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Thangamayil – Multibagger

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A great sage once wrote, “Great prophets like Christ and Krishna come to earth for a specific and spectacular purpose; they depart as soon as it is accomplished. Other avatars, like Babaji, undertake work which is concerned more with the slow evolutionary progress of man during the centuries than with any one outstanding event of history. Such masters always veil themselves from the gross public gaze, and have the power to become invisible at will. For these reasons, and because they generally instruct their disciples to maintain silence about them, a number of towering spiritual figures remain world-unknown.”
Manish Dave, my friend is one such investor who is more seasoned yet humble than other famous fund managers we see at Smartmoney, MorningStar or Gurufocus or who saturate CNBC with noise all day.
Manish Dave’s management meet and research notes below. 
Thangamayil sells jewellery, and as a stock it is a GEM too. 
Management is god loving, not god fearing and very ethical. This is my first concern as an investor for any company. Even when they were small not a milligram of gold sale was left unreported. This was told by people other than in their management.
Employees admire, not fear, their bosses. I could see employees extremely friendly with customers and extremely friendly with me as an investor. They were very open to any of my questions and there was nothing to hide.
TMJL’s operation at existing stores is like a well oiled machine.
Management is very much focused on Jewellery business. They don’t have any other business and they don’t want to do anything else. I could see their passion for gold and jewellery. On top of that, tuning amongst family members is good. So management bandwidth for growth is there. One of MD’s sons is planning to study gemology and not engineering is a good sign which shows that they are committed to the business.
They have barely covered 50% of TN and many pockets even in the covered area are available. So for their growth, sky is the limit. After TN they can go to other states. They will be able to grow as far as the eye can see. Compared to other retailers who spread out at far places, logistics is easier and less expensive for TJML. Plus marketing is also cost effective.
Their main business is gold and it going to remain that way. Diamond in small towns will not replace gold. Cultures don’t change that easily and TMJL understands that.
Company management is traditional, yet open to new ideas. They are making full use of technology weather it is alarm system, video conferencing or IT. Security systems are robust. Management is very open to new ideas and I saw no hint of ego to accept new ideas. I suggested few things, they liked them and MD immediately asked relevant employees to implement them.
Stores are spacious and full of choices. I think the best part for the customer is wide variety and value for money. Thangamayil is a well recognized and trusted brand for them.
For future growth TMJL keeps on training managers at existing locations. TMJL has also tied up for the fund and have identified locations at different town. So all the ingredients required for growth are present.
TMJL management is willing to share profit with its investors. Compared to other jewellery companies, their dividend is good even when they are growing at 50% and there is huge expansion plan ahead.
100% of their business is retail. No wholesale. (Margins are obviously better in retail.)
Cost of fund is on decline and will keep on declining with RBI will cut the rate sooner rather than later. That will be icing on the cake.
TMJL is also planning to start online sales in 3-4 months. That is non-fund activity as they don’t need to keep additional inventory. Only extra cost will be marketing, which is not much as it also creates awareness and gets footfall into stores.
Where do you get a company which is growing at 50% and is available at trailing p/e of 4 when even dividend is growing? TBZ is quoting at p/e of about 12. Why should TMJL not quote at par or above TBZ? TBZ declared dividend of 7.5% while TMJL declared 70%!! TMJL is due for re-rating once investors recognize this GEM. Difference between TBZ and TMJL is that former is the known brand in Mumbai and Gujarat where investor communities live, while TMJL is the known brand in Tamil Nadu not in Mumbai/Gujarat. So it is like a hidden gem.
·       High debt: Since the company is growing fast with internal accruals, they are using debt. But debt is mostly in liquid inventory – gold. I had mentioned to the management about the risk of the decline in gold prices. They are aware to that risk and are increasing gold loan portion to reduce that risk. Once that risk is covered, I am not concerned about the debt as it is totally liquid and their business is retail.
·       Opportunity: The opportunities are huge. IMO they need to increase brand awareness in cities like Coimbatore, Salem, and Tuticorin with help of more advertisement and involvement of outside agencies in marketing. This can increase sales and brand awareness substantially in newer cities.
There is an opportunity in creating other brand as they have infrastructure for the rest of the operation. For example Hindustan Lever has Lifebuoy for ‘Tandurusti ki raksha’ and they have Lux for “Saundarya”. So they can add smaller stores in big cities with more push of diamond/platinum/gems etc.
In the future they can add loans against gold in the existing stores. This division will run on zero additional cost. As all the expenses for location, electricity, security, employees, marketing are already in place.
Overall I was extremely satisfied with my visit. TMJL will certainly get recognition with investor communities by their sheer performance. Floating stock is only 9% according to my calculation. My price target for next 2-3 years is 700. If market sentiment gets better, it can go even higher. The logic is quite simple. Company plans to grow 50% CAGR. Even at 40% CAGR the profit will double in two years. Even after two years there will be visibility for growth. So even at extremely conservative valuation company can easily get p/e of 8-9. You cannot go wrong with TMJL. So be right and sit tight.
Disclosure: Manish and I are invested in TMJL.

