There is some negative sentiment around the company and its management, particularly concerning their technological claims and receivable days. However, I find that the numbers align with management’s commentary. While there is definitely room for improvement—such as distinguishing inquiries from orders and addressing receivable days more effectively—the situation doesn’t appear alarming.
The company works with channel partners that drive sales, which naturally leads to some challenges in the working cycle. Their business tends to be lumpy, showing significant growth during periods of large orders as they primarily focus on substantial contracts. They seem to take a long-term view, planning from a 3-5-year time frame rather than focusing solely on quarterly performance.
For Q1 2025, we can expect marginal year-over-year growth. According to management, receivables should improve in September and October, but this will need to be monitored closely.
What I find interesting is that everything was fine until the start of July, with the 145-150 level providing good support. However, the company began trading below those levels, leading to larger selling pressure at the start of August, around the 120-125 mark. The selling then intensified, with even larger volumes in recent days.
I believe that every 30-40%+ correction has some underlying fundamental reasons, but in this case, I’ve revisited my initial thesis and looked for recent developments, yet I don’t see anything too alarming that would explain these price movements. I understand the sentiment is weak and there are questions about execution, but such drastic price changes are beyond my understanding.
The only thesis I can offer is that some people made too much, too quickly on this counter. The company was trading at around 4.50 INR in mid-2021, and by the start of this year, it had touched over 200—a whopping 50x return in three years. After consolidating at around 150, the price dropped again to 125. It seems someone decided to cash out and book profits, leading to panic selling among shareholders with similar holdings. Recent buyers, understandably, didn’t want to hold onto a falling stock, especially with the market in turmoil, and within days, the stock was completely decimated.
Disc: This is all just my opinion and limited understanding. It represents 0.6% of my allocation, so there’s minimal bias as well as research. I just wanted to share something odd that I observed during my bi-monthly portfolio review.
| Subscribe To Our Free Newsletter |
