Investing Reflections On India

Sujana Universal is in the business of manufacturing steel castings, bearings, appliances etc. with other divisions operating in the fields of infrastructure, share trading and other activities. The company has shown high growth in revenues, which haven’t translated to similar increases in operating profits.   It reported 70cr of operating profits on revenues of about 3000cr in the twelve months ending 31 st March, 2011.   It operated with a relatively high net debt of about 200cr. The business, however, generates weak operating cash flows as a result of heavy investment in its working capital. The primary risk with this business is the lack of focus in its business activities – with management time devoted to activities seemingly unrelated to their primary business (steel castings) such as real-estate, share trading etc. and a host of unquoted subsidiaries engaged in unknown activities.   In its steel castings business, it is blighted by the cyclicality of the in...

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...

Malabar Trading Company is in the business of trading shares in the financial markets.   It is based in Mumbai.   It has generated only marginal profits of only 1 to 4 lacs in the last five years.   It has generated a net profit of 8 lacs in the last 12 months but no balance sheet figures are available for FY’11.   Last available balance sheet for FY’10 reveals an unleveraged balance sheet.   The assets are tied up largely in unsecured loans and advances. Management has, however, proposed to enter into a motley group of unrelated businesses including, hold your breath, 1) Agro Food Produce 2) Healthcare related activities 3) Infrastructure and Construction activities and 4) Hospitalities, Entertainment and Related Activities and issued warrants to promoters and select outsiders to finance the new ventures.   It has, interestingly, declared a dividend in the last AGM.   It has also, however, empowered directors to issue bonus shares, presumably to ke...