Investing Reflections On India

National Steel is in the business of manufacturing steel sheets/coils/strips etc. The company has reported erratic operating profits on reasonably stable revenues – generating 134cr in operating profits on revenues of about 2,550cr in the last financial year while employing a relatively high net debt of about 265cr, considering the nature of its business. The business requires heavy working capital expenditure resulting in a heavy hit to operating cash flows and is exposed to the risks of import substitutes, heavy competition including from foreign players established in India, raw material price spikes, and sharp business cycles resulting in poor revenues and profits during recessionary times. Management have not declared any dividends in any of the last five years presumably as a result of the erratic profitability mentioned above.   This doesn’t appear to be initiated any time soon unless the business generates consistent profitability, which appears speculative a...

Alphageo is in the business of executing seismic surveys for oil exploration majors such as ONGC, Essar etc. The company has reported reasonably stable revenues and operating profits over the last five years except for a dip in profitability in the last financial year as well as last quarter.   It operated average operating profits of about 30cr in the last five years on revenues of about 75cr.   It employed no net debt as at 31 st March, 2011. The business is subject to risks of international competition from reputed players, crude oil price drops, technological obsolescence, manpower retention, government policies on oil exploration, highly lumpy revenues including periods of significant revenue and earnings downturns in lean times, cost underestimation on long-term projects, legal risks of non-compliance with laws and regulations, etc.