Hey Raja, my assumption of PE re-rating is mainly because the financial metrics for Virat are second to none and are superlative (though on a small base, so it remains to be seen if this can be maintained). Also, I have reported issues with the story in my earlier posts in this thread.
- RoE and RoCE of 30% and 50% thereabouts for FY15. (there are intangible assets of 10 crore which you need to adjust while calculating equity as this came as good will from Durga Diary acquisition). That’s how I calculated.
- Net Fixed Asset turn over of more than 25 (62.98 crore revenue/2 crore net fixed assets). Not capex intensive.
- Dividend pay out of 40% in FY 15 and more than 50% for 2 years before that. The 50% dividend is on a much smaller base, so let’s not give that much importance to that.
- Inventories as a %ge of revenues for FY15 is only 6.5%.
- Negligible debt.
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Disclaimer
My holding bias may be the reason behind my positive rant, so please do due diligence before any buy.
Anyway, I should stop here as too much positive bias may lead to members getting positively influenced whereas they should take decision starting from neutral view point and drill down based on facts.
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