Hitesh portfolio (20-10-2024)
Few years back I had started to learn DCF but a learned friend pointed out the negatives related to that method and I gave up. There are too many suppositions and gazing in to future, and these days things change too quickly for most businesses. So I like to look at the trajectory of the business, rather than put an exact value to it.
Hitesh portfolio (20-10-2024)
Hi… Can you suggest which is a better course, Safalniveshak or SOIC?
Hitesh portfolio (20-10-2024)
Dmart as a business is a fantastic business. But a great business may not necessarily mean a great investment. An oft repeated saying in markets is price is what you pay and value is what you get. So even great businesses have to be bought at right time and right prices. Coming to why it started falling, fundamentally there can be a number of reasons.
But on charts, the clues were present in Negative divergence in RSI Indicator in weekly chart. In April stock price made a high of 4890 and RSI made a high of around 78. But in recent rally to 5400 plus in Sep 2024, RSI was lower and could not even cross above 70. These kind of negative divergences may not always play out, but can provide early warning signals to be on the toes to look out for any major negative chart developments on chart front. First real signal on daily charts was a gap down day on 3 Oct 2024, where stock price closed at 4942, and since then it has been mayhem in price action and it closed at 3986, a cut of nearly 1000 rs within a few days.
OAL was in a flag like consolidation since nearly 8 weeks and last week gave a breakout above falling trendline. It has been retesting its previous key breakout level at 503. Usually this retesting is not restricted to an exact price point, but in general the price keeps dancing around that level without really breaking down too much. And once consolidation is over, (which may take a few days to few weeks depending upon the time frame of chart) there can be a breakout. disc: I own it and remain bullish.
Kotak Mahindra Bank – Low Cost Liability Banking Franchise (19-10-2024)
Anyone has a good view on the valuation of the subsiaderies?
Given the PAT runrate of the kotak investment, kotak amc and kotak securities has exploded all which deserve valuation twice standalone bank. Also kotak life has superior margin and return profile vis a vis industry.
my back of envelope calculations show subsidaires after 20% holding discount should be valued at 700-770 Rs/share. So core standalone bank is trading a 2x book value cheapest of all the banks.
I think it would be critical for kotak to get back to 20% growth runrate or also to look at good acquisitions as current leverage is low and the CAR is too high for it to do 16-18% ROE, even after being best on NIMs and ROA.
Kotak given its 100% control over subsidiaries is probably quite antifragile as most of its subsidiaries dont carry balance sheet risk and would aid core bank to drive higher growth without diluting equity
The harsh portfolio! (19-10-2024)
Its been a few years since I am invested in RKEC projects; as there are no specific threads on RKEC, I am adding my notes from their last few years of operations.
Unexecuted Order book
- Jan 2017: 357 cr.
- Jun 2017: 444 cr.
- Aug 2020: 823 cr.
- Sept 2021: 867 cr.
- March 2023: 1158 cr.
- May 2024: 915 cr.
Problems faced since FY20:
- Abrupt termination of a contract after 85% completion in Purvanchal project without any justification 13.04.2018; political change; 38k power connections to BPL customers; (80 cr.) negative cashflow; Went through legal and arbitration; contract validated and work completed; only 36 lakh remaining amount to be received. Bank of Baroda panicked due to large negative cashflows, added 43 cr. of negative cashflow by increasing 10% margin money; reduced overdraft limit (50 to 37.5 cr.). Consistently been convincing BOB and convinced them in 2022 which reduced margin money; took cash credit from Bandhan bank. Time lost is forever
- Accident in Farakka project leading to loss of 2 lives: was running ahead of schedule, it wasn’t fault of RKEC, reason is yet to be found. This accident was followed by national lockdown due to covid. Project has restarted in FY24. 2.5 km bridge (4 lane bridge), one bridge by June 2024, remainder by Dec 2024 and complete project by March 2025
- Ukraine war: steel price increased, took a 10 cr. hit on one project, in another project it was neutralized
- 200 cr. negative cashflows since (80 cr. Purvanchal fully recovered + 43 cr. BOB recovered + 20 cr. tax issues not recoverable + 30 cr. Farakka project not recoverable + 20 cr. COVID not recoverable; steel price hike, etc.)
AGM23 notes:
- Took more banking relationships (Bandhan bank, ICICI bank, 80 cr. from another national bank, have approached BOB to reduce margin money and increase in cash credit limit)
- 1800 cr. bid – final decision awaited (200-500 cr. size projects), 1500 cr. bids under submission, will have 1000-1200 cr. order book at end of FY24 (achieved 915 cr. in May 2024). Want to have order book of 3x of turnover
- Don’t undertake distress bidding which is being seen in NHAI projects currently
- FY24 margins will see 1% improvement (actually saw 3% drop)
- Tax issues have been resolved and tax liabilities has been provided in books
- They had faced delays in payment of taxes, EPFO. 90% out from this difficult situation and will get out of high cost of loans by H2FY24. Still have little bit of liquidity issues. Focus is on stabilizing co in next 2 years and then go for expansion
- Contingent liability is down to 9 cr. as of today, confident to remove remainder by FY25 (accomplished)
- Have resolved issues that had impacted them and expect considerable growth in next 2-3 years
- 5 projects of 300 cr. completed in FY23 (jetty in Haldia port, freshwater intake for Adani Power in Jharkhand, cruise terminal in Vizag, and 2 other projects in Vizag). No negative remarks in these orders
- 42 cr. arbitration orders won – 16 cr. realized so far, confident to realize remainder amount
- 30 cr. additional credit limit with ICICI bank (80 cr. + 47 cr.). Reduction in margin money by 5%, working capital has been brought down significantly
- 17.6 cr. fixed assets added
- 400 cr. sales in FY24 and better in FY25
- Monthly EMIs < 1cr. in all term loans combined
AGM24 notes
- Seeing growth opportunities in logistics, green energy sectors
- Few more arbitration and claim cases going, this has become routine part of their income stream. 1 arbitration + 1 claim ~ 30 cr. currently outstanding.
