CFL

Lighting companies, Philips, Havells and Bajaj Electricals, have increased the prices of CFL (compact fluorescent lamp) bulbs by up to 15% due to soaring prices of key raw material — rare earth element — after the Chinese cut its production and exports.

Phosphor, the rare earth element, prices have shot up almost six times to $300 per kg in the last few months because its supply fell short of demand following the Chinese government's move to protect its CFL industry. An entry level CFL bulb, which was selling at Rs 80 a few weeks ago, now costs Rs 90 in the domestic market.

"Increase in rare earth prices diluted the advantage we had earned through economies of scale," Havells India president Sunil Sikka said.

Weakening rupee too has made imports costlier. Sikka said his company has proposed to the government to remove taxes on rare earth imports to keep prices of the energy-efficient bulbs under check. Indian companies are paying a tax of close to 20% on imports of rare earth.

About 97% of global rare earth is produced in China. The country also dominates the global CFL production with a share of 70%. China's move to limit rare earth exports makes the industry's movement towards clean energy products difficult because there are no alternatives for phosphor, Philips Lighting India President Nirupam Sahay said.

Rising incomes, along with falling prices and increased awareness, have helped CFL lighting to become a Rs 2,000-crore industry, growing 25-30 % a year.

The total lighting market in the country is pegged at Rs 7,000 crore, still dominated by incandescent lamps, or light bulbs. Philips Lighting has increased CFL prices by 7-10%, while Bajaj Electricals increased them by 8-10%.

The cost component of phosphor in CFL has increased to 18% from 5% till the second quarter of this year, Philips Lighting's Sahay said. Companies have not revised the prices of LED, or light-emitting diode lamps, because the cost component of rare earth in LED bulbs is low.

revenue recognition

revenue recognition policies
1. revenue is recognized at point of dispatch of materials to customers
2. Sales is recognized on dispatch to customers
3. Sales is recognized on delivery or passage of titles of goods to customers
4. Sales is recognized at the time of despatch of goods from factory
5. Sales is recognized on dispatch of the goods to the customers
6. Sales is recognized when the products leave the premises of the company

Check out the 6th revenue recognition policy. As soon as the goods
move one meter outside the boundary wall of the factory, the products
is booked as sales. ;)

Regards

Short term Vs Long Term - Difficult to decide once you are listed

http://www.thehindubusinessline.com/industry-and-economy/logistics/article2452876.ece

After reading the article, it is difficult to say whether the
government was too conservative in its estimates of projects or the
players too aggressive in their bidding with traffic projections. But
it is hard to believe that the difference can be so huge that a
positive grant projects turns into a negative grant project. All I can
say at this point is, the players are hungry for order book or sales
and may be are willing to compromise on the margins. Something that
happened with the aluminium conductor industry during FY2009 and
FY2010. PGCIL did not release orders and players went extremely
aggressive in bidding, since these contracts take time to execute, the
actual effect was felt only towards the second half of 2010 and the
entire 2011. Would not a similar situation arise, market will cheer
them for the short term increase in order book but when the execution
happens the problems will begin to show up in the P&L statement. One
more classic example... the air conditioning majors like blue star
entered into the EMP segment and have been badly hit due to the
different nature of the business. They also in order to keep the
revenues growing bid for projects at extremely competitive rates and
now are facing the same problems of low margins or negative margins.
And now they say they will look at managing costs better and improving
the payment terms. Ridiculous. The RoE in the mean time for Blue star
have dropped from the highs in 2009 to the lows it has witnessed now.
I am nowhere saying, that the managemnet of the company is inefficient
all i think is how being listed on stock exchanges and showing the
analysts an increasing trend in sales affects the ability of the
companies to see what their actions will do in the future over just a
slightly long term period say 1-2 years.

Yesterday i read an interesting interview by Samir Arora of Helios
Capital.. He says the markets have become increasingly short term, i
would say they were never long term, analysts are always right on the
short term side of the game, on the long term as i see only two things
can be predicted
1 . The competitive advantage/durability of the moat and you buy this
at a decent price
2. Normailized earnings

Predicting anything else seems a waste of time.

