I had some help from the hedge fund which shorted caeser stone and I found the following:
- selling price for daltile (could not find it specific to pokarna’s quantra) is on par with others – so nothign different here
- we would not know about the price they are selling to daltile at – my sense is it should be 10% lower to push higher margins to daltile to make them feel incentivized
- so it comes down to pokarna’s RM as a percentrage of cost being much lower than caeser stone’s.
we know that
- AP/telegana have not given away these mines through open auctions. there is no public information on how chettinad got these mines and how much they are sharing as royalty etc. it all seems very obscure here.
- pokarna has on board a guy who is charge sheeted in the coal block allocations cam – yugandhar. We all know how coal block allocation happened
- Given caeser stone is present in India, I am not able to understand why on the face of it chettinad (check them on google to understand the unsaid) would sell to pokarna at a lower price than what caeser stone would buy at. No one seems to have an answer for this and I suspect we will never get an answer as it involves getting info from chettinad group.
As things stand, given pokarna’s dependence on one single mine owned by chettinad group and possibility of a black swan event (coal block cancellation redux ?), I would look to enter at about 900 – roughly 10x or so but would be cognizant of these high impact, low probability tail risks (russian roulette risks).
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