Interview with Anil Sarin - Very interesting read

Src : https://www.valueresearchonline.com/story/h2_storyview.asp?str=33027

Lessons for the DIY equity investor

Anil Sarin of Edelweiss Global AMC correctly predicted the dot-com crash in early 2000. Aarati Krishnan catches up with him to know what Indian investors should watch out for now, and other things

By Aarati Krishnan | Feb 8, 2017

Anil Sarin, now the chief investment officer - equity at Edelweiss Global Asset Management, is no longer directly involved in the Indian mutual fund industry. But it was a story told by an ex-colleague of his, now a senior honcho in the fund industry, that prompted me to meet up with him.

He told me that Anil, as a young fund manager in early 2000, was so convinced that a bubble was building up in the dot-com space that he argued vehemently with his colleagues to book profits on tech stocks. He didn't entirely succeed in convincing them. But his timing was exactly right as the dot-com crash unfolded soon.

After fixing up a telecon with him in the second week of December, I spent the week in suspense as Cyclone Vardah swooped through Chennai and proceeded to rip apart telecom towers and phone lines. But my voice call to Anil miraculously went through and we jumped straight into the interview.

I ask Anil to deploy his trend-spotting skills to tell us what Indian investors should watch out for now. Should we be bracing for a big market crash after events such as the Fed rate hike and demonetisation?

Anil flags two global trends that are disruptive - dollar strength and the commodity rebound. 'The dollar has been strengthening quite a bit after the US elections and dollar strength has usually triggered a global equity correction.' But Anil thinks that emerging market (EM) currencies are oversold and believes that the time is ripe for EMs to come back. The commodity rebound, though, may not be great for FII flows into the country.

No crash

What about that big black-swan event that has come flying out - demonetisation? Does it change the sectors and themes that we should bet on? Anil doesn't think that a big market crash is round the corner though. Why?

'Indian savings rates are high. Until now, these savings were going to four windows: gold, real estate, fixed income and equities. Now, two of those four windows are temporarily shut: gold and real estate. The savings remain constant. So what was going into those four windows has to go into just equities and bonds.'

But he also thinks it makes B2G companies a good bet and reduces the attractiveness of B2C companies. Err... what are B2G companies? They are companies that sell to or deal with the government. Anil's logic is as follows. Until recently, investors were keen on companies selling directly to consumers because these firms had revenue visibility and pricing power. But demonetisation has triggered a negative wealth effect for consumers. Likely job losses in the informal sector also cloud the consumption story. But with the government likely to benefit from demonetisation and emerge as the largest spender in this economy, it is companies that receive their business from the government that now offer visibility. B2G companies are value bets, too.

Anil cautions that to make money now, you have to be bottom-up. 'On a stock-specific basis, there are many sectors and firms doing well and that still trade at reasonable valuations.'

Under the radar

Are there any such good stocks that the armies of analysts have failed to unearth, I silently wonder. But he goes on to cite some live examples.

'Take a sub-segment within textiles: the makers of towels, bed sheets - home textiles. They have high return ratios, strong revenue growth and are foreign-exchange earners. These companies have good visibility and economic margins and yet are in low-teen valuations. Or you can look at specialty-chemical companies which are well placed to tap both domestic and export opportunities. There are some pharma companies in the mid-cap space which offer very good return prospects. There are NBFCs which have been unfairly battered and have a very good chance of growing their loan books once temporary hitches are over. They also make higher NIMs [net interest margins] than banks,' he rattles off in a rapid-fire fashion.

Avoid groupthink 

Anil has told me that Edelweiss' long-only business focuses on identifying '2x by 3 stocks', stocks that double every three years. Sounds great, but with market dynamics changing so fast, aren't such secular-growth stories hard to come by?

Anil says that to do this, it is essential to be contrarian and to avoid 'groupthink'.

Taking a potshot at the crazy valuations for 'quality' stocks in the current market, he says, 'A quality stock is thought to be good at Rs 800, Rs 900, Rs 1,100 and even Rs 2000! There is almost no discrimination based on valuations. So when the earnings momentum of such stocks slows down, the impact on the stock price is disproportionate. Then investors ask, 'I bought a high-quality stock, how come it is losing money'?'