Written by amitdipsite

July 7, 2012 at 9:58 pm

Posted in Uncategorized

120 Responses

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  1. Govt intervention to reduce Gold import by increasing duties and rising Gold prices is also a concern as co. has 60% revenues is from Rural


    July 8, 2012 at 6:29 am

  2. This comment has been removed by the author.


    July 8, 2012 at 7:11 am

  3. Thank you for this! I was trying to get the original post – perhaps Manish's blog: Could you provide the link?


    July 8, 2012 at 10:52 am

  4. Dear Amit

    Good to see your Analysis on Thanga Mayil ( Golden Peacock ) Jewellery.
    I mentioned it as multibagger in my last years e-mail.
    I bought it last year because of many convincing points but sold it after few months because

    1. Company was increasing debt,Interest rates were increasing.
    2. Cost of funding was high, their corporate FD rate was @ 12.5%.
    2. Very Poor stock performance of Shree Ganesh Jewellery.
    3. Possible Indirect connection with Politicians/Parties.
    4. Not sure whether profits can grow at 30% CAGR in long term when there is a big
    competition from other non listed players in Tamil Nadu and Kerala.
    5. Better short term bets were available.

    Postive points –

    Latest Wiki data says Tamil Nadu is the 2nd largest contributor to the Indian Economy ( GDP ) after Maharashtra.
    Tamil Nadu also has the advantage of high number of HNI Tamil speaking population in many Countries/Cities.

    Corrupt Govts, recession fears, global shocks, very high real estate prices etc should force every Indian to allocate at least 5-10% of one's money to Gold.
    I think most of the woman in India will love to buy Gold Jewellery instead of Gold ETF.



    July 8, 2012 at 12:08 pm

  5. Hey can u explain the mitigation of risk(high debt) by increasing the gold loan portion did not get it.


    July 8, 2012 at 2:22 pm

  6. Hello Sir,
    1.Why TMJl has a negative cash flow from operating activities in 2012 & 2011.
    2. Debt has increased consistently, then why does it give Dividends?? Isn't make more sense to clear debt first ..
    3 If the company is growing at more than 40%, then it shouldn't give Dividends. If the Company is giving good return then it should keep all the money and make the shareholder more richer…

    Mayur Jain

    July 8, 2012 at 5:31 pm

  7. Hi Amit,

    I have been following this company for some time, their results are impressive; I am from Tamilnadu(Coimbatore)and when I checked with the people there they said its not a big brand, but one in making. They are aggressively advertising so people are getting to know the brand. The thing I liked was that they are targeting tire 2 and 3 cities in TN.I live in bangalore and planned to visit their shops in Krishnagiri and Salem on my next to coimbatore.

    From the Mar 12 Balance Sheet their debt level seems to be fine, not sure why it’s a concern. I was concerned that they are offering 12.5% for the FD's not sure why they have to do this? ( they are not a NBFC!)

    Anyways from the valuation perspective this can be a potential multi-bagger!


    July 9, 2012 at 2:40 am

  8. Hi Amit,

    When you spot a new potential multi-bagger, how do you go about allocating the funds? Do you go one shot or you do it in a staggered manner? Also what % of your portfolio you allocate?

    When one focuses on future multi-baggers whats the best statergy: 5% * 20 or 10%* 10? Your views are highly appreciated. Thanks a lot.


    July 9, 2012 at 2:46 am

  9. Thanks for sharing the idea. Really appreciate, as always.


    July 9, 2012 at 4:43 am

  10. Govt. can not increase duty from here or ppl will start smuggling. Otherwise they would have raised duty to 10%.
    People have money in rural area but they don't have organized retailers. Business and ROI are good in rural areas. It is not exactly rural but tier III cities.

    manish dave

    July 9, 2012 at 12:47 pm

  11. Answers to some of the questions:

    They are reducing risk by increasing gold loan. Gold loan means, they borrow gold and obligation is to pay gold back. Cost of borrowing is about 5.25% for gold loan. So price fluctuations don't matter.

    On gold owned by the company risk is there but upside is there too. In case price drops, it is one off thing. But at the same time business will get better as there is lot of pent up demand. Remember, this company is growing when gold imports are down 30% due to price. Think what happens to business if price drop by 15%.

    There is lot of concern of debt, but debt is not in fixed assets. They can reduce inventory and debt PER DAY by 4-5 crores if they intend to. Debt is in totally liqtuid assets. And with expansion debt is going to rise. There is no alternative, but then it is not like steel plant. They can easily monetize inventory. Even HDFC BANK has debt. So DEBT IS NOT ALWAYS RISKY. Any gold retail business will have debt but I dont see that risky. It would be risky if they sell gold on credit.

    Shree Ganesh jewellery is more of wholesale.

    I don't think there is connection with political Parties. Otherwise they would not go to public and instead of taking loan, they would deal under the table.

    Even with competition, large part of the business is with unorganized sector. So it is not necessary, that they are eating each other's lunch.

    They are offerring 12.5% for CD as they need money for inventory in new stores. They plan 12 new stores this year and 12 next year. Last year cost of fund was 14% but with good timely payments and bigger size, their cost will come down to 12.5% with banks. They also keep offer gold deposits to customers. In that case, passbook is given to customer. Customer can buy any amount of gold and get it entered into the passbook. They can redeem that gold any time. Rate I think is 5%. So if I want to invest into 200g gold instead of keeping in locker, I can earn 5%.

    On Debt: Even Tanisq being so profitable,their shareholders' fund is 1450cr. but inventory is 2878. Isn't it debt too? So it is like bank. This business model runs on loan. Or there is no growh. But that doesn't mean it is risky. Thid debt is absolutely LIQUID.

    With 40-45 stores in two years, wont it be possible to create better regional brand? Won't they have marketing muscles? Allukas has stores spread out. So AD in Dubai doesn't help in coimbtore. But TMJL's stores are close to each other. So people in Coimbore watch same TV as people in Madurai.

