than glamorous trade, accepted tank loads, supposedly of vegetable oil, from an outfit known by the unwieldy moniker Allied Crude Vegetable Oil Refining. In return for the supposed salad oil, the warehouse issued receipts to Allied, which used the receipts as collateral to obtain loans. Subsequently, Allied filed for bankruptcy. Creditors seized Allied’s collateral—or rather, tried to.
At this point—November 1963—American Express discovered that it had a problem: “Subsequent investigation disclosed that the tanks contained very little vegetable oil.” What they contained, in part, was seawater, and seawater of very high quality, though not worth its weight in salad oil. In short, the warehouse had suffered a massive fraud, by some estimates totaling $150 million.

The American Express subsidiary also filed for bankruptcy. Whether American Express itself had any liability was uncertain. But Howard Clark, the chief executive, grasped that for a company with its name on traveler’s checks, the public trust was all.

The company’s stock fell from 60 before the news to 56½ on November 22. When markets reopened after the Kennedy assassination, American Express tumbled to 49½.
American Express, which had not missed a dividend payment in ninety-four years, suddenly was said to be at risk of insolvency.
As these events were unfolding, Buffett paid a visit to Ross’s Steak House in Omaha… He positioned himself behind the cashier, chatted with the owner, and watched. What Buffett observed was that, scandal or no, Ross’s patrons were continuing to use the American Express card to pay for their dinners.
Then he went to banks and travel agencies in Omaha and found that they were doing their usual business in traveler’s checks. Similarly, he went to supermarkets and drugstores that sold American Express money orders. Finally, he talked to American Express’s competitors. His sleuthing led to two conclusions, both at odds with the prevailing wisdom:

1. American Express was not going down the tubes.
2. Its name was one of the great franchises in the world.
   American Express had earned record profits in each of the past ten years. Salad oil or not, its customers were not going away. And the stock market was pricing the company as if they already had.
   Because of the bad press and fear of bankruptcy, American Express’s stock price fell from $60 to $35 in early 1964. That is when Buffett pounced, buying 5% of the company with a purchase of $13 million…Warren Buffett Buys American Express

So, why this story? Polycab has been raided by Income Tax Department at 50 of its locations. Its share has fallen by 5% on the last Friday, 22nd Dec., 2023
My question is, should we follow the Buffet example in such cases?
Many great investors like Greenwald and Li Lu suggest that the best companies to buy are those that are near bankruptcy. Of course, you need great diligence to be able to see that despite the blip the company has a great future.

unit economics has just turned worst.

bulk business
revenue per litre of bulk alcohol ~64 + animal feed and other by products ~12 = 75-76
RM cost = 2.2 kg of broken rice (26*2.2 = ~ 57)

Gross margins = (75-57)/75 = ~24% (this use to be (58+10)-(20*2.2=44)/(58+10) =~35%) when broken rice prices where 20/kg and bulk alcohol was 56-58/ kg just 6 months back.

Power cost of around 9-10 rupees a litre which was as high as 12-13 rupees per litre 6 months back.

net net the impact per litre is 6-8 rupees. which means EBITDA margins down by about 700-900 bps going forward from a sustainable margins of 13-15% purely on the bulk alcohol.

Consumer business (business – govt – consumer)

very similar impact of about 6-8 rupees a litre but because there was no price increase (at least till March-2024) margins could be hit by 500-700 bps since realisation is better in consumer business (or one can call it B-G-C business).

I don’t see EBITDA margins of more than 8-9% for the next two quarter unless the broken rice prices fall which has not happened yet.

Key variables in order of priority.
Broken rice – a ~3 rupee/kg drop would mean ~500 bps margin expansion.
Consumer business price hikes – a 10% price hike would mean ~300 bps margin expansion
further price hikes on ethanol – a ~3 rupee/kg increase would mean ~300-400 bps margin expansion.

disclosure : reduces it to just as a tracking position.
All figures are indicative as management doesn’t provide any info.

Interesting !! So, based on these filters, what stocks have you shortlisted for investment?

Thank you Sir for pointing it out. Have updated the post accordingly.