He cautions against blindly following the big names in the market. 'What is good for an older investor who has made a lot of money, may not be good for a new investor who is just starting out. A seasoned investor may have made his money and may be focused on capital preservation more than anything else. He may be quite happy sticking to the stocks that are right up there on the quality curve. This may not be suitable for somebody who is trying to build wealth. He needs to have a more open mind about the new opportunities.' Good point!

Trade secrets 

Can retail investors hope to compete with professional fund managers in unearthing these '2x by 3' stocks? Anil is one of the few industry professionals who don't make stock picking out to be rocket science. He says quite frankly, 'I don't really subscribe to the view that only fund managers who do this for a living can identify such stocks. Yes, if you don't have much time to spare, you can leave it to the fund manager. But otherwise anyone can do it.'

Follow the insider

So what are the two or three things that an ordinary investor can do to identify multi-baggers? Anil doesn't try to hoard trade secrets and shares practical tips for do-it-yourself investors.

For one, 'Look for companies where promoters are increasing their stake, whether through creeping acquisitions, preferential allotments or buybacks. This information is available in the public domain on BSE. This is even collated on a monthly basis.'

As Anil reasons, 'The insider always knows more than the outsider. Plus, self-interest beats all other interest. If someone with self-interest is going in one direction, it makes sense for you to also move in that direction'.

Edelweiss has found that portfolios built around stocks where insiders have recently increased their ownership usually beat the market. 'Individual stocks may make or lose money within that, but if you build your portfolio around this principle, you usually do quite well,' cautions Anil.

Two, look for companies with continuous deleveraging. Interest costs coming down every quarter, with flat depreciation and healthy sales, is the indicator to watch for.

Fallen champs and hated sectors 

Three, one must deliberately look for stocks in special situations, counter cyclicals and fallen champs. How this is done, I ask. Anil isn't cagey.

'To identify fallen champs, you look for a sector where profits are suddenly turning around from a continuous down cycle. You can then go back to the previous cyclical high and see how much operating profit the firm delivered at that time. A comparison of market cap with that profit can help you take a call.'

'In counter-cyclicals, you need to look for a really hated sector and then look for triggers that can change that view. Two years ago, nobody wanted to buy cement stocks, but they have been a great turnaround story. Today, no one touches paper companies, but we see promoters increasing their stakes in this segment. In the September quarter, we have seen a distinct improvement in the earnings patterns of paper companies,' he adds. 

To make money from 'special situations', Anil favors betting on companies in the midst of demergers and spin-offs where the new entity gets listed.

Mid caps deliver 

Our chat so far tells me that Anil leans towards mid-cap investing. So is the view that mid and small caps are risky correct? Is there merit in hunting for good businesses, while ignoring the market cap?

'I would sympathise with that view. Mid-cap investing has worked very well internationally.' He refers to internal studies by Edelweiss which show that in the US, over a period from 1994 to 2016, the small- and mid-cap index delivered double the returns of the large-cap index. 'In China, mid caps have outperformed large caps by 2.7x in the last 11 years. In Germany, we have 28-year data showing mid caps delivering more than large caps. In India, from 2000 to 2016, if you invested equal amounts in the Nifty 50 and Nifty Midcap, you would have made six times your capital in the Nifty 50, but 12 times in the Nifty Midcap,' he rattles off.

But caution kicks in and Anil notes, 'This is not to say large caps are avoidable. There is a survivorship bias in evaluating these mid caps.' He advocates a prudent allocation to mid caps in the portfolio so that you don't need to meet your emergency needs by selling mid or small caps.

Follow the money, not gurus

Having spent two odd decades in equities, does Anil have a favourite investment guru? Is he a sishya of Buffett? Anil gives a very contrarian answer to that one! Following gurus doesn't work!

'We have a culture of blindly following celebrities in India. But equity investing is all about independent thinking. You cannot blindly mimic some large investor's moves because it may or may not work for you.' He reiterates the point about wealthy HNI investors seeking capital preservation, while capital growth is the main thing for the ordinary investor. That may call for totally different stocks and sectors in one's portfolio.