EXCEL VBA

Debug. Print

Immediate Window

Two pretty useful features in excel. You can read about them on the
website here. I would say they are pretty interesting features which i
was unaware until now.

http://www.cpearson.com/excel/debug.htm

Desperate Attempts

The company had a blockbuster IPO listing day and hence forth the
street has thrown the stock on street. First of all the run up to the
price of 255 looked quite a dramatic one. But now the stock is at 15
rupees. or put another way at one point of time, the market value of
the company rose to 334cr and now stands at 25cr. The company has been
trying hard to draw the attention of the investors, through entering
into new areas like

Successful demo plant running in Coastal Gujarat on saline land with
saline water of 15000 TDS with organic fertilizers produced from
effective biocomposting unit and by product biogas is for captive
power for agriculture and irrigation.
Pilot plant on small scale successful for desert land and bigger demo
plants on 10 Acres will start after Diwali.

Dont know if they will actually work out or they are just trying to
draw the attention by doing some random announcements. But its
actually funny how the managerial behavior changes once your company
gets listed and you see the market cap or your total networth getting
eroded as each day passes.

I really need to check up the financial performance of the company,
though i am sure it cannot be good.. otherwise rather than coming out
with these BSE announcements, the management would have done well to
buy its own shares from the open market.

Regards
Vivek Jain

One more Hyderabadi Biryani

Ramky Infra - Two particular interesting things with this company, one
it is based out of Hyderabad and two it is in the infrastructure
space. Our fixed Income Professor at XLRI once mentioned volatility is
not spread out evenly, it occurs in bunches or is grouped together. :)

And every company after being framed with the charges, comes out with
the same statement. We are cooperating and that it was a regular drill
by the CBI.

Eastern silks - Time for CDR

http://www.thehindubusinessline.com/companies/article2236004.ece

Highway Projects - Bidding again intensifies

http://economictimes.indiatimes.com/news/economy/infrastructure/gannon-bids-lowest-for-nhais-rs-1050-crore-project/articleshow/9230811.cms

The revival of the competitive intensity .There was one report which i
read way back in 2008 that in a market of perfect information symmetry
the bid difference should not have huge difference in bid amounts
until and unless either of the three things happen
1. Information advantage
2. Incorrect assumptions and calculations
3. Overagressive bidding, the developer willing to compromise on the
returns due to intense competition and a desire to gain market share

It is generally dififcult to say what exactly happend, it might be
just one factor dicatting the decision or a combination of all the
three factors, but 98 prequalifications certainly is a lot, which
essentially goes on to show that that the techincal norms are not so
stringent that only a selected set of players make it through. Though
not all these players would be eligible for the bigger projects of say
above 1000cr but the fact still remains that the entry barriers are
the least, the proejcts strains the balacne sheet if your traffic
projections go wrong.

Why promoters convert warrants at prices higher than market prices

Today i was reading an article on warrants being converted by
promoters at prices higher than the current market price. Should the
investor take this news as positive?

The act that the promoter is willing to issue shares to himself at the
current price gives some confidence that the current price might not
be overvalued. But if the warrant price is higher than the current
price, it does not necessarily show additional confidence the company
has in its business. It is merely a simple profit-loss calculation
that the promoter does at his end and decides to converts the warrants
even at higher prices. Consider for example
Amtek Auto which issued 1.68 crore shares to its promoters on
conversion of warrants at 180 on June 27 when the stock closed at 160.

Here is the arithmetic behind why the promoters converted.

SEBI requires 25% of the money to be paid upfront irrespective of the
fact whether you would convert or allow them to lapse. So the
promoters had already paid 75.6cr (25% * 1.68*180). Now had they
allowed their warrants to lapse the net loss to them would have been
75.6cr. This cost is a sunk cost.

Now consider the case when they convert their warrants. They can
purchase those 1.68cr shares from the open market at 160 or get those
share at 180.The net difference being 33.6cr (1.68(180-16)). So the
promoter will stand to loose only 33.6cr while in the first case he
lost 75.6cr.

So the conversion is purely from an economic standpoint less
lossmaking for the promoter as compared to foregoing the conversion
rights.

Interesting move

Everonn moves into the business of school uniform.
http://www.thehindubusinessline.com/companies/article2107323.ece

BGR Energy

There is a BSE announcement made by BGR wherein BGR has said, they have surrendered its Category I (previously Category-F) trading license obtained from CERC. The CERC has cancelled the said electricity trading license in its order dated April 29, 2011. I was reading the petition document, the reason given by BGR is "Due to highly competitive power trading business, uncertainty prevailing in the market and risk associated with it, it has not been able to undertake any inter-state trading in electricity".

Is there a possibility that more smaller players start surrendering their licenses as the margins are thin and volumes get too dispersed if there are too many players? I mean should this not be beneficial to bigger players as competition decreases for them due to un-viable economics of small scale operations? Not saying it can be a trend, but does it not show that the industry cannot support a large number of players and over time only the players with large volumes(read PTC) or captive volumes(read tata power) enough to justify a minimum 12% RoE will only sustain in the business?