    And finally can we get debfree company with big brand at P/E 4, clean management, 40-50% growht, reasonably good yield?

    manish dave

    July 9, 2012 at 1:18 pm

  12. I seriously doubt that govt wont increase CD further. Agreed Tier III is big opportunity for them.


    July 10, 2012 at 9:03 am

  13. Thanks Manjunatha for all the useful links and also clarifying meaning of Thanga Mayil !


    Amit Arora

    July 10, 2012 at 10:05 am

  14. Hi Manish

    Thank you very much for the details.

    Gems and Jewellery sector is actually better than FMCG sector in the long term.

    Simple and Highly Scalable Business model, Repeat Business, Good Dividend yield to support the downside of the stock, High promoter holding are enough reason to buy this stock.This Business can do well even in recession times.

    Thanks & Regards


    July 10, 2012 at 4:31 pm

  15. Hi Amit/Manish,

    The company is cash flow negative for last 4 years…i think that would be because of heavy expansion. For them to be cash flow positive they will need to kind of slow down the capex and consolidate.
    Else, they would keep on requiring additional debt or fresh equity which can -vely impact returns of business.

    your thoughts on this please?

    Saurabh Shankar

    July 11, 2012 at 6:11 am

  16. isnt it best to grab gitanjali gems which is a market leader in gold n jewellery space..promoters r daily increasing their stake through open market purchase and it is available at mouth-watering valuations at 5pe??????your views will be appreciated..:)


    July 11, 2012 at 9:07 am

  17. Its debt will keep on rising so will be sale and profit. Have you ever seen debt of HDFC going down? So that is business model. But their asset is liquid and not depreciating or perishable.

    manish dave

    July 11, 2012 at 12:11 pm

  18. Gitanjali is only 10% retail. TMJL is 100% reatail. Gatanjali doesn't pay almost any tax. I don't like a company in this space that doesn't pay tax. Plus volume in wholesale is easy. Retail is better business IMO.

    manish dave

    July 11, 2012 at 12:15 pm

  19. hi amit,
    plz tell me about impal (indian motor part and accessory). Is it good for investing? Fundamentals are good. Plz comments.


    July 12, 2012 at 3:54 am

  20. My point was more on when can they become cash flow +ve? If they perpetually run on -ve FCF, then they would continuously need to put in equity and thus dilute the returns.
    So there has to be an inflexion point at which cash flows from existing stores will exceed the expenses/inventory outlay on new stores. I want to see can we have a sense on that.

    Saurabh Shankar

    July 12, 2012 at 5:39 am

  21. Hi Amit, Why do power companies trade at such decent valuations..Diamond Cables ROE ~20%, P/E ~3. Is it because it is controlled by raw materials and Govt policies?


    July 12, 2012 at 1:26 pm

  22. This comment has been removed by the author.

    Sunil Gupte

    July 12, 2012 at 2:08 pm

  23. I was looking for a way to reduce my GOLD ETF holdings and TMJL is a perfect way to do that. If GOLD rallies ( 2000$+) they will make huge margins and if GOLD falls the demand will definitely pick up.


    July 13, 2012 at 4:59 am

  24. Hi manish and Amit

    What part of their profits can be attributed to inventory gains.
    Far sure they must be having some inventory gains considering that gold has been going one way for long.



    July 13, 2012 at 11:56 am

  25. Amit,

    Just curious to know what % of your stock portfolio is TM JL? Doing analysis and finding multi-baggers and other fine investments are all fine but I am totally confused on the asset allotion technique! I will appreciate if you can help me in this regard. Thank you very much.



    July 13, 2012 at 4:49 pm

  26. vel,
    TMJL is certainly better than Gold ETF. You pay management fee for Gold ETF, while here you get dividend and growth. Another option is you can put gold deposit with TMJL. They give you passbook with gold holding and pay I think 5% interest. You can get your gold back whenever you want. So no fee, but income.

    Even if price falls 30% they will make little money but business will boom from next year. 30% is highly unlikely though.

    About %, it depends on your conviction. I like management. They have everything in this business and are honest people.

    It is difficult to know about invenotory gains since inventory is increasing and they added gold loan portion. But Next year their cost of fund will come donw from 14% on average to 8-9%(due to introduction to gold loan) and there is backward integration in manufacturing and refining so that will help margin. Don't knwo how much.

    Remember that many new stores opened last year, so logicaly they will do more business this year. And if banks are willing to fund funding and reduced rate, so they like this business too.

    manish dave

    July 14, 2012 at 11:14 am

  27. Manish,

    I like to fact that this company is focusing more on Tier-2 and 3 cities. My concern is hyper competitive nature of ths business. Just check out the number of jewelers in a place like Tuticorin. There are around 30.

    Do you think this market is huge enough to accomodate so many players without impacting the margins

    Vijay Chandrakar

    July 14, 2012 at 2:43 pm

  28. Thanks for your reply Manish

    I did a simple exercise
    the average price of gold in rupees for FY 2011 and FY 2012

    the average price per ounce was for FY 2011 was 58974.29 and the same for FY 2012 was 79058.89
    that is a increase of 34.05%

    but this does not present the entire picture
    as this inventory is rolled over 3 times in a year (sales/inventory) that is every 4 months

    to calculate the average gains made I took the rolling 4 months returns made everyday for the year
    some days are gain days some days are loss days
    the average of the rolling “4 months returns made everyday” for FY 2012 is 14.7%

    now the inventory for FY 2011 was 207.75 and for FY 2012 was 369.23
    therefore the average inventory for FY 2012 which I assume if average for two years is 288.49

    now a 14.7% gain on 288.49 crores is 42.31 crores

    therefore to calculate the real profit of Thangamayil one will have to deduct an assumed inventory gains of 42.31 crores out of the EBITDA?

    the above calculation would not be true if they are hedging their exposure
    if you wish I can post my calculations here

    this should also stand true for Titan as well as for TBZ


    July 15, 2012 at 2:36 pm

  29. Please find a spreadsheet with two scenarios

    1. With 3 times inventory turnover
    2. With 4 times inventory turnover

    3 times turnover gives inventory gains of around 42 cores
    4 times turnover gives inventory gains of around 32 crores


    July 17, 2012 at 7:08 pm

  30. Amit,
    you know any reason for the sharp fall in cohin minerals this week? please let us know whether its safe to invest now.