So what style does Edelweiss follow? 'Any style that makes money' is Anil's answer. 'Any strategy that makes money for me is fine with me. In our team, we try to see what has worked in the West. It doesn't matter who it has worked for - Buffett or Phil Fisher or Marks. We re-run those strategies in Indian conditions. If we see that a strategy works on back testing, we adopt it. Everybody likes to be inspired by the greats. But we only adopt whatever works on back testing. We are wedded only to returns, not to the personality'.

With his stints in both private equity and asset management, where does Anil put his personal money? Mostly in stocks, he says. He quickly adds the disclaimer, 'I may be a wrong example. Mine is a risky approach. I put a great deal in equities and over 22 years that has worked to my advantage. I am not advising others to be so skewed.'

Anil says he merges the private-equity and mutual fund approach while selecting stocks. 'I think like a consultant or private-equity investor while selecting a business. I don't take high return ratios at face value but dig deeper into the root cause for those ratios and identify patterns of success. If I find that a new entrepreneur is shaping his business around the same root causes, I bet on him. That has me led to some multi-baggers.' 

Has he made any investment mistakes that he has learnt from? For the first time during this chat, Anil doesn't have a quick answer. 'I have so many mistakes I am unable to prioritise them to give you a good answer,' he says with a laugh.

But he does have lessons that he would like to share. 'Whenever I have missed out on an opportunity, it has been because of a closed mind and a very set opinion. Now I have deliberately forced myself to evaluate companies where my inclination tells me not to go there.'

FOMO

A second mistake is to get influenced by rising prices and to increase your positions for the fear of missing out. You need to overcome this, he says, as it often leads to big losses later.

His one piece of advice to every budding investor is to have an open mind. 'For the youngster today there are so many resources to read, watch and listen to gain knowledge. What you need to avoid is being caught in an echo chamber. This is why people are getting surprised so often, in politics and markets.'

I can certainly feel my mind buzzing with ideas after this refreshing conversation with a truly different money manager.

An interaction with Vallabh Bhansali

http://www.morningstar.in/posts/39516/vb.aspx

An interaction with Vallabh Bhansali

Vallabh Bhansali, Chairman of Enam Financial Consultants

Morningstar | 09-02-17

Vallabh Bhanshali of Enam Holdings is a leading investment banker, investor, venture capitalist and capital markets expert. Nilesh Shah, Managing Director at Kotak AMC, engaged him in a very thought-provoking discussion during the Morningstar Investment Conference. Below is an excerpt.

Enam was an entrepreneurial journey and today it has become an institution. Many people in the audience are individual entrepreneurs. What will be your advice to them in terms of building an institution?

First is inspiration. Do you see yourself doing something a lot bigger than just yourself and then whether that is followed by an intellectual conception of it? Just having an ideal dream is no good. You need some kind of plan that you are able to take action on. Keep reviewing it because everything keeps changing. In every aspect of my life, I have followed these steps: have a large ambition, be inspired by something much bigger than your immediate self, create a conceptual plan, execute, review and renew.

There are many people in this audience who are chartered accountants or lawyers. What will be your advice to them in terms of scaling up their business and accepting change?

Very early in my journey two things happened.

I decided to stop doing what I did not enjoy. I was practicing as an accountant and I realized that I may have been academically brilliant, but my heart was not an accountants. So, I just walked out of my practice, not knowing what I was going to do next. You have to be very passionate about what you do.

The second is rules of engagement. I tell my people, are you the person that you would like to deal with? Try and think of the other side. If you are too selfish, I want my commission, I was my sales, et cetera, it's not good. But if you think of the other side, they will talk to an honest man, a consistent man, a knowledgeable person, and someone who will keep him out of trouble, and if in trouble, will stand by him.

Clients swore by us. The best of people walked into my office saying “Enam should take the IPO because you will stand by”.

Air Deccan was the first low-cost airline. It caught the country by imagination and storm. Captain Gopinath wanted us to do the IPO. As I dug deeper, I realized many things were not solid. Out of the five bankers appointed, three scooted when they realized that things were not as solid as they appeared. But I said “Captain, I'm not going to leave you”.

If I had, the airline would have stopped in next week or so; it was that bad. In the hope of the IPO, the show went on. The day we opened the IPO, the market tanked by 800 points. If we pulled the IPO, the dream of this nation to have a low-cost airline would go.