The market has reacted positively to this news and BGR is up today.This business does not even contribute a minuscule % of their revenues, yet the stock has moved. I find it strange, or  am I missing something in terms of the money tied for getting the license that might get released after the surrender.

Thomas Friedman - :)

There are two superpowers in the world today, There's the United States and there's Moody's Bond Rating Services. The US can destroy by dropping bombs and Moodys can destroy you by downgrading your bonds.

The need to shift to Mumbai

"To achieve speedier growth it necessitated proximity to financial markets. It therefore planned to shift its registered office to mumbai." - A listed entity on the reason to move to mumbai

Found it really amusing as to how shifting office to mumbai can lead to speedier growth, the company failed to mention if that speedier growth was in share price or underlying business. I dont think mumbai offers anything additional to the company in terms of business, apart from the fact that the company would be closer to investors. But there are numerous examples of companies headquartered in Mumbai but still their share price not reflective of their value. Have put the company on my watch list for seeing how the change reflects in its share market performance going forward.

Repeat Order - Hyderabad Biryani

I had written about how I dislike the managements of most Hyderabad promoted companies, recently came across one more company based out of Hyderabad which is again in trouble. This time its a pharma company, Aurobindo Phrama, the stock fell by 9% yesterday, after the company received a warning letter from the US health regulator with regards to its antibiotics manufacturing unit at Hyderabad.

The company had on 23rd February 2011, submitted to the exchanges, a press release stating that Unit IV of the company has been put on an import ban by the USFDA and it will impact the shipments from unit IV to US markets. On this announcement, the company stock fell by 7.8% on Feb 23, 17% on Feb 24 to hit 170.

Yesterday in continuation with the same, the company has received a warning letter from the agency, and in addition based on the field alert report for packaging and labeling compliance for unit III, the USFDA has also asked for submission of a detailed action plan for improvement. The stock fell 9% and today as i write it is down another 5% to 167. So the intermediate action where the stock rose was just in anticipation that the meeting between the company officials and the USFDA will lead to a positive development. The price is back to the same place as on Feb 24.

There is something in Hyderabad that works against the investors. Its like the Bermuda triangle, you are bound to be in trouble if you fly in that part of the North Atlantic Ocean.

BHEL DIS-INVESTMENENT

Today BHEL released its quarterly and annual results and the stock fell 7%. The market reacted sharply to the results(at-least that was I thought initially). I was confused on the reaction as the results were largely in line with the provisional numbers. I kept reading the other pages of the press release, which had three three things worthy mentioning

1. The company had changed accounting policies which had led to higher profits and revenues
2. Stock split, from FV of 10 to FV of 2.
3. Disinvestment of 5% stake by the government.

Initially after reading and re-reading i could not make sense as to what led to this dramatic a fall in the share price of this big a company. I mean 7% in a day for a large cap should be a black swan event.

I will talk about each point now

1. The company had changed accounting policy in Q2-Q3, so it was not a surprise.
2. Stock split!!! That is generally considered a news to cheer on. There are numerous examples where stock split news has led to stocks being locked in upper circuits. Crazy as it may be, it happens. As behavior analysts put it, people feel more wealthy if they see they own 1000 shares @ 50 as compared to 200 shares @ 250. Anyways that could also have not led to the decline in price.
3. Disinvestment, is it not a good news? I mean on Feb 28,2011 the news of disinvestment led to the PSU index going up 3% as against the sensex rise of only 1%.I dont see anything wrong with disinvestment, somebody wants to sell his stake to raise money, what difference does it make if it is some hedge fund or the government of India and neither do i see anything wrong with offering retail clients a discount of 5% which helps in attracing more investors. I would have never applied to Power Grid IPO had I not got the 5% discount, it does help in broad basing the investor base.

So none of the reason appear justified to warrant such a fall. I was reading one article which said that disinvestment caps the upside movement.I would totally agree, but i need empirical proof of the same, so let us take cues from other disinvestments that the government has done so far in this fiscal in order to see is our view correct

Company Name	Price Band	Issue opens	Issue Closes	Date of announcement	Price on announcement	Price on Issue opening date	Price band and announcement day price differential
Power Finance	193-203	10/05/2011	13/05/2011	10/02/2011	251.95	215.85	-19%
Shipping Corp	135-140	30/11/2010	03/12/2010	5/10/2010	168.1	143.75	-17%
Power Grid	85-90	09/11/2010	12/11/2010	22/07/2010	101.45	99.6	-11%

So we can see the disinvestment has not really gone down well with the markets. Disinvestment is not such a good thing after all as the govt. fixed price is generally 10-20% lower than the price on the announcement date and hence the fall in anticipation of the same.