    July 18, 2012 at 6:12 am

  31. Dear Amit,
    Your posts made good reading and you come across as a wealth builder without being aggressive to get risky. I need your advice on some stocks that i hold; subros, adsl, smartlink, suzlon, manappuram, phaarmasia, srei infra, OCL, LCC Infotech. Suggest good ones to switch if you feel some are not good eggs. Thanks.



    July 19, 2012 at 5:53 am

  32. Dear Manish and Amit,

    What about the dividends given by THANGAMAYIL.

    Why they are giving hefty dividends considering their huge capex plan and high debt.

    Is this dividends will sustain in future also,pls give your views.



    July 19, 2012 at 6:01 am

  33. Thangamayil is low capex. It is working capital intensive, which is extremely liquid. They want to share profit with their shareholders. Business is simply booming. Each of their store is profitable, even 3 months old. Their new store opened at Namakkal, not a big town, did business of 5kg gold on opening day.

    Dividend is absolutely sustainable.

    I am bullish and I am adding TMJL.

    manish dave

    July 19, 2012 at 1:11 pm

  34. Hi Amit, I am a great admirer of your blogs on value investing. I started investing in stocks after reading your many inputs(Cravatex).Also, I started reading few books to under stand basics.I am almost novice in stock market.So,Wanted to understand one thing on CMP.
    In “One up on wall street”, Lynch says, stock should be available at 6-7 times of the PE. But, in Thangamayil case, it is almost at 40 times( still not yet completed the reading though). May be i am wrong in understanding.
    Could you please clarify on this. But definitely it is a great stock to add with such a high growth.

    Once again thanks for sharing the info Amit and Manish.



    July 22, 2012 at 8:14 am

  35. P/E = Market Price / Earnings Per Share per annum = 180 /40 = 4.5, hence it is cheaper than even 6-7.


    Amit Arora

    July 22, 2012 at 9:17 am

  36. Thanks for clarification Amit.



    July 22, 2012 at 11:10 am

  37. Hi Amit,

    I subscribe to the fact that sooner or later earnings make or break an investment in equities. In my analysis of companies there are lot of them reporting healthy topline growth but a poor bottom line growth in both QoQ and annual.
    Globus Spirits: QoQ: Topline: 77%, PAT: -28%. Annual: Topline: 46.76%, PAT: 2.4%
    Photoquip: QoQ: Topline: 1.62%, PAT: -20.97% Annual: Topline: 33.38%, PAT: -10%
    VST tillers: QoQ: Topline 21.20%, PAT: -0.48% Annual: Topline: 24.48%, PAT: 8.10%
    Poly medicure: QoQ: Topline 23.53%, PAT: -27% Annual: Topline: 23.07%, PAT: -11.20%
    Cravatex: QoQ: Topline 65.68%, PAT: -27% Annual: Topline: 71.61%, PAT: 28%
    The list is long … As of now the market is not bothering about these stocks.
    I have some such stocks in my portfolio. I am not sure how to react to this. I feel many of such stocks have the ability to report better topline and bottom line in future. Should one neglect such stocks?
    The stocks which have reported good topline and bottom line ( Cera, Mayur, Astral, wimplast, indag, atul auto, Everest …the list is long) has gone up anywhere between 20% and 60% in last couple of quarters. These companies in future can also falter on earnings and get punished by the market!
    In this scenario how would one pick the multi-baggers? All the above mentioned companies have stories and have grown the topline. What’s your experience on this? Should one keep track of the quarterly earnings and keep rotating the stocks? Thought this will be a good discussion point.


    July 22, 2012 at 4:46 pm

  38. 10s to 20s of Billions of USD in India. That depends on private sector participation.

    All problems have been solved on paper as in Govt. paper below

    Not a money spinner biz yet IMO, needs more de-regulation. Home cleaning is already..


    Amit Arora

    July 23, 2012 at 9:09 am

  39. Hi Amit/Manish,
    Nice analysis…
    In Yesterday's Q1FY13 results in the footnotes they have mentioned Cost of advertisment as deferred revenue exp & taken into B/S…if possible can you please throw some light on it.
    Keep up the good work.

    kunal mehta

    July 25, 2012 at 6:52 am

  40. Amit Crav's Provision for Bad Debts at 84 lks??


    July 25, 2012 at 10:55 am

  41. It is like capitalizing interest cost for infra project. New store need lot of wall painting for add and pre-opening ad. Now if there is a wall paining AD on a DHABA on a highway, its effect will stay for few years, while expense is done in one quarter. Beside, some deferred exp last year would come to this quater too.

    Main point is they are able to move merchandize, and managing growth very well. This Q was not even a season. So there is more to come.

    manish dave

    July 25, 2012 at 12:24 pm

  42. HI Amit,

    Have you looked at HAnung Toys? Any factors you like in it to invest?



