Unknown Market Wizards

Simple thesis: Buy well run, well financed, efficient capital allocators, market leaders that are available cheap at the trough of the market cycles. How often do you find this combination? Frequent buying/selling makes very little sense.

FY21 was a depressed base. In next 5 years, pre-tax ROIC went from 9% to 17%, drove a massive rerating and stock returned 35% cagr. Reinvesting ~90% of operating profits, business earned 15% incremental ROIC in an unusually favourable period (also historical best) which implies 13-14% sustainable growth potential. What multiple would you pay for this? For me, to justify materially higher growth, incremental returns must improve.

Deliver stellar results, only to get hammered next day. 😅 As if global uncertainties were not enough, leverage is adding another layer of complexity to the market. Price action is becoming increasingly disconnected from the underlying operating performance.

What does the 2000 dot-com bubble teach us?

Indian IT Q2 numbers so far: - CC growth in low single digit - Core services demand is muted - AI revenue is rising but not large enough to offset deflationary impact - Guidance isn't encouraging Numbers dont really back the enthusiasm the market is showing, so maybe the bottom is in. But you're looking at 4-5% div yield + low single digit growth as of now. Best case 9-10% returns before any rerating.

Viceroy Hotels: From bankruptcy to turnaround? Background: Viceroy went into insolvency in 2018. In 2023, Anirudh Agro Farms won the company with a 168.5 Cr resolution plan against 768 Cr of admitted claims and bought these two Hyderabad hotels with ~460 rooms (for ~37 lakh/room) : -Marriott Hotel & Convention Centre -Courtyard by Marriott In January new management added another asset: Marriott Executive Apartments. Before the deal, ownership was split between 2 parties. One owned the land + building and another party called SLN Terminus leased the property and ran the apartments under Marriott brand. Viceroy bought both pieces, land & SLN as a subsidiary for a combined 206 Cr at less than 10x EBITDA. Why Q1 looks big: Sales up 77%, EBITDA up 144% YoY. MEA added ~12 Cr, Courtyard was under renovation a year ago. Like for like hotel part grew 30% YoY. MEA purchase was funded with ~200 Cr debt. Interest cost & depreciation ate profits. Rights issue: Promoters were holding 84%. Viceroy did a 105 Cr rights issue at 115 Rs/share, promoters gave up the entitlement and have now come down to 74%. Money goes to: -Repaying MEA acquisition debt (41.35 Cr) -Repaying subsidiary loans (38.9 Cr) -General purpose (25.6 Cr) 80 Cr of debt repayment saves ~7 Cr interest cost. Zerodha founders Kamath brothers acquired 6.72% in the September, same quarter when rights issue came. 40% margin aspiration: Management guides 30% margins for full year and targeting 40% in the long term. Q1 is generally the weakest for city hotels, H2 is the stronger (Q4 FY26 margins ~31%). MEA might lift the margins as about 72% of sales comes from rooms, which earn 80-85% gross margins vs 45-50% for food and banquets. (Negative: Convention centre stays shut until December so hotel misses the wedding season. Long term 40% target needs convention centre back + higher room rates.) With convention center shut, hotel took lower paying bookings to keep occupancy up. Given convention center will be there in H2 onwards and renovated courtyard rooms could sell higher, margins could inch up going forward. FY27 and FY28 earnings build: Screener shows TTM EV as 1396 Cr which takes pre-rights level debt. Adjusting for rights money, EV would be ~1290 Cr. Closest peers are business hotels like Brigade that hand operations to Marriott, Hyatt or IHG. Brigade trades at half the valuation, however its a recent listing with a heavy capex pipeline to FY31 that will need more spending and debt. Just a study, no recommendations.

V2 Retail: Deja Vu anyone?

Small and Micro cap space continues to offer value, of course in pockets. Opportunities are more company specific but some of the places I find interesting- Hotels Capital Markets (broking/wealth/IB) IT products Building Materials Pre-engineered Buildings

Good one! White has to give up kingside pawns in a certain order (h-pawn, then g, then f, e) to avoid stalemate. Every sacrifice forces black to capture or advance which gives white king time to capture and keep moving forward. By the time white king walks over to queenside, black bishop comes out but cannot stop white pawns. h3, gh3#, Kh1, h2, g4, fg4#, Kh2#, g3, Kg1, g2, f5, ef5#, Kg2#, f4, Kf1, f3, a4, f2, Kf2#, e5, Kf3 and so on....

