Investing Reflections On India

Torrent Cables is in the business of manufacturing power cables, insulated cables etc.  Specifically, it manufactures XLPE and PVC cables.  The company has reported fluctuating profits on revenue levels of about 200cr – reporting 11cr in operating profits on revenues of over 250cr in the last financial year.  It employed minimal net debt to finance its operations as at 30 th September, 2011. The business is exposed to the risks of price increases in its major inputs such as aluminium, copper and PVC compounds etc. Further, the nature of business is such that contracts are negotiated on a fixed price basis and tenders generally take a while to get finalised, which exposes the company to risks of intervening input price increases.  The business is also exposed to INR depreciation resulting in increased import costs.  Of course, the business could hedge against commodity and currency risks, but these are fraught with the risks of opportunity costs as we...

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...