Thanks for the feedback.
I actually don’t mind small, mid or large caps, however I feel large caps in India look really expensive right now and I think there is not much room for growth. However I do think small cap names are relatively cheaper. 80% of my India portfolio is in small cap, definitely not for the faint hearted.

In US, there are a lot more regulations and corruption is lesser. I don’t want to exit at any cost because small companies will grow to become bigger. But only very few of them will be multi-baggers, if I sell any I reduce the chances of having multi-baggers in the portfolio.

In USA, I work for one of the FAANGS. ~80% of my net worth is in US and rest is here in India. In USA, money is equally split between Index funds/ETFS (US, ex US developed markets and emerging markets), Stocks (mostly US) and cash.

I am very bullish on India compared to US, but I need to learn more regarding the Indian market and will slowly start investing here more.

Bought some Cigniti in July end and some in early October. Bought Gravita in July. Cigniti, as noted above I have a very small position. Its a software testing company, management has aggressive goals to grow. Their ROCE and growth numbers look good so far. You can refer to Cigniti Technologies – Global Leader in Software Testing – #21 by keerthan_bs

Some bright individuals have posted good info.

I am simply too dumb to be able to understand this business, CG issues, its nuances, etc. Moving on to next. I might be wrong, please don’t use this as investment advice or anything of the sort – I am just sharing thoughts as I was looking at the company from an investment perspective.

Here are notes gathered based on readings from AR, ValuePickr & Youtube. Hope this helps existing/would-be investors.

• Super expensive valuation As per one post on value_pickr management has said

potential (revenue) of 400-500 crore in the financial year 2026-2027 compared to 163 Cr in FY23

• Business is currently valued in market at close to 1.2k Cr, that’s almost 3x the potential revenue in 3-4 years.

• Management quality concerns – see super high salaries and related party transactions on valuepickr

– Competition – What is preventing other vendors to enter into their market? Is there a China threat (cheaper products/services than Focus Lighting & Fixtures)? Are they hoping for long term contracts based on their low priced services? If so, can other vendors (in listed/private space) beat them to it? If not, how sustainable is this? Are contracts long term in nature?

• Pricing power – If they are tending to govt, there would be no pricing power as they will have to participate in L1 contract kinda things? For private – they also seem to be catering to some very large brands, which generally take services from multiple vendors and if any of the vendors diverge from the norm (pricing, delivery terms/timeline, etc.) they are usually very quick to terminate the contract and move on to next provider – Is that a threat here? If yes – mitigation strategies, if no, why?

• Management quality – any past/ongoing litigation? Against the company or individual promoters / directors? Is business run by professionals or is it a family owned business? Why is promoter reducing their holding? Trendlyne says in Dec 2022 they held upwards of 70%, now it’s around 50% and meanwhile stock price has skyrocketed. Is management unloading onto retail investors? Has retail shareholding gone up or were these shares sold to other large / institutional shareholders? What about so many CG concerns? Related Party Transactions? Would I be willing to invest one third of my portfolio into this if this was available at acceptable valuations?

• Interest free advances to subsidiary, why interest free? Either put in as capital investment to enable them to grow or charge interest if they do not want this to be permanent capital for subsidiary? Why is a subsidiary company being given free money. That money belongs to shareholders. Has management acknowledged it in satisfactory manner anywhere?

Some major concerns related to Related Party Transactions highlighted here: https://forum.valuepickr.com/t/focus-lighting-fixtures-limited-sme/21606/7

• They give 5-8 yr warranties – but AR doesn’t mention anything along the lines of this being recorded as either Liabilities or Unearned Revenue or Deferred Rev., Their revenue recognition doesn’t mention anything in relation to this. Has anyone looked into this?

Management:

other players like K-Lite … They dont have die casts which is difficult to do in India due to pollution control etc.

• So given pollution control concerns for other companies like K-Lite, is this sustainable for Focus 10-15 yrs down the line?

• What are raw material costs for Focus? Could they end up taking a hit on raw materials end? Who are their primary suppliers? Are raw material costs hedged in any manner?

• In one concall (see post dated Apr 16 by sahil_vi on ValuePickr), management:

Now we do not have to go get certain certification to an external agency we can self-certify it and this is approved worldwide which is a big advantage with us

• Isn’t this contradictory? It’s like grading your own exams? Is this sustainable or simply awaiting discovery by some regulatory authority?

• One user lovekesh_thakur mentioned Auditor’s fees has increased 3X (4 lacs to 11 lacs) from FY21 to FY22. Any address to this?

• Some good pointers raised by johnsgeorge.net on Apr 26 2023 post – https://forum.valuepickr.com/t/focus-lighting-fixtures-limited-sme/21606/61

• A post by rajpapdeja and its response mentions about Cash flow issues due to govt contracts. Reminds me “Here’s all the profits I have made to made – sitting in this junk” – Charlie Munger (Charlie was referring to plant/equipment owned by business in that case)

Wondering why the RAID has been done in those states where there were election. No clarity on if anything found or not.

All good points that said. REC/PFC are much stronger franchisees and thus have greater scale efficiencies. Net result higher RoEs (which matters more than any other metric).