Well this is my second banglore based company where I have started investing and it's again due the simplicity of the business and easy access to company executives ,since I work in bangalore. Already the company is selling very cheap although they have huge debt but it's not a bad debt because most of it is going into increasing landbank .Also the amount of unsecured loan is around four times the secured loan. Company's sales declined this quarter and that's why it is hammered by masses. I tried to get the approximate value of the stock based on DCF model and the value comes out to be Rs13 which on 50% margin of safety will be around RS6-7(Well usually I donot go by DCF number because I'm still not very efficient in it but for simple businesses yes I 'm always able to find out range and do all my buying in that range).Getting the price by DCF I started using scuttlebut approach finding every information about the company. Most of my scuttlebut points gave favourable outcome but the one very important ,which is organisation should grow like a tree ,is failing as they are foraying into telecome voip business,while ideally they should foray into biodiesel business as they are totally agriculture base.Well this point is well into my DCF calculation as I have not included any cash generated by companies cable and telecome foray but yes I have added them into capital expenditure.Well in my view derisking of business is a sign of management's lost faith in what they saw the company to be 10 years down the line but I attribute that to some useful way of rejevunating it's cable and telecome business which will eat cash from itself and will not do any profit margin increment.
Profit margins of the company are exceptionally great and they might vacillate around current level or may also go down due to huge expansion plans but downside is little since raw material cost is almost negelegible ,profit margins will pick up. The main concern is shipment of goods of which I'm having a closer look and will update in this Blog.
Currently I'm working hard to find great companies in alternative energy sector. Since I'm a chemical engineer and I have done lot of experiments with Biodiesel so it has to be my hot favourite. Well another sector of alternate enery is solar enery and I'm telling this not becasue cost of PV is going down but there are number of experiments being done in this field which will change the way solar energy has been tapped and the latest invention is PV ink which is an outcome of nanotechnology. Well moserbaer ,webel-sl,XLT are some of the companies working in this sector .In biodiesel sector I am constantly working on finding about IKF tech and southern online. Well I will update about them when I'll be sure in my findings. Till then. Happy Investing!!!!
I'm into blogging to make a community of young or elder value investors who all can discuss about the favourable outcomes of the hammered businesses.