  43. Amit,
    I will appreciate if you can provide your views on the following companies:
    1. Globus Spirits
    2. Puneet Resins
    3. Photoquip
    Their results are not good but from the quantitative valuation perspective (globus at 5 PE, Puneet at 5% yield, Photoquip at 17Cr mar cap) they seem to be ok. What is your advice on these stocks? Thanks a lot


    July 26, 2012 at 1:23 pm

  44. I have not got an answer on it, will have to ask in AGM.

    Amit Arora

    July 27, 2012 at 10:03 am

  45. One does not have to be fixated on 5 baggers or 10 baggers. Searching for sustainable 25%+ growth per annum at reasonable price automatically delivers multibagger. I like Globus Spirits and Photoquip but they need to prove more and pay dividends. If 7 out of 10 stocks do well, one should do more than fine. 7 five baggers in 4-5 years and 3 zero baggers makes initial investment of 10 to 38. Who can say that is bad and 70% of above names will end up there.

    Amit Arora

    July 27, 2012 at 11:57 pm

  46. Thank you very much for your reply Amit.


    July 28, 2012 at 5:32 am

  47. Amit tracking asm tech ?


    July 30, 2012 at 5:05 pm

  48. Hey Amit, What do you think of Intec and MMFSL now?


    July 31, 2012 at 1:48 pm

  49. Contempo new marketing initiative for FILA by BB UK

    BB also designs for Russell Athletic ( War Buff owned ) once owned by them.


    August 4, 2012 at 2:18 pm

  50. >>> They are offering 12.5% for CD as they need money for inventory in new stores. Last year cost of fund was 14% but with good timely payments and bigger size, their cost will come down to 12.5% with banks.

    Q. Does not it indicate that they very less borrowed gold.

    >>> They can redeem that gold any time.

    Q? What about cost of redeeming gold (waste of making charge, most of gold must be in jewellery form)? Bank will not buy jewellery at same rate as gold bar!

    >>> Even Tanisq being so profitable,their shareholders' fund is 1450cr. but inventory is 2878. Isn't it debt too?

    Q. Where this debt is reflected on their balance sheet? They work out of borrowed gold.

    >>> Have you ever seen debt of HDFC going down?

    Q. How we can compare two different businesses, one is in business of finance and second is in Jewellery ?

    >>> excel_monkeyJuly 15, 2012 7:36 AM :: What part of their profits can be attributed to inventory gains.

    Their operating profit margin has increased from 5% in 2007 to 10% in 2012. What is the reason? inventory gain or higher value add in each jewellery piece?


    August 8, 2012 at 4:23 am

  51. Thangamayil has proven how you can knock the socks of national and global brands of jewellery and power of connection with traditional audience. That should provide a model to all family jewellers to defend their territory in respective states.

    100% gold on loan would mean Thangamayil will have close to ZERO debt in no time. But being what they are, they believe in GOLD even though as investors we may not believe in future price of GOLD. Gold is still liquid than machinery or investment in cement plant.

    Amit Arora

    August 8, 2012 at 8:53 am

  52. Cost of redeeming gold is not much. If they need to melt, it is 3-4%. But to reduce inventory, they may not need melting. Their sales is 5 crores per day. If they decide to reduce inventory by let say 50 cr., they may buy only 2.5cr gold per day for fast moving product. So they can reduce inventory by 50 cr. in 20 days without melting. But there is NO NEED TO DO THAT.

    Yes Tanisq has borrowed gold. But isn't it debt? It is debt, but in different form.

    My reference to HDFC is business model. Yes it is different business but debt is debt. My point is not all debt is bad. If debt is in fixed assets, then it is risky.

    manish dave

    August 8, 2012 at 12:51 pm

  53. As investors we don't believe in the future prices of GOLD because there is an element of speculation and there is no means to value it even approximately. No wonder buffet did a pass on it ( Its just another missed opportunity and he doesn't care!).

    Anyways, coming to my view point: people in Tamil Nadu's Tier2/3 or even people in general have traditionally invested their money in land and GOLD ( most do not understand stocks and hence are afraid of the loss and volatility). They strongly believe that land and GOLD will not crash. They intuitively understand that land and GOLD are a perfect hedge against inflation and loss of rupee's value. Having said that land values have skyrocketed for the past 10 yrs and also recently Tamil Nadu government have hiked the guide-line value of land to an enormous amount putting people in dilemma about the future land prices. (This has led to another problem; people hoarding black-money have to find other means to park it other than a land.) Now this leads to a higher chance that people will start looking GOLD more seriously as an investment avenue than before.

    Thangamayil's plan to open many stores in Tier 2/3 of TN is a great move at this point of time. People will eventually rush in to buy more GOLD and the traditional way of buying GOLD is through Jewelery and Thangamayil has an edge here as it is serving Tier 2/3 people. If low cost is a moat, then serving Tier 2/3 citizens is also a MOAT, definitely we need to bother about the durability soon. Thanks, vel


    August 10, 2012 at 8:08 am

  54. Interesting points, all Ads (dozens of them, part of them here :
    ) are in local language. Its in a completely different niche and only another local company is their competitor.

    If Jewellery sales saturates Loan Against Gold can be done but it can be five times bigger in TN itself.

    Amit Arora

    August 10, 2012 at 8:30 am

  55. A 130 years old textile mill of 21st century that defies all Capitalists and Buffett alike. Not just profitable but more than thriving privately held company. Its been praised in this book as well

    A brief Glen Raven video

    Amit Arora

    August 10, 2012 at 11:48 pm

  56. hey amit,
    been holding mmfsl for a while
    the “story” is indeed becoming better(though the stock price is indeed a live action class on catching falling knives)
    its like a rock and snowball combo,just the way i like it.

    so just wondering what are your thoughts on it now?