The 5 I's that spook the market

Consultants, marketing teams had their own sets of 5W, 3Cs and 5Cs, time for something in finance, the 5I's

1. Inflows
2. Interest Rates
3. Inflation
4. International reasons
5. Inaction from the government 

Hats off to the CMD of IDFC securities. :)

http://www.business-standard.com/india/news/qa-nikhil-vora-md-idfc-securities/433099/

Why do companies Delist

A friend today asked me why would companys like Blue Dart etc de-list, i dint know the answer, searched for it and some googling gave the following possible reasons, any more possible reasons for the same are welcome

1. High promoter holding say 70%, will lead the promoters to think, why comply with all the listing requirements quarterly publishing of results, communication, analyst questions etc for the remaining 30% of the shares only, better to keep it in our own hands
2. If the company has now further plans of raising capital, then it might not make sense for them to remain listed, like most of the foreign MNC do for their Indian subsidiaries, when they feel that no more capital will be ever required by the business, they go for de-listing.
3. A company feels that they are undervalued and after trying to communicate the strength of their projects to the market, the fail to elicit the valuations, it would be better for them to de-list and rather go in for a PE funding/Private transaction in case future capital is required because the deal value will not be biased by the CMP.

The making of another Hazare

China to quadruple desalination capacity

http://www.thehindubusinessline.com/industry-and-economy/economy/article1645209.ece

KEC International forays into water treatment business

http://www.thehindubusinessline.com/companies/article1612223.ece

Chemical process piping aims at Rs. 100cr revenues by fiscal end

http://www.thehindubusinessline.com/companies/article1618182.ece

All three articles relating to what acute water shortage is going to happen over the world in the coming years. I guess it can be one of the big macro themes in the coming years. But what might happen if such a things does happen

The smart capaitalist

1. Enter the business seeing huge opportunity as the first mover
2. New technology innovation happens, leading to lower cost of desalination and more business share.
3. Identifies and profits from the opportunity

Others/Non Capitalists/News followers

1. Reads Anna Hazare going on fast, abuses the nation, tweets and India yet again records 4.4 million tweets
2. Cant all those people who tweet or go in the candle light marches be told about capital markets and financial education, and be reminded that markets provide an excellent time to buy stocks at these times and show the world the believe of Indians in their economy.
3. Be reminded time and again of the numerous commissions that have been formed every time somebody goes on fast and draws so much attention. Would it not make sense for them to see what happened to the Kirit parikh report, dumped and thrown. What good what a committee do? Does Anna thinks he achieved his goal by getting a committee formed?
4. Be reminded, that wise decision are to be made in the electoral process, if Anna can go on fast, cant some one supporting him stand for the elections and bring about the change that they speak about on tweets. It is easy to blog/tweet.

Few - Extensive - Neglected

The chart below depicts the share price of INDOBORAX at the end of each quarter along with the EPS recorded in each quarter. Some interesting points about the graph

1. Phase 'FEW': During the period 2005-07, the spike in the price used to happen one quarter before the EPS announcements, the stock was covered but not extensively


2. Phase 'EXTENSIVE': During the 2008-09 period the stock began to get a lot of attention, the price went up 1 year in ahead of the EPS


3. Phase 'NEGLECTED': During the 2010-11 period, the stocks is not followed, no aggressive expansion by the management, well they dont need to, there plant is running at 45% capacity only, people loose interest, the price moves after the EPS has been announced.

Interesting Graph!!

Nice articles

http://www.financialexpress.com/news/let-money-become-easier-before-freeing-savings-rate/765180/0

http://www.financialexpress.com/news/hey-steve-jobs-a-few-survival-apps-for-japan/764834/0

http://www.financialexpress.com/news/column-even-age-isnt-on-japans-side/763994/0

EV/EBITDA Multiples for Indian Companies

The chart below shows that 50% of the companies in India trade in a EV/EBITDA multiple of 2-8 times. This graph compares with the Graph of US equities. Almost similar graphs

