Investing Reflections On India

MRO Tek operates in the computer hardware industry within the networking and communications segment.  It manufactures digital modems and converters and aims to cater to 3g/broadband demand. The company has reported a consistent decline in revenues and operating profits over the last five years, representing a decline in competitiveness – it reported operating losses on revenues of about 25cr in the last financial year.  However, it had a net cash position of about 16cr as at 30 th September, 2011. The business operates in a fast-changing field where new technology renders business models obsolete.  This, perhaps, is the reason for the company’s massive revenue decline.  It is also exposed to the risks of delayed launches and large gestation periods of own products, which could be lethal in such a dynamic industry.

Alka Securities operates in the brokerage business – offering brokerage services and trading in commodities and stocks.  Its balance sheet revealed about 10cr in working capital and 4-5cr of liquid investments financed by 5cr of loans. The company currently has investigations initiated against it by SEBI on allegations of circular trading in shares in 2009, which is pending resolution.  Meanwhile, the company is barred from accessing capital markets, approaching new customers and raising new finance.  The company has lost its existing clients through a period of low retail client participation and the brokerage revenue has shown a consistent decline over the recent past – with no revenue and net losses in the latest quarter (Sep, 2011). Although the company claims innocence, the investigation may be protracted over an extended time period and even a favourable judgment wouldn’t guarantee a restoration of former profits.  Moreover, its trading activitie...

Jetking Infotrain operates in the IT education industry, providing training solutions for hardware and network professionals. The company has over 100 centres throughout the country and has partnerships with IBM for training material, WIPRO for recruitment and various colleges for training students.  It aims to adjust its curriculum according to demand and hence, focuses on recruiter requirements when drafting its courses. The company has reported declining revenues and operating profits over the last five years – reporting about 10cr of operating profits on revenues of about 40cr in the last financial year.  It employed no net debt in its operations and had liquid assets amounting to about 18cr as at 31 st March, 2011. The business is subject to the risks of rapidly changing technologies such as cloud computing, which question the need for extensive hardware/network systems.  Therefore, the company has to always be on the watch to update its curriculum, w...

Orient Beverages is in the business of supplying ‘Bisleri’ branded mineral water.  It is also engaged in real estate activities. The company has reported no growth in revenues but reported consistent net profits (including rental income – see below) over the last five years.  It reported a net profit of 1cr on revenues of 13cr in the last financial year.  It operated with a relatively high net debt load of 5cr (as at 30 th September 2010). The mineral water business has been on a declining trend and is exposed to further deterioration of revenues as a result of slowing demand for its products with no real prospect of a turnaround.  It has been a victim of labour unrest at its plants and there doesn’t appear to be a reason why this wouldn’t happen again in the future.  It has also veered away from its core business and into real estate with currently one major rental customer (United Credit) generating its rental income – this would require a different asses...

Remi Process Plant and Machinery is in the business of supplying engineering goods – primarily Agitators – used in core industries such as petrochemicals, fertilisers, pharmaceuticals etc. for the purpose of mixing materials.  It also generates wind power for sale. A notable feature of its balance sheet are mutual fund investments of over 2.6 crores and freehold land with a cost of about 1 crore, from which it generates substantial interest and rental income. The company reported profit from operations of just 11 lacs (PY: 1.4 crores) on revenues of 17 crores (PY: 24 crores) exhibiting a significant decline in operating performance.  The leverage, however, appears conservative with a debt/equity ratio well under 50%. The decline appears to be a result of the general slowdown in capital equipment spending by the industrial sector, which appears to have hit this company – one of the smallest in its industry – quite hard.  The company is exposed to the risks of indef...