    August 11, 2012 at 11:11 am

  57. Hi there,

    I'm out of MMFSL mate and made some in Manappuram Finance. Now in Bajaj Finance


    Amit Arora

    August 11, 2012 at 10:16 pm

  58. My friend sent me this photo, that's not a bride from Tier2/3 city, and that's not jewellery that other national and global brands provide !

    Amit Arora

    August 11, 2012 at 11:06 pm

  59. Hi Amit,

    Globus Spirits bottomline has shown a de-growth of 17% inspite of 25% topline growth on a QoQ basis. Whats your view on this company.



    August 12, 2012 at 6:38 am

  60. Globus Spirits consolidated total income stood at Rs. 1585.3 million up by 29.35%, EBITDA stood at Rs.194.9 million up by 54.2% and PAT stood at Rs.115.8 million up by 46.3%. EPS stood at Rs. 5.03.


    August 12, 2012 at 9:03 am

  61. k ,thx for the prompt reply
    sincerely considering thang. jewellery (even checked out their website,considering my family is in the wedding industry im pretty sure THEY DEFINITELY KNOW THEIR DESIGN) and one obviously cant help but admire the promoters for showing faith through insider purchases.

    However some pressing concerns have been a source of worry over here(and i could really use a little help here)-
    q.The company's NEGATIVE OPERATING CASH FLOW is a source of serious concern for me
    {having had the 'honor',(since ultimately it was a learning opportunity) of investing in some mass fraud stocks, this kind of stuff truly scares me,so please forgive me if i ve overstated the obvious}
    so whats the mitigating factor here(i.e. what s helping you and mr.dave getting comfortable about this situation?)

    q.i how exactly are they amortizing their advertising expenditure..i mean is it over 2 years total or 4?( i understand that extensive advertising need is a given for brand building especially for this company )


    p.s. just wondering what made you change your mind about mmfsl? was it better opportunities or some real negative development which contradicts the original thesis, that i should be aware of?
    (could use a lil dis confirming evidence since at least for now, all i see is the company coming firmly into black ,especially since they ve started to allocate much of their capital into apparently lucrative real estate lending operations and yet being available below liquidation value)


    August 12, 2012 at 3:12 pm

  62. Dear Amit,
    I have been following your blog keenly and amazed to find the depth of your knowledge and good analysis.Did you at any time consider the stock REPRO ltd., which seems investor friendly and transpatrent accounts policy? kindly analyze


    August 14, 2012 at 11:37 am

  63. amit, any take on cravatex's recent quarterly results?


    August 15, 2012 at 4:40 am

  64. Pretty bad results. No growth in domestic revenues. Only silver lining is capital employed has not increased. Self owned shops have increased to 37, all of them in loss.

    Amit Arora

    August 15, 2012 at 7:18 am

  65. true, the lack of topline growth is disappointing. we have been used to big bump-up in topline quarter after quarter. by the way how did you come to know that the self owned shops are 37? I believe the present quarter results would be better as FILA is expected to take a hike of 5-7% in aug. I am also not very clear when their UK subsidiary would turn around. overall, the results are not great but not very bad either. i guess the stock price may take a small hit, but if anything in excess of 30%, i would be a buyer…. how about u ?


    August 15, 2012 at 1:31 pm

  66. Hi Ramit,

    It would be prudent to wait for a quarter or two before jumping into the script as i expect more negatives atleast for the next 1-2 quarters. The marketing expenses to sales ratio will increase which will impact the margins along with depreciating rupee. Also i feel hiking prices at this point of time will not do any favour to the script as they are struggling to increase the sales. Instead it might effect the sales more. Regarding signing of sehwag, I am yet to see any kind of publicity featuring him. Even if they start now and go agrressive in this it would take atleast 2-3 quarters to yeild the fruits. PE is still high considering the company's expected de-grwoth in profits for the year. I would expect it to correct to 400 levels by next quarter. Any thing below 400 or around 350 levels is a very good entry point for the longterm.

    Hi Amit,

    Any comments on this???

    sandeep maddali

    August 16, 2012 at 1:32 am

  67. Soros bullish on gold prices. increases stake in SPDR Gold trust.


    August 16, 2012 at 5:32 am

  68. Boss we are in a lucky position to be not running business. Only thing we need to avoid is foolish bias. It take time to organise a business and more so to make it profitable. While 58 Crores revenues in a quarter are no small achievement, profits have been elusive. After 25 years Relaxo is where it is in shoes, still stock Yo-yos from 200-500 in any given year. It will pay off in long term but other un-expected ones have done well for now. Companies go through bad patches – not sure if we want to be with them – after all we are not family or married to them. So, I will reduce and add others, and completely get out if next quarter is on same lines. Definitely won't add, because as they say 'growth is life'


    Amit Arora

    August 16, 2012 at 9:23 am

  69. The 'consol' domestic revenues have increased by 60% yoy from 30 cr to 48 cr.


    August 17, 2012 at 5:14 am

  70. In IT continue to like RS Software, made more and sooner than anticipated. Also Polaris, significant lock in and a product company with 40% of EV in hard cash. Wim Plast has been a blast, still good. Thangamayil, maximum visibility and potential. Cravatex – like my school report card – CAN DO BETTER. Atul Auto has become cheap in buying range again.

    Amit Arora

    August 17, 2012 at 9:42 pm

  71. Hi amit, any new book you read recently ?


    August 18, 2012 at 9:12 am

  72. Hey Jatin

    Liked these few recently..

