We will keep updating this page for future updates relating to companies which are down significantly post suggestion. Please not that only those companies would be covered which have been suggested before 4 qtrs.
Most small and midcap companies have seen steady decline in the past one to two years, despite having strong profits. Even some of the best PMS schemes have their portfolio’s in losses. So there is nothing wrong with your portfolio if its in Red. Interests rates are at an all-time high, and there is a very good possibility that they will rise even further in the near future. There are very few occasions when markets hit fresh highs when rates of interest are elevated. So long as it is obvious that the pattern of interest rate hikes will reverse, this turbulence or underperformance in small and midcap companies will continue. Economic cycles last at least two to three years, and the stock market is regarded as one of its early indicators.
According to our projection, the business cycle will flatten out in the first quarter of FY 24 and begin to pick up after that. That is why we always ask users to have a long term time frame while investing in the markets. Additionally, we anticipate a significant improvement in the technology sector, which has been severely struggling for a while.
Last week when we had suggested few mutual fund schemes for lumpsum investment, we also said that we do expect market to bounce back from 17350 levels which it already did.
Date of suggestion – 18/June/2021
Price – 311 Rs
Down since suggestion – 55%
If we observe over past 4-5 quarters the sales of the company have been following downward trend with decreasing operating margins with company reporting loss in the current quarter. Also post Q2FY22 company has not done any concall conference as well so there is very little information shared from the management.
Going by the financials , Net profit for the year ended march 22 was just 15 crs down from 43 crs in march 21 and from 117 crs in march 2019. It is likely that the company may report loss in the current year.
Additionally the exact debt of the company is difficult to take a call on but over the past several years despite decreasing profits the debt of the company has been quite steady.
The company had substantial work in progress, which is better. Since 2019, the company has spent approximately 180+ cr. Without taking into account depreciation, which totals 73 cr, fixed assets have increased by 122 cr since 2019. Based on this, we conclude that despite its declining financial condition and declining sales, the company is making a concerted effort to weather the current storm, and there is a good chance that it will soon see a return on its current investment. Additionally company has no shares pledged and the promoter holding is also stable.
Therefore in case if there is turn around then we expect the same to happen only after the end of Q2FY24. Also since very less information is available in the public domain about the company we will get more clarity on the sectorial outlook as well as management’s comments only after they release their annual report or undertake a concall conference.
We are personally holding shares of the company and our exposure to this stock is very very small, therefore we are planning to hold it for another year or so. Normally we do advice users from time to time that they should put only that money in this stocks which they are happy to lose and we stand by that rule while investing in microcap companies. So we have no issue in continuing to hold this stock. For now based on our above analysis we continue to hold the stock but we are refraining ourselves from any additional investment since there is no clear direction where the company is heading.
You can refer to the detailed report from the link below.