The harsh portfolio!

As of today, I have utilized the 1% remaining cash position to add Suyog Telematics as a deep value bet, which brings down cash to zero.

In the last couple of years, I have been reasonably successful at implementing a deep value strategy, where the idea is to buy reasonable cos at very good prices & hold for 2 years to see if there is some kind of value unlocking.

Suyog fits in this framework very well as the company has grown well and are available at cheap multiples. Over last 5-years, Suyog has grown sales, operating profit and PAT at 21%, 21% and 19% respectively. They generate 25%+ ROICs and have invested for growth, which is shown in their gross block growth of 32% vs sales growth of only 21% in last 5-years. Company is currently trading at 8.7x p/e and 6.3x EV/EBIT, which is quite reasonable for this kind of growth profile. I think there are 4 major reasons behind such cheap multiples:

1. Vodafone is a large customer, it can lead to receivable problems if they go under
2. Telecom industry is consolidated which will lead to lower realizations per tower for Suyog
3. Suyog has certain conflicts with MSRDC which has led to decline in revenues this quarter
4. There are certain related party loans given to Suyog Funicular (which is also a listed co)

My rationale for investing is that despite such low ARRs for the telecom industry and consolidation, Suyog has improved margins and grown sales. The sector has seen a lot of stress, and Suyog has managed to tackle this (maybe because of their niche business strategy). If situation improves, there can be a positive delta as company has already done very well in a downcycle, and a couple of their competitors have gone out of business. Lets see how things play out.

Core compounder (44%)

Cyclical (42%)

Slow grower (4%)

Turnaround (4%)

Deep value (6%)