So we changed the price band. We got the IPO subscribed by begging and borrowing. I have seen this again and again - how you are rewarded for your good work and integrity. The IPO traded well. All the initial investors were able to exit. Eventually that company merged with Kingfisher.

Are you the person who will stand by the client? Will you keep him out of trouble?

So, I think having that kind of harmony in your organization where key people think the same way is extremely important. Be passionate. Be the man you would want to deal with. Be lucky so that you can find a partner of that kind.

You are available to the government, corporates, entrepreneurs, HNI clients, retail clients, acquaintances. You are there for everyone. What will be your advice in terms of building a connect with customers?

I think it's just a matter of being passionate. But I want to tell you another story about time management.

If you distribute uniform time to everybody, you cannot have relationships. But if you give time to people when they need it most, they will still value the relationship. Then you can afford not to be present with them on many, many different occasions.

Let me narrate one extraordinary experience of my life. The papers were full of Essar announcing the deal. Soon after Ruia signed the deal, he called me and said Vallabh, we just signed the deal and we can't forget that we have Essar Oil because of you.

We did the Essar issue way back in 1995. The issue almost didn't happen. It closed with all kinds of difficulties in approving the allotment then in sheer listing. Listing in one exchange was approved; we had mentioned we will approve on other exchanges, difficulties came up there also.

During that period of roughly two months, it used to take a long period of time to list, all kinds of difficulties including court cases being threatened, company law being used, I was sitting at Essar office every day. There were even small tasks I didn't leave to anybody. I said I need to know what's happening. We are facing something and I will fight it. I was not the only banker, there were many bankers, but I was there every day. I did my duty. If I started something, I must do my best not to scoot from the responsibility. Can you imagine my happiness when they do a Rs 80,000 crore deal and they make it a point to say that we cannot forget you?

And the second thing is, if you can't drop what you don't believe in, where there is no value to add, you can't keep on doing new things. So, as I said renewal – I've understood renewal is very important in life. So, you must renew yourself, that's how you remain young. And so, I would say that to whatever extent if you feel that I have succeeded is because of these two principles.

You have out-of-box solutions for many things. How does one become as knowledgeable as you? You are able to see a lot of other things which people are not able to see. For example, some of the advice you gave the government on some of the steps which they have taken…..

To be liberated you must be knowledgeable. Your desire to be liberated from ignorance is what makes you knowledgeable. Not having any selfish interest beyond what you have disclosed is what makes you credible.

So, whether you are talking to somebody in an ordinary fashion, or talking to the government, or talking to sensitive relationships like a spouse or child, the rules of the game remain the same. Before you speak have you given thought if you are qualified to speak?

People still want to come and talk to me and Nimesh because we will do speak without knowledge. If you look at the possibility of knowledge today, it's infinitely greater and easier than what it was when we started 30-40 years ago. I remember when we started, many times we would laugh and say “oh, we are able to trade successfully because we know what is the capital of the company or we have read the balance sheet.” People didn't even know the basic facts. Sorry to say, but many times I come across financial professionals who haven't done their homework, they aren't thorough.

I remember I went through an illness and in a period of three months I read at least 100 balance sheets. You have to be very thorough about what you have to say. And then it becomes an intoxication. You really want to know then. It is not for the results; it is just for the sheer pleasure of knowing.

Over the you have launched many IPOs, some became Infosys, some became Motherson Sumi. What is your advice to the audience to become the next Narayan Murthy or Vivek Chaand Sehgal?

Even Narayan Murthy probably cannot become a Narayan Murthy again.

Walk your own journey. Never forget that you don't control success. If you are after success, there is no formula. But there is a formula for excellence. That's how I have lived my life and that's what I would advise you. Your processes - mental, physical, intellectual, emotional, must be excellent and not just adequate.

If you continue to work on taking them to the next level, the chance that you will become somebody in life is disproportionately high. I have had many Gurus, one of them, Dr. Rooshikumar Pandya, said he does not have a sixth sense. He only uses his five senses very well.

I have personally experienced how you have convinced clients on things which we couldn't convince them for months. In this audience many of entrepreneurs talk to their clients. But does the client always listen to them? What advice would you give them in terms of being an effective communicator?

Every evening when I go home, my communication skills are tested very severely. There is no guarantee that you will get success.