The graph for Indian equities

The graph for US equities

The maximum no of companies are in the 4-6 EV/EBITDA range and no doubt most of my portfolio falls in that range. I would normally expect the no of companies to decrease as the multiple increases, which happens except for one place where the no of companies rises unexpectedly i.e. 12-16 multiple range both for the US markets and the Indian Markets. I tried looking at the companies which fall in this range, but they did not belong to a particular sector. Any help in understanding this would be greatly appreciated

Interesting articles

Spiders - A business Risk :)

http://www.financialexpress.com/news/gasloving-spider-prompts-mazda-recall-in-us/758109/0

Bank locker room also a make-up room - SBI

http://www.thehindubusinessline.com/industry-and-economy/banking/article1515028.ece

The pain Continues - Punj Lloyd lowers order backlog by 23%

http://www.thehindubusinessline.com/companies/article1509969.ece

A new insight into China's exchange rate

http://www.thehindubusinessline.com/industry-and-economy/article1512766.ece

Bluffed in the Budget

Today was the second budget that I listened. Last time I did not bother to understand it too much, this time I decided to check the numbers. Before I Delve into what has been presented by the FM, here is a small table that will help make matter simple

The FM is projecting a petroleum subsidy of Rs 23,640cr. If I do a backward calculation assuming that given the inflation scenario the government does not increase the prices of the petroleum products going further point 1 gives the scenarios

Item	Petrol	Kerosne	Diesel	LPG
Consumption Quantity (MMT) in 2011-12	15.2	9.3	66	14.8
Current market price	58.37	12.32	37.75	316

1. Now doing a quick math on the above figures, assuming that the government bears 77% of the total subsidy and the upstream bears 33%, the crude price has to be $76/bbl and the prices of these products should not be marked down if crude is to fall to those levels.
   On the other hand if I assume the crude price of $92 which I think is reasonable to assume in FY11-12 the total subsidy bill comes about Rs.98000cr. Now if the government is to provide only 23640cr that is too less at 24% of the subsidy. If the government does that then upstream companies, downstream companies everyone will be paying out huge money and it would be really difficult for the OMC’s to even show a profit figure. The third possibility is he is banking on plugging the leak i.e containing subsidy payouts by ensuring that only the needy get the subsidy through the UID project. I would assume it to be the right step, but assuming that it will happen in 1 year timeframe is like buying a stock with PE of 500!!. Huge expectations!. For as simple as taking approvals for setting up a power plant where you require approvals from just 5-6 agencies takes years, just imagine opening an Indian Rural Facebook with so many districts, panchayats etc


2. On the gross tax receipts Rs.9,32,440 an increase of 25% over the estimates of 2010-11, without too much changes in the tax structure and allowing the exemption to the common man which according the FM will lead to lower tax receipts of Rs.11500cr means he is expecting way too much from corporate profits. I mean how is that even possible, on one side equity markets is punishing companies due to inflationary scenario and our FM comes and says that he is expecting corporate profits to grow upwards of 25%. I don’t think that is possible.


3. For the above kind of growth to happen, credit should be available at reasonable rates, RBI has been tightening monetary policy has raised the key policy rates by nearly 150bps and can raise it further if it does not stop here. The borrowing gets expensive, capital plans get shelved, how does our FM expect the economy to grow by that much amount


4. This year the government received a bonanza in terms of 3G auctions, I say this because all the telecom players have made their not so ugly balance sheet into Altman Z balance sheets. This is not going to happen in the next year. I mean if government expects to come up with 4G then we might expect some payout but again that is not happening, even if it happens, we will need to find a whole new hosts of operators to pay the money.

I think the targets set by the FM are overly optimistic on the backdrop of no reforms and the rising crude prices and higher fertilizer subsidy payouts. FM has been able to deliver what he has promised, this statement is borrowed from one of the speakers on CNBC, but this one looks like he has raise the bar too high for himself. All can I say is best of luck Mr. FM. Hope to see the number s you put out actually being hit.

The market falls

I came across an interesting graph today.. the market falls greater than 500 points. Since it was for the first time that i actually felt the market going down as this time i was Invested rather that other times when i was just an observer. I took the market fall snapshot also.

Getting Squeezed

There are some companies who are dependent on just a single company for a bulk of their revenues. I had invested in one such company some time ago but did not realize this concentration risk. I had bought the company as the market was not factoring in the increased capacity that the company would have. When I look back I realize that capacity addition cannot be the sole reason for buying, as the margins that the company makes on that incremental capacity might be very different. The company I had bought was Hitech Plastics, the company derives 80% of its revenues by selling plastic containers to Asian paints. Now if Asian paints wants to protect its margins in an rising input cost scenario, the first place they will cut their margins is where they have the highest bargaining power and that will be guys who are solely dependent on them and hitech fell in that category.

