What they don’t teach you at Business Schools (Harvard or not)
As you may be holding 20 positions, you can only infer from AGM or market gossip or genuine feedback about company.
Some of the hints and clues that minority interest take cue from are dividend policy, communication during bad times, dealing with group companies, acquisition of shares from open market etc.
One of the big turn offs for investors is when the promoter groups run a large number of companies be they public or private (this is a very common disease with Indian promoters) think ADAG Group, VH Group (Venky’s India).
The key problem is that # of hours in a day are limited and the promoters looking at 5 businesses will do worse than one looking at 1, especially if they invest a lot of personal time in absence of professionals.
As I am on a constant prowl for opportunities and lately in India now, organic cosmetics, foods *everything* is growing very rapidly, I stumbled upon a company which is associate of a BSE / NSE listed company Poly Medicure Ltd. The company has made its sister company (Vitromed Healthcare) RICH by giving it the jobwork, paying it rent for using premises, buying and selling products to it at so-called arms length.
Anyone interested in further probing the management can ask few simple questions:
Qs 1) Has Poly Medicure got any shareholding in Vitromed Healthcare ?
Likely answer – NO
Qs 2) What were revenues of Vitromed Healthcare prior to alliance / dealing with Poly Medicure ?
Likely answer – Zero
Qs 3) Knowing that certified organic food business is trending, your sister company has founded a step down subsidiary and has ventured into Organic Juices and Organic Cosmetics. This business must be juicy. You invest personal time as does your son in this business. Meaning Poly Medicure Ltd is now being neglected. Anyhow who are the investors and beneficiaries of this organic business (http://www.vitronaturals.com/natural-juices-cosmetics) ?
Likely answer – 100% owned by my family
Qs 4) Okay great, you have all the legal right to have as many businesses in the free land of India. But why are you advertising Poly Medicure’s facilities and manufacturing prowess on the website of Vitro Naturals where the listed company that I own a part of gets no benefit and is not compensated ? Shouldn’t we be getting some compensation “at arms length” ?
No answer from management.
The reason is, management of Poly Medicure Ltd. is greedier and slipperier than usual, 100% goes into pockets of the family that runs the company listed on BSE / NSE India.
So my friend, avoid companies like these where management shares its second best business with you and keeps the best to itself. These companies will not be long term wealth creators.