- No unresolved issues in Farakka project, have been given extension until 28th Feb 2025. Positive to finish by March 2025. 83% progress currently. Can get additional claim from insurance company for Farakka site
- 400-450 cr. target revenues FY25 (Q1 was good, Q2 may not be good because of monsoon)
- Unexecuted order book in March 2024: 900 cr. (407 cr. Andaman + 100 cr. Andaman + 150 cr. Farakka + 180 cr. Mirawal). These values will increase because of additional works in this projects + inflation (~1000 cr.)
- 600 cr. expected order wins by December 2024 (won 186 cr. until Oct 2024)
- Want to increase unexecuted order book to 2000 cr. order book by March/June 2025 (want to maintain orderbook at 3x of sales)
- Receivables issue: Project in Uppada (near Kakinada) – government funded project taken from another corporate. Exited (4 cr. pending). Other receivables are in normal course of business and fully realizable
- Haven’t paid interest to promoters for borrowings from them, will pay once their liquidity is sufficient
- BOB (main banker) – 10.65% on CC (made proposal to reduce it by 1%); ICICI – 9.5%, Bandhan – 12% (small loans availed during covid)
- Credit limit: BBB/Stable (with positive ) for 390 cr. Using 295 cr. currently. Got new sanctions of 35 cr. from CSB + 80 cr. from Indian bank, positive of getting these sanctions by end of this year. Can reach 600 cr. sales with this (with 400 cr. debt). Demand for bank guarantees have increased
- Will be looking at financial restructuring (including raising money)
- 14-15% PBIT margins, arbitration income was offset by higher one-time expenses (e.g. taxes)
- Gross block increased to 101 cr. (from 51 cr. in FY20). Has also made them more cash strained, bought 2nd half stuff as well for commercial viability
10.03.2023 Infomerics
- Assigned BBB/stable for long term bank facilities (310.86 cr.)
- Activities are managed by Garapati Radhakrishna, Ms. Garapati Parvathi Devi and Garapati Ram Mohan. They are assisted by a team of professionals
- Takes up short to medium term projects (18-36 months) and handle limited number of projects at a time to ensure timely completion
- Unexecuted order book of 1157.6 cr. in March 2023 (to be executed in 2-3 years)
- The average utilisation of fund based and non-fund based working capital limits of the company stood high around ~84.49% and ~85% during last 12 months ending 31st January 2023
- Raw material fluctuation risk is mitigated to some extent with presence of price escalation clause
- Projected to generate cash accruals of Rs. 14.48 crore in FY23
12.05.2023 Infomerics
- Proposed Long Term bank facilities of 70 cr. (in addition to existing 310.85 cr. existing bank facilities)
- Unexecuted order book of 1015.09 cr. which is to be executed within 2-3 years
- The average utilisation of fund based and non-fund based working capital limits of the company stood high around ~83.69% and ~84.62% during last 12 months ending 30th April 2023
24.06.2024 Infomerics
- Rating outlook upgraded to BBB/Positive (from Stable). Additional long term bank facilities proposed for 100 cr.
- Unexecuted order book of 915.14 cr. in May 2024 (to be executed in 2-3 years)
- The average utilisation of fund based and non-fund based working capital limits of the company stood high around ~81.53% and ~78.31% during last 12 months ending 31st May 2024
Michael Valentine, 74, Who Helped Drivers Stay Under the Radar, Dies (19-10-2024)
An engineer who loved to drive fast, he helped build an industry-altering device that made its debut after the national speed limit of 55 m.p.h. became law.
Kiri Industries: Loan reduction and demand surge (19-10-2024)
Well said – The shares are ‘effectively’ pledged (both of Dystar and Kiri) as it is litigation financing and the Private Creditor of Singapore would not lend money without the ability to sell the shares in case the loan is not repaid by Dec 2025. RBI does not allow pledging to foreign lenders so ‘encumbrance’ is used but effectively it is pledged. This makes it very risky now if money does not come by Dec 2025. Then Kiri is at the mercy of the Private Creditor to allow extension and not invoke the shares. It is a high risk gamble on part of the promoter to borrow now vs patiently wait for a year!
Very low likelihood but nonetheless, what if court case is extended beyond Dec 2025 due to some gimmickery of Senda (and say Private Creditor is working with Senda/LongSheng) Private Creditor invokes the Dystar shares and passes it on to Senda – black swan event but a risk nonetheless)
I don’t intend to FearMonger but just adding a remote possibility esp. as this case has taken so long already that anything looks possible here and so market will not believe this situation unless money comes in the bank account.
Disclaimer – Invested small % of pf and understand this is almost binary event now esp after this latest aggressive financing event!