You can control your processes, never the outcomes.

I'm angry because something is bothering me. The other person may have no connection with it. The other person may have a completely different perception. So, if I say something out of my emotion, it is my need. The other person has nothing to do with it. Getting a client to buy something or to act in a certain manner is my need. I've no idea what is the other person's need.

The biggest principles in communication; one, you listen. You have to listen a lot more. The second is to anticipate the result of what you're going to say. And then you can alter your communication accordingly. With these two principles, itself I think one can do very well.

What are the basic principles you follow when you pick up a company for investment?

I think in economics there is a principle that what has value. Diamonds will have no value if there is abundant supply. So only rare things have value. If you look for rare qualities in your company - either from the brand, capital efficiency. Obviously, management is at the top. There are very few good managements, good from integrity and capability point of view and having a business model right. So, if you look for them and you stay with them over the long term, you'll get 7/10 right.

Investment is a very simple process. Life too is a simple process. I think the difficulty that I've seen in many people is that a tree that grows big has a particular seed. It may look the same size as some other seed, so look for seeds that grow tall. In your own life, be that seed.

The method to win in the short term is completely different from the method to win in the long term. You can say, hey, this year chemicals have turned around, so let me invest in it. Now, government policy has changed, so let me jump into it. Those things don't work. Most of the time - news, media, advice, et cetera, is short-term. This has nothing to do with the long term. They are completely different.

Demand may return to normal in 3-6 mnths: Crompton Consumer Elec

http://www.moneycontrol.com/news/results-boardroom/demand-may-return-to-normal3-6-mnths-crompton-consumer-elec_8452261.html

Crompton Greaves Consumer Electrical expects it will take at least 3-6 months for demand to be back to normal as demonetisation-led inventory build up and uncertainty in the real estate sector impacted business.

Speaking from the sidelines of Edelweiss India Conference, the company's MD Shantanu Khosla told CNBC-TV18 the company has gained market share from both the organised and unorganised players.

He says Energy Efficiency Services (EESL) provides scale, which enables them to reduce the cost of LED, and that is passed on to consumers.

The company is working on cost reduction of projects to mitigate the rise in commodity prices and looking at premium end of the market which helps it to improve the mix.

The company reported strong earnings for Q3 with revenue increasing 9.7 percent at Rs 888.9 crore versus Rs 810.1 crore in corresponding quarter last fiscal. Profit was up 39.3 percent at Rs 57.4 crore from Rs 41.2 crore in year ago period.

Below is the verbatim transcript of Shantanu Khosla's interview to Sumaira Abidi and Anisha Jain on CNBC-TV18.

Sumaira: You reported a very strong set of numbers just a short while back but we were listening to some of the takeaways from the analyst conference call that you had post your numbers. You said that definitely the impact of demonetisation is not entirely behind us. By when do you expect for this impact to be over for normalcy to return and can this trajectory of earnings then continue?

A: It is very difficult to predict exactly how long it will take to come completely back to normal because there is potentially some amount of inventory down the channel plus longer-term uncertainties such as the impact on real estate, which impacts our business, I would -- if I had to guess -- say probably three-six months would be the timeframe.

Anisha: You mentioned that you are more exposed to the business segment, so can you please bifurcate what is your sales from business to retail and what part comes from business to business?

A: Primarily our business is business to consumer (B2C). It is only in lighting segment where about 40 percent of our business is B2B. What I had mentioned earlier was there is a correlation between our business and the real estate business. So if the real estate business takes some time to recover that does have a correlation with consumer electricals since a lot of our products are bought along with new property.

Anisha: Give us a word on the gross margin, this time around the beat was around 200 bps higher than last year. With the raw material prices going up, do you see that there might be some pressure going forward or the price hike that you have taken in January, you intend to keep on taking the price hikes, so that you can manage the margins?

A: We will work a couple of fronts given the commodity cost pressure, one is pricing but beyond pricing, it is also critical for us to continue to work actively focused cost reduction projects and the final thing is strategic choice on driving more of the premium end of the market, which helps improve our mix. Pricing we will obviously have to ensure that we stay competitive.

Anisha: You did mention in your conference call that in November and December, you had scaled back some advertisement spend, would we see that coming in Q4 and therefore the spike in the advertisement spend in Q4?

