Arman Financial Services: thoughts on quarterly results and future direction

This post is not BUY/SELL/HOLD advice but a statement of my personal views and opinion on the latest results. I own stocks of Arman Financial Services and my views are biased.

Arman Financial Services is a Gujarat based NBFC with a presence in two-wheeler financing, microfinance & SME lending. By the name Arman Financial Services Limited “AFSL” (NSE: ARMANFIN) caters to two-wheeler finance and SME lending. By the name Namra Financial – a subsidiary of AFSL – the group caters to Micro-finance lending across Gujarat, Maharashtra, M.P, U.P and Uttarakhand.

What is my interest in the company?

  • I own 0.06% of its non-class A, public shares. No really. It is my moonshot
  • As some one who tracks the microlending sector closely, I have written about the Microfinance Sector and have been a believer that it will emerge stronger after demonetization

Investment Thesis

Continue reading “Arman Financial Services: thoughts on quarterly results and future direction”

Aditya Birla Fashion and Retail – Good Brands don’t equal Good Business?

This post is not BUY/SELL/HOLD advice but a statement of my personal analysis and opinion.

  • NSE: ABFRL is one of India’s largest fashion retail companies with Madura (premium) and Pantaloon (value) house of brands.
  • ABFRL’s brands include household names that capture the entire gamut of discount and premium customers, including in-house and foreign brands such as Van Heusen, Peter England, Global Desi and Forever 21.
  • ABFRL has the ownership / perpetual license of its brands unlike competitors like Future Fashion and Retail and Shoppers Stop. Intangible Assets.
  • These intangible assets however are not translating into improved ROCE (Return on Capital Employed) and this is not a source of competitive sustainable advantage
  • We can blame the industry structure and the value conscious Indian buyer who prefers substitutes to brands when it comes to discretionary spending such as apparel. The discount disruption by online players like Myntra and Amazon has spoiled the buyer and changed industry structure.
  • We can also blame the huge debt on its books and asset-heavy (rent is 600 crore) model of its brick and mortar retail format, which leaves little in terms of EPS for stock price appreciation.
  • To give you a sense of the enormity of debt, the company reported post-merger, a Goodwill of 1795 crore (which includes Pantaloons, Madura and Forever 21) but the debt with accrued interest stood at 1881 crore.
  • Premium brands do not necessarily lend to margins – Compare ABFRL with Kewal Kiran that manufactures discount brands such as Killer Jeans. Kewal Kiran has an OPM of 15% while ABFRL with its premium brand portfolio clocks under 10%. What matters more is getting the right product-market mix and returns on operating assets.
  • Even in the same omnichannel format, COGS is 93% of sales while Future Lifestyle Retail (Central, Brand Factory etc.) manages costs more efficiently (COGS 90% of sales).

Continue reading “Aditya Birla Fashion and Retail – Good Brands don’t equal Good Business?”

Fineotex Chemicals: Stock Market Recursion

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

The Indian stock market has all types of companies. The deeper you look down the spectrum of market capitalization, the stranger things you will find, growing away from the analyst spot light. Fineotex Chemicals Limited (FCL) is one such micro-cap company. With only 72 employees on its rolls in India, FCL operates in the attractive space of speciality chemicals competing with foreign MNCs that dominate the space of textile finishing. Continue reading “Fineotex Chemicals: Stock Market Recursion”

Investing in Road Infrastructure stocks? Here’s one strategy.

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

While the goose of private capex has been cooked, the Government of India is taking every step to boost public spending on infrastructure.  The focus is currently on roads. In 2015-16, NHAI awarded about 50 projects to build 2,624 kilometres of roads. A budget of US$22.35 billion has been set out by the Indian Government for infrastructure projects, for which highway construction will play a major part. Continue reading “Investing in Road Infrastructure stocks? Here’s one strategy.”

Kriti Nutrients and Sanwaria Agro: Soya and Edible Oils back in focus

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

Soya products and the edible oils are areas I have been closely following. India imports  67% of its demand for edible oil. This is economically unsustainable due to several reasons. There are a few key factors about the industry:

  • The demand for edible oils is inelastic and insulated from macroeconomic conditions as cooking is a basic need for survival.
  • India has failed to be self-sufficient in edible oil production due to misaligned incentives for farmers and low agricultural efficiency, which causes Indian soya to be globally uncompetitive in prices.
  • Soya has applications beyond cooking oil in cattle feed (poultry), food proteins, value added products (like soy milk).
  • China is driving the global demand in soya and increase in prices of the raw material.

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Taneja Aerospace: Speculation’s swift knife, whither will it turn?

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

  • Taneja Aerospace and Aviation Limited (TAAL) operates the Hosur Airstrip, 30 minutes from Electronic City Bengaluru
  • The airstrip is 2km long and can accomodate Boeing and Airbus class of narrow-body aircraft, with in-house hangar and repair facilities
  • The government under its low cost flying or UDAN (Uday Desh Ka Aam Nagrik) scheme recently airmarked TAAL’s Hosur Aerodome as a hub for low-cost domestic flights
  • Inspite of many triggers in place TAAL has historically failed to produce returns on assets making it a speculative grade stock

Continue reading “Taneja Aerospace: Speculation’s swift knife, whither will it turn?”

Grauer and Weil: Are the Risks worth the optionality of future growth?

This post is not buy/sell/hold advice. Please see the disclaimer at the end before reading further

  • Grauer and Weil is one of India’s largest companies in the Electroplating and Coatings chemicals business.
  • It is a diversified conglomerate of both commodity and speciality chemicals, with interests in paints and real estate.
  • The diversified businesses may be holding down growth in the core chemicals business
  • Management decisions need to be closely monitored

Continue reading “Grauer and Weil: Are the Risks worth the optionality of future growth?”