Investing Reflections On India

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...

Metrochem Industries is currently engaged in the business of real estate activities. It formerly owned a dyes and intermediates division, which was demerged from the company in the last financial year.   The proceeds from the demerger are currently deployed in real estate activities with the bulk of it tied up in advances for construction etc. Therefore, the past record of profitability is irrelevant to assessing future business prospects.   It operated with a net cash position of about 30cr (as at 31 st March, 2010). The business is exposed to the risks of the real estate industry including construction material price rises, low availability of land for construction, high competition, vulnerability to economic downturns, increasing customer bargaining power (as a result of greater information availability etc.), greater government regulations on real estate activities etc. The lack of a decent track record in real estate activities would prevent the formation of further se...

Winro Commercial is an investment company – primarily trading securities and disbursing loans and advances. The balance sheet discloses stock-in-hand worth about 67 crores, cash of 18 crores and long-term quoted shares with market values well over 33 crores (Mar ’10) aggregating liquid assets worth over 120 crores.  It has practically no debt (1 crore).  The nature of its business, however, doesn’t permit consistent earnings.  Nevertheless, it generated net profits in each of its last six years. The business is dependent on the vagaries of the Indian financial markets – particularly the stock markets; and is exposed to the risk of material impairment in its holdings.   Furthermore, a rapid deterioration in market sentiment and/or credit conditions could put its not insignificant amount of pledged securities (totalling over 21 crores at Mar ’10) at risk of complete loss. Management, as is consistent with other shareholder-unfriendly companies, have not declared di...