Cupid Ltd – Helping the world play safe!

I had invested in Cupid 3 years back as valuations were dirt cheap and all the ratios like ROCE, ROE, debt, cashflow everything seemed great at that time. I gave up after staying invested for 2 years. Here are few of the reasons for the exit:

1. There is no succession planning. Mr Om Prakash Garg has been saying that they are looking for candidates for CEO position since i don’t know how many years but couldn’t find anyone. Seriously? he couldn’t find a CEO? Every call, he said same thing from past 4-5 years.
2. They don’t have anyone else in the board who can attend the earnings call. Investors have been requesting to bring someone else along with him.
3. They have been trying to get USFDA approval since long time, application itself took so much time.
4. in Q3 FY21 concall, he mentioned that medical device business will have sales of around 50Cr from FY22 and that division didn’t pickup at all.
5. in same call he said revenues will be around 200Cr from FY22 onwards. it is still around FY20 numbers. Here is his statement from the call: “Starting the first quarter of FY 2022, we are projecting an increase in revenue from say about Rs. 150 crores to a total of about Rs. 200 crores. And the margins would improve accordingly as well. If we take a 20% net profit, then you are looking at about Rs. 40 crores for the next financial year”
6. There were plans to increase marketing spends and partnering with some firm to increase D2C reach, nothing happened in that area.
7. They were in talks with Veru for the acquisition but couldn’t close that deal.
8. They are sitting on good amount of cash and in the past mentioned about the buybacks but it didn’t happen.
9. They are totally reliable on tenders from governments and non-profits, which depends on economic conditions and many more things. I don’t think we can have structural growth by participating in these kinds of tenders.

In conclusion, Management is not fraud or anything but doesn’t have motivation to grow. Investors can make money only if someone buys it out. Porinju Veliyath sir also bought stake in this company after the bumper growth till FY20 but then lost patience and exited.