    Viral Loop – Adam Penenberg
    Inside Coca Cola- Neville Isdelle
    Liar's Poker – Michael Lewis
    More Money Than God
    Sam Walton – Made in America


    Amit Arora

    August 18, 2012 at 10:55 am

  73. By the power vested in me by no-one in world I quote: 'In investing, lack of open mind soon follows with closed bank account.'

    Amit Arora

    August 19, 2012 at 8:27 am

  74. Hi Amit,

    Simran Farms posted excellent Q1 results. Are you tracking ?



    August 19, 2012 at 2:58 pm

  75. hi amit,
    even after rechecking could not find any new (negative) development (not really sure what the ceo's transfer of his INDIVIDUAL holding into his HUF implies)
    has there been any new negative development with mmfsl which made you change your mind?

    p.s. apologies for repeatedly pestering


    August 20, 2012 at 12:29 pm

  76. Nice One, Amit. So lets have an article on this one, been lots of time.

    Rahul Paliwal

    August 20, 2012 at 1:08 pm

  77. Thangamayil Jewellery Limited has informed the Exchange that the Company is opening its 21st (Twenty First) branch at Dharmapuri – on August 19, 2012 between 10.35 Am and 11.25 Am admeasuring 2200 sqft.


    August 21, 2012 at 4:11 am

  78. Hi, nothing negative except there was 1.8 crore warrants due for conversion{3FF742C9-819C-435E-94BA-AA284708A928}&param1=1

    They did not convert,{CF2D6246-BB62-448A-A662-11625E200C8B}&param1=1

    Which makes it interesting again!

    Amit Arora

    August 21, 2012 at 8:24 am

  79. Amit,

    do you still hold photoquip?. whats your take on that?


    August 22, 2012 at 4:27 am

  80. Photoquip can pay off in very long run only, may not go anywhere for 1-2 year. But there is no downside to it. There will be no surprise if its 1000 Rs after 10 years, nor a surprise if its just 200 Rs. They know how to make products better than most companies. Keep watching the story as it evolves.

    Amit Arora

    August 22, 2012 at 6:57 am

  81. Photoquip's new venture:
    I would recommend buying after price crosses 100+Rs or promoters start dividends, then it will be Symphony round 2 – iPhone of home lighting.

    Amit Arora

    August 22, 2012 at 7:10 am

  82. Heritage Foods seems to be on breakout to 400+ I will just watch the fireworks from perimeter.

    Amit Arora

    August 22, 2012 at 7:12 am

  83. how do you know that Corvi is part of the listed entity?


    August 22, 2012 at 8:18 am

  84. It is expected that by 2021, the LED technology will penetrate 57 percent of the lighting market. This penetration may be accelerated by the demonstrated leadership by the government procurement and large scale penetration by the public sectors. Private sector by its cost economics will be early adopters in LED market.

    By 2031, more than 80 per cent of the lighting market will be captured. Currently, the market penetration is solely driven by the economics of transactions. However, as the income level of the consumers, standardisation of the technology, consumer confidence improves, it will drive its market penetration.

    This certainly looks good move by photiquip but with low entry barriers will they be able to make an impact ?


    August 22, 2012 at 9:47 am

  85. Hi Amit,

    What do you think about Granules India at current levels?

    What impresses me the most about the company is the agressive promoter buying even when stock is trading at all time high.
    Also the chairman/director of the company getting all their shares released from pledge.
    Moreover, its strong management which promises to make this a 5000 Cr Revenue generator from current 500 Cr Revenue company.
    June Qtr results saw a staggering 100% jump in net profits and nearly 57% jump in revenues.

    The stock to me seems to be going in the same direction as Ajanta Pharma (in future)

    Kindly let me know your views on it.

    Kunal Banker

    August 22, 2012 at 12:57 pm

  86. Dear Kunal

    I have no idea since I do not buy/follow pharmaceutical companies.

    All the best and good luck

    Kind regards

    Amit Arora

    August 23, 2012 at 12:04 am

  87. ThangaMayil up 10% – CMP 226.


    August 23, 2012 at 4:46 am

  88. Amit Arora Ji:

    Pls look at jayant agro organics..

    Consolidated Sales/NP numbers.
    March 2007 Sales 462.49Cr Net Profit: 6.76Cr
    March 2008 Sales 605.96Cr Net Profit: 9.51Cr
    March 2009 Sales 875.86Cr Net Profit 7.49Cr
    March 2010 Sales 904.01Cr Net Profit: 12.47Cr
    March 2011 Sales 1,175.26Cr Net Profit: 24.92Cr
    March 2012 Sales 1,832.26Cr Net Profit: 31.35Cr

    In past 5 yrs profits have increased 500% sales have increased 300% with no equity dilution or high debt

    Q1 June 2012 Sales: 464.62Cr Net Profit: 13.58Cr

    Market Cap of Company is: 182.7Cr, Dividend payout 40%
    For this Public listed company.. Total number of shareholders as of June 2012 is just 5754 shareholders. June 2011 shareholder count was:- 6672 shareholders. Promoters acquired 4.9% from open market! before March 2012 Promoter shareholding 64.79%
    acquisitons reported to the SEBI and stock exchanges.
    1. April 22, 2009 : Jayant Finvest Limited Acquired 3,25,094 shares between Nov 26,2008 to April 22,2009 ( Acquired in 24 different transactions)
    2. August 28,2009: Jayant Finvest Limited Acquired 3,02,266 shares between April 23,2009 to August 24,2009 (Acquired in 30 seperate transactions)
    3. Jan 1, 2010: Jayant Finvest Limited Acquired 3,17,737 shares between August 25,2009 to Jan 4,2010 (Acquired in 72 different dates)
    4. March 31 2012:- Promoters increase stake by 7,27,871 shares creeping acquisition..
    Jayant Agro Organics promoters have forward and backward integrated in the castor business right from farming to castor oil derivatives consolidating their position in castor oil business..

