Saturday, September 20, 2014

Poddar Developers - India - Micro Cap

I admonished to keep at less than 1% for large portfolio (20 INR Crore+) and < 2% portfolio weight for small portfolio ( < 1 crore INR)  for this micro cap.

There is some information received through grapevine and other market channels, which to be fair should be in the market to keep symmetry, even though it means short term stupidity.

- The company results are always chequered with profits booked only on actual sale and project completion
- It appears that there will not be sale of buildings and houses over the next couple of months as multiple projects are mid way construction, March 2015 could be a better quarter
- I wished the company to continue in low cost housing < 25 Lacs INR apartment and scale out to other states, but the company is acquiring land for mid income housing in Maharashtra - 60 Lac - 1 Crore INR range of apartments

So expanding out the low income model in other states is also looking unlikely in short term. Becoming a stronger regional player is a bigger focus than becoming a low cost housing specialist pan India in the short term

- I also wished the company to get into NBFC space in low cost housing as Gruh and Repco, given that Dipak Poddar is one of co-founders of Bajaj Finance (first cousin of Rahul Bajaj), co-promoter of Bajaj Auto, and also the promoter of Poddar Developers Ltd

The company has long term plans to get into it but NBFC business is looking unlikely in short term as company has hands full with housing projects.

 - One the positive side company has taken in well the Corporate Governance message and expects to improve it in subsequent year.
- We have also learnt that in real estate sector, company provides highest levels of transparency to purchasers/end users of apartment by publishing prices on the website. This is unmatched.

 Couple more links:

“We don’t sell more than one flat for a single buyer. We have a 75:25 mix of actual homebuyers and investors,” said Rohit Poddar.

"Poddar Developers launches Rs 825 crore project in Shahapur"

"Poddar Developers eyes Rs 500-cr revenues by FY'17

I had spotted Atul Auto 20 Rs and invested for myself and partnership in 2012 @ 35 Rs and @45Rs  respectively, based on advance from customers (CMP 377 Rs). I see similar strength in Poddar Housing product.

"Besides, we will fund the expansion through internal accruals. We are not keen on raising funds through debt or equity, mainly because of high interest rate and higher cost of valuation."

- Remains a developing story and likely to stay sideways for next 6-9 months. A product that customer pays for in advance is typically a Bajaj Auto scooter in monopolistic India of 1970s.

Disclosure: Invested. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Law of diminishing marginal utility in India | Go Nigeria

Most of the portfolios in India have returned 3x in the past two-three years, lulling us into a feeling as invincible as supermen.

It has become increasingly hard to find value stocks in India. One has to compromise on few important characteristics that are hallmark of a good investment. For me a good investment is one as good as first or second home buying decision. Overpay for 10% grower stock with survivorship traits (super abundance of names like Blue Dart etc.), or compromise on corporate governance, or perpetually live in hope with micro caps.

For the first time in life after 2009, I feel I am awfully short of money and super abundant with ideas to invest. An investment bank just gave us the opportunity to invest in 15 countries in Africa. There are at least 10 super strong heavy-duty companies in Nigeria alone. A couple of monopolies got listed in Africa including one in Kenya in the past one month.

I mean "blink" is the word. You blink once and you have spotted in investment in Africa with one days of effort in each country vs finding needle in a haystack in other countries including New Zealand and India.

Some companies offer compelling long term propositions in Nigeria without steep multiples such as:

GlaxoSmithKline NIGERIA

Be gluttonus with these opportunities that are unlikely to cause indigestion. As always it is legal and allowed for anyone to invest in Nigeria if you are part of human race.

More detailed writeup on some of these opportunities sometime later.

Good to have a problem of plenty, not complaining.

Wednesday, September 10, 2014

Two Microcaps - India - 2014

Poddar Developers

Amongst a few microcaps that I was invested in, I acquired two in the past 1 month in my personal account, but could not buy enough of either opportunity and would it be advisable to keep below 2% of small portfolio and 1% of large portfolio. 

 - Orient Beverages @ 24 INR 
- Poddar Developers (PD) @ 200 INR, still want to accumulate.

 Spent over a week researching PD. Poddar Developers has a phenomenal MD, Rohit Poddar and business model who has been heaped praise even by HDFC Chairman Deepak Parekh who says, "Unfortunately Deepak Poddar has only one son, Rohit". "We support them and have viewed their title deeds, their legal documents".

Management looks quite clean but real-estate sector in India involves crummy deals and palm greasing not only to local mafias but also to the biggest bandit  of India, Govt. of India, not only by small real estate developer but all and sundry including Tatas.

Rahejas, Lodhas, DLF, Unitech will not be able to crack low housing or at-least have not yet been able to so far. 10 Lac INR apartment for DLF is like producing an Atul Auto scooter for a company that make Porsche. Only Tata appears to be serious about affordable housing/low income housing. Market potential is 500 times the market cap of affordable housing industry, the sector that is driving GRUH and REPCO loan books. 

 HDFC Chairman - Deepak Parekh, who never visits real estate developers and applauds them publicly, is paying tribute to Poddar Developers and Rohit Poddar in this video.

Jam with Sam - Rohit Poddar 

Orient Beverages  

B/S looks okay with rental income. Company sells market leader Bisleri (36% market share in India) in West Bengal and is venturing into soft drinks. Has strong links with Parle. Did not expect price to go to 100-150  bucks, but in this cuckoo market everything is possible.

As usual feel free to go nutty as a fruitcake or mad as a hatter with your research. Market definitely seems to have gone given the price movement.

Disclosure: Invested. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.