Next consider the case of a company called Shah Foods which is basically a bakery company, the company does contract manufacturing for Britannia biscuits. The company is 100% dependent on Britannia for its revenues and the company in its annual report acknowledges the fact that they have been trying to diversify its revenue base, and the demand from Britannia is highly erratic and irregular. Their financial performance speaks of the same.

Next the most recent example which actually prompted me to write this article, Mphasis derives 80% of its revenues from HP and yesterday in the results reported by the company there was a mention of the company giving price cuts to its parent company. Now people are questioning the corporate governance issues, but is it not a matter of lack of pricing power and bargaining power rather than corporate governance? It simply shows the solutions being provided by the company to HP are not differentiated and there are other competitors who are willing to provide the same service at a lower cost. Had the company’s product being in-substitutable, the price cut would not have happened as the possibility of switching from one service provider to another involves a lot of costs and effort and time.

Had the company not taken a price cut, HP might have moved to some other solutions provider, the revenues would have taken a further beating and hence the profits. There are numerous companies that take a price cut to push their products, but the fact here is accentuated by the fact that the cut is taken for a customer from where 80% of revenues come, this leaves the company vulnerable to further price cuts since it bulged once, it might bulge once again.

After my learning’s from Hitech I have decided not to invest in companies which are hugely driven by one customer and even if I would invest it would be at a huge huge discount to the multiple that other firms are trading at in the same space.

Mr. Porter said it long ago, look at the bargaining power with buyer and suppliers.

Compounding Machine

Value investing has the same definition but everyone chooses different stocks. The field is huge. But i like the concept of "Compounding Machine" brought about the manager of Akre Focus Fund

1. have durable pricing power
2. have real prospects for growth
3. are not natural targets of regulation
4. require only modest amounts of capital to operate efficiently
5. are run by people of the highest integrity
6. duplicate what happens at the company level at the per share level
7. have an opportunity to reinvest all the excess profits at above average returns

This model of great businesses, great managers, and great reinvestment

opportunities has the potential to create a great “compounding machine”.

Hyderabadi Biryani - Tasted really Bad

Hyderabad Investing sucks!! That is how my experience has been investing in companies based out of Hyderabad. The companies are among the worst in terms of communication of information to shareholders. I guess as Dilios say’s in the movie 300 “We did what we were trained to do, what we were bred to do, what we were born to do”.
The Hyderabadi Companies can replicate the above line with a small word at the end which says ‘-SCAMS’.
The premise comes from two companies that I ended up investing and from other examples that we all are aware of, Ramalinga Raju. Below I will write about the two companies

1. Premier explosives:A company based out of Hyderabad, whose website seems to have been updated ages ago. None of the phone numbers given on the website leads to the company. Even if you try calling the agents, most of the numbers are out of service and one number luckily got a response, a guy picked up the phone, but alas, he did not have the head quarter number.
   
   The problem with the company is the company has been maintaining its gross margin over the past quarters, which is a good sign as the raw material price rises have been passed on to the end consumer which is 90% times coal India. The worry is the employee expenses which have been travelling at the speed of light. On exactly the same quarterly sales as last quarter, the Q3FY11 results show that employee expenses have increased by 28%. In Q2 and Q1 the Y-o-Y increase was 19% and 25%. I fail to understand what has the company been doing without increasing the sales which is leading to such dramatic jumps in employee cost. I had asked the same questions to the management in the HOPE that would reply, but as it turns out that my hopes are based on FALSE EXPECTATIONS. I Have not received any reply from the company till date.


2. Nagarjuna Agrichem The name speaks of its Hyderabad origins, but I somehow got invested in the company due to two good years of growth the company witnessed where it made EPS of 40 rupees each year. But alas!! I was caught at the wrong part of the cycle. Anyways that is my mistake. The company had a plant shutdown for the DECEMBER quarter for 2 months and there was no investor communication!! Can you beat that!! I guess No!! Tata chemicals even if they close the plant for 15 days, they send out a notice to the exchanges. Well that’s the difference!!

I face a dilemma whether to book losses on these stocks or not. For the second one I will wait till the next year. On the first one, if the management replies to the emails that I have sent them after Q3FY11, fine, otherwise that would be my first BOOKED LOSS.

One more thing I was reminded of after the recent market correction is

“Markets go up the stairs, but come down the elevator” – warren buffett