    Not only have the Jayant Agro Promoters successfully consolidated their position .. the regulatory environment is also conducive to growth of castor oil derivatives..

    European Union (EU) has initiated in 2007 REACH Registration, Evaluation, Authorisation and Restriction ofChemical substances.

    According to this initiative in EU countries plastics which are derived from Crude oil (Phthalates) are carcinogenic and can also cause birth defects.. going forward companies that use crude oil derived phthalates need to label their products as contain ingredients that are carcinogenic and can cause birth defects.. Castor oil derived phthalates are safe and quality is also better..

    Even US Govt through Consumer Product Safety Commission has started screening for carcinogenic products in toys and other products that come in contact with humans..

    The industry is responding to these regulatory changes by producing castor oil based products..

    – Ford motor company has started producing “Car Dash boards” with castor oil derived plastic
    – Nike has introduced during the olympic the lightest running shoes ever!! ( derived from castor oil)
    – Spectacle manufacturers, Skateboard , skiboard, shoes and others have all introduced products in the market as “Green Products” manufactured using renewable material (castor oil derivatives)
    more info in my blog


    August 23, 2012 at 5:08 am

  89. Hi Amit,

    Whats your view on bajaj fin serv now?.. This constitute around 60% of my folio. any idea why its falling now


    August 24, 2012 at 4:38 am

  90. “Mamata Benerjee” I think the reason, Dear JM.

    Rahul Paliwal

    August 24, 2012 at 7:29 am

  91. Amit..

    Do you think infinite comp. can touch 180-200 in next 2 quarters as the company has been declaring good results and also with good dividend projections…

    sandeep maddali

    August 25, 2012 at 3:27 pm

  92. Dear Manish,

    I have been following macro-economics on GOLD from 2009(read almost every article on GOLD in and now I feel GOLD has broken out of the 2012 range and looking good for a huge upside. Now my question is how does it affect the prospects of Thangamayil? Assuming a GOLD price range of 30K to 50K in next two years will it be a catalyst for higher bottom-line? Does higher GOLD prices good or bad for Thangamayil in the current environment? I will appreciate if you can throw your views on this. Thanks,vel. I have vested interest on Thangamayil.


    August 26, 2012 at 4:33 am

  93. This is Manish's reply:

    Their accounting for stock is FIFO. So invetory gain will certainly be there. If price goes to 50,000 in two years, inventory gain will be 120 after tax according to rough calculations provided they don't hedge.

    At the same time volume will drop. I don't know how much. Some volume will be maintained as people will convert old into new one so no additional

    Manappuram looks more convincing to me. It is no brainer and extremely misunderstood by the market. With 60 LTV, that company has absolutely no risk. After a quarter or two they will start growing. Capital adequacy is 22% which is very high compared to required 14%.

    My interpretation:

    What Manish is saying is that from gold price fluctuation perspective Manappuram carries little risk on its balance sheet but Thangamayil does. Thangamayil does well automatically by selling gold for 35000 that it bought for 30000 and conversely suffer if gold goes to 25000, thus there is element of risk in gold price fluctuation.

    Amit Arora

    August 26, 2012 at 8:40 am

  94. Dear friends,

    Some one from the loop, pls tell me why HSIL is quoting around 110 as on friday,



    August 26, 2012 at 10:35 am

  95. Dear Shanid

    I will give one try (not so seriously this time) and others can add…

    Two possible reasons:

    1) Its IPO came long back so its not hot anymore
    2) Its not an underwear company

    Kind regards

    Amit Arora

    August 26, 2012 at 8:42 pm

  96. 3) It hasn't gone through CDR or spinoff (wock/strides)
    4) Its not in preschool space(treehouse)
    5) Definitely not an aggressive pizza co.


    August 29, 2012 at 6:31 am

  97. 😀

    Going through AR it appears management is very proud of Glass Business which earns 100 Crores per annum pre tax and their IDEA of MOAT is CAPITAL INTENSIVE business. All profits from Sanitaryware will be subsidizing glass business. Diworseification into EVOK store was a bad idea too.


    Amit Arora

    August 29, 2012 at 7:24 am

  98. As of June 12, 1700 Crores is blocked is Glass Business including land revaluation and they are happy to earn a PAT of 50 Crores on that business. SBI can pay more on FDs.

    Amit Arora

    August 29, 2012 at 7:25 am

  99. Hi Amit,

    Ion Exchange, do u track this leader in water treatment. If so throw some insights




    August 31, 2012 at 9:26 am

  100. HI Amit,
    I am holding the cravatex @ 600 (pre-split data or pre-bonus share rate). Money is already arround 2.5 timmes. Should I continue or exit.


    September 3, 2012 at 5:09 am

  101. hi amit
    Thangamayil results for sept quarter:

    with the change in accounting policy company will incur defferd advertising expenses in three quarterly instalments this year. does it mean there ll be no growth in bottomline this year
    also there is increase in other long term liability from 5 cr to 19 cr during march to sept. amit any idea regarding this?


    October 17, 2012 at 12:20 pm

  102. Not a great set of numbers from Thanamayil


    October 17, 2012 at 5:15 pm

  103. Now that the stock has gone in T2T, when it comes out of T2T will it rise? Can this stock be rated as retail consumption stock as previosly jewellery stocks were given low PE ?


    January 17, 2013 at 4:38 pm

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