Hello everybody!

My name is Amit Sharma. I couldn't locate any "Introduce Yourself" page on this forum. I have been a member of this forum for long but was never active. I will try to be active from now on.

I met Mr. Achal Bakeri, Chairman, Symphony Coolers in Ahmedabad. We had some conversation on discussions related to value creation in the business of Symphony Limited.

Mr. Achal Bakeri stated that the value creation in a business happens when the market capitalization of the business grows/increases. I didn't find this statement rational. In my opinion, the value creation in a business happens when the business is able to generate free cash flows for the shareholders of the Company, or RoCE improves and the business is able to create entry barriers.

If it comes to analysing Symphony Limited, they are a negative working capital business. They are asset light, no debt, good Profit margins and RoCE. The Company has design copyrights and they have a good design team and they come up regularly with innovative designs creating entry barriers. This way the business is creating value for the shareholders.

I just couldn't understand as to why he was placing much emphasis on market capitalisation rather than these elements. In my opinion, market capitalisation is the work of the market and it goes up and down in a moment. But the strengths of the business don't wither out easily and they result in healthy free cash flows for the shareholders of the Company. For me, the value creation is these strengths of the business.

May be, he got influenced by the crazy valuations of the start-ups...!!!

Hi Rohit,

We should also look at the company from forward valuation perspective and not just trailing. On trailing basis, yes it does look expensive but on forward basis it might not . I think Q2 results will give us a fair idea about how the earnings will look like in FY16. For FY17, it all depends on the product approvals and off course how the competition pans out in Abilify. I am banking on two things in Alembic:

• Their superior pipeline and R&D: I think the kind of R&D spent company has been doing is really commendable given its size.
• Establishment of front end in US markets: I think we can clearly see how Torrent has been able to leverage more from Abilify as compared to Alembic as it doesnt share its profits with the partners. Front end gives you more leverage on supply chain, pricing etc. They have hired three very experienced pharma executives for the US markets. Lets see how the execution is on that front.

Hi,

Anyone attended the AGM concluded on September 30?

Please do share any notes on the same.

Thanks

@srnarayan

From current rate I see limited downsides for MPS so opportunity cost purely depends on what other opportunities you have at this point of time because I see scope for good appreciation even from here on for MPS because there seem to be many ammunitions still left in company's arsenal.....key monitorable is how well company uses the cash it has whenever it does......even if management can generate less than half the returns from acquired company than it generated in case of Macmillan then wealth creation for investors could be significant which even at current corrected rates many high quality management mid & small caps might not be capable of delivering.......company should not burn cash in any way by making high loss making acquisitions or by buying hgh debt......if at FY18 dreamed scale of management, a 25 % + EBITDA margin is maintained consistently with healthy balance sheet then current valuations will look extremely appealing for not only long but medium term investors too.

Rgds.

Discl - Invested in MPS

Note - This is not a buy/sell/hold recommendation and is only part of general discussion.