Thanks for the kind words @nirvana_laha

Macpower is just one of the many SME (soon after migrated to main board) companies I had invested in 2020, the recent price action may be bringing this into focus but I think highly of the other SME companies I’ve invested as well. Anyway, thanks for the good set of questions which also helps me structure the response as well, so here goes

1. Around late 2019, I had discovered Saurabh Mukherjea’s Coffee Can Investing and I had started investing by applying those filters on Screener and weeding out any commodity companies. However, I was mainly focusing on large/mid/small cap companies at that time with at least 10 years of operating history. Then Covid struck and everything crashed. In the first Covid decline (Mar-2020), I was mainly buying the CCP / LCP type businesses (Divis, Titan, Page, Marico, Berger Paints, HDFC Bank, Kotak, Alkyl Amines, etc.). Most of these businesses seemed to be no-brainers after a 30-50% market cap erosion and they all recovered in April and never saw their March lows again.
   However, next month i.e. May 2020 there was another correction (not to the March lows) and this has turned out to be the real Covid bottom for a lot of the broader market mid/small caps. If I remember correctly ~18 May was the 2nd lowest bottom and markets have never gone back to those levels again. Now it was at this time around May/June that I started looking at really small / micro cap companies as well because I saw many small / micro cap companies at absolutely throwaway valuations of 3/4/5 P/E and some even had 5-6% dividend yield. I downloaded the entire list of BSE SME platform and NSE SME platform companies and put screeners on them for profitable growth, low debt and ROE/ROCE (>20%) over the last 3/5 years, whatever data was available. It was then that I landed upon Macpower and few other SME companies which I invested in. I would do the exact same exercise again if we are in a similar market situation. Buying decent businesses with real cashflows for 3-5x earnings multiple is the actual time to load up as an investor because you have such a strong MoS in your buy price. I sincerely doubt that time will come again soon.

2. I bought Macpower as a 50cr company at Rs 50, not even a 100cr company. A few things about Macpower’s business & management immediately struck me (apart from basics such as debt free company quoting extremely cheap)

• Import substitution play – Based on my research, there was a genuine need for it’s products. Indian Machine Tools Association – FY19 consumption of machines in India was worth 23,500 cr out of which only 11,000 cr worth machines were developed in India. Remaining 13k were still reliant on imports. Machine tool industry overall CAGR in the last 10 years was 35% CAGR. Few players present in this industry – only 7-8 key players are present in this industry and Macpower was amongst top 5 players already despite operating at such a small scale

• Capex – Company had undertaken capex to double it’s capacity around 2019-20. I had seen videos of the company’s manufacturing facilities on YouTube

• Genuine honest promoter – he didn’t take dividend in both 2018 and 2019 when it was paid out and promoter had 75% holding so a huge sum of money was waived off by the promoter
  All this was enough for me to take a small 1% PF position

3. No, I didn’t meet them. In fact, I’ve never met any company’s management. One thing I remember watching was one of the interviews of the promoter in 2018/19 where he talked about strong growth potential of the company. By the way, promoter is no fancy English speaking professional sounding management if you ever listen to him on concalls / interviews. But all a shareholder should be interested in is the clarity of thought, vision for the company and execution!

4. As Peter Lynch said “water the flowers and cut out the weeds” – I’ve averaged up on Macpower from Rs 50 to Rs 200 after seeing the management execution and them walking the talk. At Rs 200 also, the business was around 10x earnings multiple which was fairly cheap IMO if they did successfully grow at 25-30% as per their guidance. However, my allocation was only 3.5% – it’s just the strong appreciation which has made it a 7.5% position currently.

As a note of caution for my previous post, the stock % is the current % of PF in that stock. However, you can not guess how much is allocated to which stock – some are in loss, some are in minor profits and some are in big profits like Macpower.

Please keep in mind, I invested in about 5 SME companies around that time in May-Aug 2020 and most of them gave stupendous returns in 1 year or less. That in itself should tell you the state of the markets at that time. Currently, we are a lot closer to EUPHORIA rather than DESPAIR and I’d be extremely selective in investing in any SME businesses today.

1. Beta Drugs (13x from original price, although I’m making less – refer to my posts from Apr 2021)
2. Macpower CNC (7x from original price)
3. Worth Peripheral (exited at 3x)
4. RKEC (exited at 2.5x)
5. MP Today (exited at -20% loss)

I also looked at Chemcrux Enterprises (15x since Jun-Jul’20) and missed it only because it required a big lot size of investment that time

PS: I like the business of my other 2 SME companies more – Beta Drugs and Rajshree Polypack. But then, I’m not complaining if Macpower decides to take all the attention

https://www.youtube.com/embed/mtvmqI0PV2M

Loved the summary …but loved your conclusion even more . The west wants politically correct dictatorship which is motivated by big business and superficially humaitarian but have got issues with anybody if they have divergent agenda. Its fine if …
1.Azerbaijan bites of some part of Armenia because not much business is to be done there or if
2.Saudis bomb the Yemenis since west needs saudi oil or if
3.Saudis flog people or cut off heads in public square but has big issues if Iran does so .
My problem is in believing whether anything that is stated in these books as fact are indeed so or just another piece of propaganda.

Update: We have deployed the document search application at finsearch.in

We have to change the domain as somebody else holds the copyright for word “finsight”.