Its not like that. Company is entering the US retail market…This is going to increase its topline..Business of the company is good…I would like to say here…ROE ratio will not decrease rather it will increase since now Kitex will eat away the margins of the entire value chain…It has growth in its pipeline…

One more thing which i believe is – do not consider P/E in small and mid cap stocks…if they have real growth potential…just because if growth is there…the EPS and ROE and everything else is just going to grow 2 or 3 folds in years to come. When you look at the the PE (leading PE) – 2 or 3 years leading – you see PE to be real small..We should invest in Kitex at this moment – but the red flags I have above alarm me from doing that.

Which site are you referring to for WABCO … can you pls paste the link… with Regards,

This morning I picked up the phone and got through to the Company Secretary. Asked him his take on the implications of the TPP. He said he was unware of this and that as of now, there were no signs that this was going to be implemented and that as and when there would be clear news company would take action. The response was quite mechanical and it did not even seem like he was fully aware of the TPP issue. Which is quite unnerving. I also asked him his take on if the company would meet guidance. His answer was classic – This is not my portfolio. ONLY the MD can answer this. I asked if I could speak to the MD. His response – As of now, you cant.

Let me try and answer the questions. Most of what you have asked is already covered in the thread.

1. Nisith Arora had already clarified in the earlier call that it will preferably be two or three acquisitions as opposed to one to spread the risks. He clarified on the call yesterday that talks are going on and some of them have fallen through at the valuation stage. To surmise that the money was raised without any acquisition target in mind is a stretch. Price negotiations are the trickiest part of any acquisition and quite a few deals fall through at this stage.
   Another interesting point that he raised in the call yesterday was that the sellers are seeking out MPS to sell their companies. Sounds interesting but will have to wait for some meaningful merger to happen before we can take this at face value.
2. As investors in MPS, we should be clear that the organic growth will at best be between 10-15%. I would personally pencil in 10% for my calculations. Their entire sales strategy is based on farming existing clients as opposed to having more feet on the street and knocking on doors of new clients i.e hunting. This is a strategy that they have consciously adopted to keep the sales cost in check. This is why it is important that they acquire companies which come with a steady revenue source as opposed to say a TSI evolve which had the right people and domain expertise but need to be redeployed on new projects to gain revenue.

The management wants to be a $80 million company in the next 3-4 years and they are working towards it.

Rahul Arora seemed more confident on this call as compared to the one last quarter. However, the management was not convincing on the questions about revenue growth. Not knowing the sales and profit figures of the three small subsidiaries that you have before you come to an investor call was a miss as far as i am concerned.

The slack that the investor community is cutting the MPS management is decreasing with every passing quarter and i hope that the management is aware of that.

My key learnings are:
1. Do a lot of diligence on management. Biggest losses come from management which are not looking out for minority shareholders. There are many ways to judge this.
2. Only invest in stocks where you understand the business. If you don’t understand the business, don’t invest.
3. It is good to average up on a stock as confidence builds in a company/stock. Many times we anchor ourselves to the initial price and want the stock to come back to that price. However, if you can see yourself holding it 5-10 years there is no harm in buying more at higher price.
4. Mentally think through how you will react if the stock you have purchased falls by 10%, 20%, 30%, 40%. Do the reverse for stock that is approaching your sell price.
5. Know your stocks/business better than most. This means keep track of what is changing in that business/price and be willing to act.