A: We are back in Q4 to advertising at normal levels.

Anisha: Coming to the cost reduction programme that we have been having and even the Energy Efficiency Services (EESL) impact as far as LED and fans is concerned, how do you see EESL impacting the fan segment as well as the LED business going forward?

A: On LED like I had mentioned before, over the long-term EESL has a very positive impact because it has helped provide scale to all of us which has enabled us to reduce cost which will be passed on to the consumer. I do believe however in some of the other segments such as fans, pumps, the impact of the EESL programme will be less than has been on lighting and that is because fans, pumps also involved an installation by a service provider, an electrician, a contractor etc which lighting doesn’t.

Anisha: You were waiting for the December numbers to come by and to discuss the part of demonetisation. Now if you would have a clear idea in terms of the market share, what the growth has been from the unorganised sector to the organised sector and how has the market share been in the December quarter?

A: Our market share in this quarter have grown across our core businesses, consumption market share and we are gaining share from both organised and unorganised.

India Home Loan Exec. Dir. interview

Src : http://www.indiainfoline.com/article/editorial-interviews-leader-speak/interview-mitesh-mahesh-pujara-executive-director-india-home-loan-limited-117021300411_1.html

Mitesh Mahesh Pujara, Executive Director, India Home Loan Limited

India Infoline News Service | Mumbai | February 13, 2017 16:38 IST

“Gujarat, Maharashtra will remain our focus states while Rajasthan may add to our revenues.”

Mitesh Mahesh Pujara serves as a promoter at India Home Loan Limited and has been its Executive Director since August 19, 2015. Mr. Pujara served as Non-Executive Director at India Home Loan Limited from August 21, 2008 to August 19, 2015. Mr. Pujara has an expertise in the areas of Finance, Capital & Stock Market Operations. He holds Bachelor of Commerce degree and has been instrumental in the company's growth in the home loan segment.

India Home Loan Limited (IHLL) is a Housing Finance Company (HFC) which offers retail home loan product for affordable housing segment. Under this product, loans are offered to the customers for Purchase of home, home improvement, home extension and for construction of a dwelling unit on an owned plot of land. India Home Loan Limited formerly known as (MHFCL) Manoj Housing Finance Company Ltd which was incorporated on 19th Dec 1990 under the Companies Act, 1956 in Maharashtra. In 2009, the name of Manoj Housing Finance Company Ltd has been changed to India Home Loan Limited. India Home Loan Limited is a BSE listed company. The company came out with an IPO (Initial Public Offering) in 1995 to augment its long-term resources to meet the needs of the business of housing finance and enhance its borrowing capacity by improving its net worth. Presently the company operates from branches in Urban, Semi-Urban &Rural areas of Maharashtra and Gujarat with own offices, DSA (Direct Selling Agents) and Business partners.

As all the real estate and housing finance companies got big boost from the Finance Minister in the last Union Budget, how are you planning to exploit this opportunity?

We are already addressing the affordable housing segment and have a strong presence in this market in Gujarat. While in Gujarat our focus remains on major cities like Ahmedabad, Vadodara and Surat, cities under our focus in the state of Maharastra include certain pockets in the outskirts of Mumbai and also places like Dombivali, Kalyan, Bhiwandi and Jalgaon and also expanding further in the adjacent areas where major developments in reference to real estate activities are taking place. Being a leading player in this segment, I must say we will aggressively pursue our targets through our network of DSAs across the country and mainly in the western states and directly with the developers of affordable housing segment. Toeing the line of the central government, our contribution will remain significant in this segment in the next three to five years to begin with.

As we have seen most of the banks have lowered the lending rates, can you throw some light about how much impact would it have to reduce India Home Loan's cost of capital? 

Overall 1 - 2 % has been the impact due to reduction in rate of interest in the broader market. However, I must tell you here that the government initiative (CLSS) in passing on subsidy on the interest will have significant impact on the interest cost reducing it by 4 - 6 % per annum and this is going to encourage the aspiring home-buyers as well as the players in the real estate market. We can also tell you this will strengthen business of companies like us.

Most of the financial institutions are finding their ways to housing finance sector, do you see any threat to your company because of this boom? As per you, what are the major challenges you have in this business and how are you planning to combat them?

