How will an IPO of subsidiary be value unlocking to shareholders? A demerger will be. IPO, I don’t think so. It will be a value destructor in fact. Manappuram will become a holding company of Aasirvad and will get discounted. Aarti Pharma IPO had the same effect on aarti industries

It’s actually a high ROE business, my friend. The details and nuances of accounting can sometimes obscure these gems from the standard screens used by average retail investors like us.

In 2017, the company revaluated its fixed assets on the balance sheet. What does that mean? Imagine you started a business in 1990 with land and machinery valued at 100 Cr. That investment stays on the balance sheet at its original cost until, say, 2017, when you decide to revalue your fixed assets. This revaluation might occur because the land (though not necessarily the building) has appreciated over time due to general inflation. So, the land that was worth 100 Cr. in 1990 might now be valued at 1500 Cr. in 2017. By revaluing your fixed assets, you increase the value on the asset side of the balance sheet, and since it’s a balance sheet, you adjust this with your reserves on the liabilities side.

Companies may revalue their assets for various reasons, such as M&A or maybe debt obligations, though I might not know the specific reason in this case. However, this revaluation increases the denominator in the ROE (equity capital + reserves) calculation, while the numerator (Net Profit) remains largely unaffected.

Many of the high ROE companies we admire today are evaluated based on historical costs rather than current values. If you were to revalue the balance sheets of companies like Asian Paints or Pidilite, which have been around for 30+ years, you might not see those impressive 25%+ ROE numbers. ROE tells us the return on the actual or initial investment, and revaluation can significantly alter this picture.

What I learned after reading the Engineers India Q1FY25 Earnings Call

This is a positive development. It shows that the company’s order book is robust and growing rapidly. The fact that these orders are in the LSTK and OBE segments suggests that Engineers India is expanding its service offerings and tapping into new growth areas.

The Middle East is a competitive market. Engineers India needs to maintain its competitive edge to continue winning projects in this region. This region could become a major revenue hub for the company.

The Indian government is heavily promoting green hydrogen, and Engineers India seems to be aligning its strategy with the national agenda. This could lead to potential government support and incentives.

How do we go about judging the success of the merger? Increase in market share? Earnings growth? Improving earnings power?

What I learned after reading the SAIL Q1FY25 Earnings Call

Industry-level

We have to monitor the global steel market and manage costs effectively. If SAIL can capitalize on the domestic opportunity while mitigating global challenges, the future looks bright.

Company-level

The silver lining is that they plan to gradually reduce this inventory. If they can execute this efficiently, it should help bring down the debt levels over time.

Coke is a significant input cost for steelmaking. By reducing coke consumption without compromising on production, the company is effectively improving its margins. Let’s see if they can replicate this success across all their plants.

If SAIL can successfully implement these de-bottlenecking initiatives, it could lead to increased market share and stronger financial performance.

Investors should keep a close eye on the government’s infrastructure spending and global steel demand trends. If the government steps up spending and global conditions improve, SAIL could see a rebound.

It will be interesting to see how SAIL ultimately decides to utilize this inventory.If they can monetize it effectively, it could have a positive impact on their bottom line.