Competition from bigger group is a threat but the market is too big and we are still a growing player and we do not see this affecting us significantly. The home loan segment as you are aware has been expanding fast and lots of people in the thirties are going for home buying. So there is adequate space for each of the players in this segment, be it the bigger ones and the smaller ones. Also note that the expansion in the smaller segment is equally fast, rather faster than the bigger segment. We have enough space to play and this will help to strengthen our topline in the next one to two years, for sure.

How will JM Financial as investor help the company in scaling up your existing housing finance business?

Their present infusion in equity capital and the possible future infusions as the company grows will certainly help us in consolidating our position. This is a big and significant development in our company.

Apart from housing finance, do you have any plans to diversify your business in other lending segment of finance? 

We are focused only on home loans, LAP and construction finance to developers of affordable housing projects and for now we wish to stay glued in these core areas where we have our expertise. Expansion or further spread, as you may say, will come at a later stage. Now is the time to make our mark more significant in the home loans segment.

Do you have any plans to expand the companies target regions other than Maharashtra and Gujarat? Do you have any plans to spread wings beyond your existing presence?

In the immediate future, we will continue to focus on these two states, Gujarat and Maharashtra only while we have already started exploring markets in various cities in Rajasthan. So while we strengthen our presence in western India, gradually at a later stage, we may opt for entering into northern Indian states, like Rajasthan.

Do you have any plans to change in you capital structure? At what rate are you expecting your loan book to grow in the Calender year 2017? If you can throw some light on you financials and its outlook?

As capital infusion takes place, our capital structure may undergo some changes but the present promoter group would continue to manage the affairs. We expect to grow from present Rs 32 cr to about Rs 48 cr by March 17, > Rs 200 cr by March 18 and close to Rs 350 cr by March 19.

Your message to shareholders?

The company is on the growth path and growing stronger. We can assure of a strong organic growth during the next two years.

Mandhana Retail eyes smaller cities to expand Being Human brand

Src: http://www.livemint.com/Industry/p51BeM3h41ozksu7rDeVaO/Mandhana-Retail-eyes-smaller-cities-to-expand-Being-Human-br.html

Wed, Feb 08 2017. 12 41 PM IST

Mandhana Retail eyes smaller cities to expand Being Human brand

Plans are afoot to open 100 exclusive Being Human stores in the next four years across tier-II and tier-III cities like Raipur, Bikaner, Guwahati and Vapi

New Delhi: Textile and apparel manufacturing company Mandhana Retail Ventures Ltd, which sells the Being Human brand of clothing, is planning to expand its footprint across smaller towns and cities for the next phase of growth.

The company is planning to open 100 exclusive Being Human stores in the next four years across tier-II and tier-III cities like Raipur, Bikaner, Guwahati and Vapi.

“The focus is on tier II and tier III because these are the growing cities with good disposable income. The aspirational value of our brand is much higher in these cities,” said Manish Mandhana, managing director at Mandhana Retail Ventures.

Currently, the company operates 60 exclusive stores across 40 cities, including Ahmedabad, Ambala, Amritsar and Bengaluru.

Mandhana Retail has the global licensing arrangement with Being Human (The Salman Khan Foundation) to design, manufacture, retail and distribute textile products. The royalties from the clothing line support education and health care initiatives of the Salman Khan Foundation.

Priced between Rs699 and Rs9,999, Mandhana sells Being Human clothing through exclusive stores, multi-brand outlets like Central and Shoppers Stop and online marketplaces like Myntra, Jabong and Flipkart. All combined, the company has 600 sales points, including international stores (125 in the Middle East and 75 in Europe).

“20% of our revenue comes from exports and online marketplaces contribute 8% to our overall sales. We have been growing at the compounded annual growth rate of 65% over the last three years,” Mandhana added.

In September 2014, Mandhana Industries had announced the demerger of its retail business and trading operations to Mandhana Retail Ventures, which took place in April 2016.

Earlier in September 2016, the Being Human brand also ventured into the jewellery segment and launched an independent line of diamond jewellery in collaboration with Style Quotient Jewellery Pvt. Ltd.

Style Quotient is the exclusive global licensee of Being Human jewellery.

According to a March survey by consulting firm AT Kearney, the Indian fashion and lifestyle market is expected to touch Rs3,94,000 crore over the next five years, growing at a compounded annual growth rate of 12%.

Currently, the market is estimated at Rs2,21,000 crore.

Known devil or unknown angel? Small cap investing

Src: http://www.thehindubusinessline.com/portfolio/net-worth/known-devil-or-unknown-angel/article9522898.ece

Known devil or unknown angel?

AJAY JINDAL

Instead of investing in start-ups, consider angel investments in public markets

The key reason why people become angel investors is to get better returns. Investors on an average expect around 12 per cent per annum from publicly traded equities; it is roughly equal to that of the Nifty returns. While this is better than fixed deposits and beats inflation, some HNIs want better returns, at least on on a part of their portfolio.

Angel investing is expected to give better returns, since this is arguably the most risky asset class. Anecdotal evidence suggests investors expect annualised returns in excess of 30 per cent from angel investing.

The expectation that such large returns are realisable is what may have led to the surge in angel investing in India. Many angels are successful new generation investors from IP-driven sectors such as technology or healthcare. They have the ability to give strategic inputs to the management of the companies they invest in.

While it makes great sense for them to do angel investing, for many others, this may just be a way of portfolio diversification and an getting an opportunity to earn higher returns.

Two scenarios

This article is for HNIs in search of higher returns. Instead of investing in start-ups, you can consider replicating an angel investment-like scenario even in public markets.

Consider what really happens in angel or pre-series A investing: you take a stake at pre-money valuations of anywhere from ₹6 crore to ₹15-20 crore. It is this ability to buy a chunk of stake at low valuations that really gives you the multi-bagger over a three- to five-year period.

For this, the risk you are taking is investing in a company which barely has any revenue — often just a few lakh rupees and which is perhaps three-four years away from reporting operating profits. In this period, there is a good chance that the company will shut down and your investment will be a write-off.

Now, consider how you can get a similar situation in public markets. As you are aware, the Bombay Stock Exchange (BSE) has more than 5,000 listed companies. These come in all sizes, and there are several hundred that fall in the category which we can call ‘angel shares’. Let’s define them as companies with a market cap of less than ₹25 crore.

Incredibly, almost 2,400 companies on the BSE are angel shares. This is 42 per rcent of the companies listed on the BSE! However, not all of them are traded frequently. So I ran a query to check how many of them were traded in the previous week. This again is a high number — 1,075 companies.

So that’s your potential investment universe if you want to do angel investing in the secondary market. And that’s not a small size at all. I put some more filters to see the quality of companies in this set of 1,075.

More than 200 were found to have annual revenues greater than ₹50 crore. And almost half of them are profitable. Around 15 per cent of these make an EBITDA (earnings before interest, tax and depreciation) margin greater than 10 per cent.

Spot the multi-baggers

As you can see, all these companies are not junk; there is some quality. If you are willing to put in effort to troll through data on these companies, you should be able to get one or two ideas per quarter which can be potential multi-baggers, and can give you angel-type returns of 30 per cent or more on an annualised basis.

If your only reason to do angel investing is to get higher returns on your savings, you might as well try listed angel shares.

However, it is important to appreciate the differences between the normal angel investing and investing in public angel shares.

In start-ups, you interact much more closely with the management, and may even have a seat on the board after you invest. In other words, access to information is much better before and after investing.

Available information will be lesser in case of public shares since you may have no access to the company and the board. Many small public companies are notoriously bad at sharing the real picture with minority investors.

Also, the focus in start-ups is on strong growth. Many public angel companies will be turnaround stories, though finding a growth story is not entirely impossible. Many investors don’t want to look at companies in stress; this class of investors may not favour public angel shares.

Easier exit

To balance these negatives, public angel shares offer the possibility of easier exit if you think your call is not working out. Overall, we think there are good reasons to look at public angel shares, if angel investing is something you are keen on.

However, hard work will be needed to find your multi-bagger. And, if a start-up investment sinks, you can blame the promoter; but if an investment in a publicly-traded share does not work out, you have no one else but yourself to blame.

The writer is partner at Wisdomsmith Advisors LLP, a financial advisory firm

(This article was published on February 5, 2017)