Different denominator. MTF is mostly a retail & HNIs product, who own about 10% of India Mcap. Force selling risk lies there, not with the entire market.

Usha Martin - In last 4 years, delivered ~8% sales cagr and ~16% ebitda cagr. 65% domestic market share. 80% is replacement demand so a decent annuity like visibility. Long qualification cycles (3-5 years) create entry barriers and customer stickiness. FY22 to Q1 FY27: VAP (wire rope) went from 61% to 73% of sales EBITDA/tonne went from Rs 19600 to Rs 40600 (Wire rope sells ~3x plain wire, Hoshiarpur wire line cut 48kt to 23kt) Moved UK production to India, saved 70 Cr (~Rs 3400 EBITDA/ton) New capacities- Elevator rope 6000t, commissioning from Oct 2026 Plasticated LRPC 6000t, FY27 target is 3500-4000t (realisation is ~Rs 126000/t vs ~Rs 64000/t for plain LRPC) New capacities sell at 2-3x vs the displaced ones. Mgmt guides FY27 at 10-12% volume, 15% value, 20-21% margins. Volume has been flat at 4-5% for 2 years, Q1FY27 rope volumes actually fell. 10-12% volume growth seems unlikely without Middle East recovery. Model 5% volume growth YoY- Volume ~207kt to ~217 kt Ebitda/t ~34.1k to ~38k Ebitda 705 Cr to ~825 Cr 17% ebitda growth on 5% volume.

How scalable can a consumer internet business become? Customer economics (ARPU, margins, lifetime value) vs geographical density (need for local physical infra) Most effective model combines high customer value with low infrastructure intensity. Another compelling model is the one catering to mass market at low cost without needing dense physical infrastructure. Source: MOFSL

My views on large private banks, shared on the @seecowealth podcast a few months ago. youtu.be/Lr0Bfe4iD6U?si=wXYz…

MCX: Quarter to date revenue ~615 Cr At current run rate, Q2 FY27 revenue lands at ~750 Cr, up 100% YoY. Commodity derivative traders went from 13 lakh to 21 lakh in FY26 while equity traders fell from 1.06 Cr to 88 lakh. 25% of equity derivative traders also trade in commodities. Commodity option contracts are ~5% of equity option contracts.

India lithium-ion battery industry: India Imports $3 bn of lithium cells/year. Advance chemistry cell demand is expected to go from 28 GWh in FY26 to 272 GWh by FY30 ( ~60% EV, ~40% stationary/grid). Meeting that entirely through imports would mean ~$23 bn import bill. (GWh is a measure of how much electricity these cells can hold. 1 scooter battery holds ~3kWh) Opportunity: Chinese cells are 20-25% cheaper but add shipping, insurance, import duty etc, gap is only 8-12%. With PLI scheme, Indian cells cost about the same. Shipping from China takes 6-8 weeks so OEMs must take 6-10 weeks of stock. Buying from Indian supplier cuts that to 2-3 weeks. Import duty on finished cells is 5% which should rise further once India has 30-50 GWh capacity. At the same time machinery needed to build cell factory in India is duty free. China gives 6% tax refund to battery exporters. This will be fully gone by 2027. Exide has 6 GWh capacity mfg today. Assuming it doubles to targeted 12 GWh by FY29 and utilization goes from 10% to 50%+, that's 6.6 GWh cells sold. Considering global cell prices keep dropping, that still is potentially a 5000+ Cr revenue possibility. Add battery packs and grid battery boxes, that could be another 30-40% additional revenue. Amara Raja has no cell mfg capacity today. 2 GWh line is targeted for FY28 scaling to 7 GWh by FY30. With 50% utilization and similar realization, that's ~3000 Cr revenue possibility. But cell mfg is 1/3rd of the story, rest is 10 GWh grid battery plant + battery packing business. Exide would earn most of it from cell mfg, earns better margins. Amara Raja would earn most of it from assembling grid battery boxes, earns much lower margins.

Asian Energy Services- CMP ~370 Rs Post merger shares ~9.11 Cr Mcap one is paying ~3370 Cr Standalone services business: FY26 revenue ~492 Cr Mgt guides for 30-40% growth in FY27 with 17-18% margin -> FY27e standalone EBITDA~ 113 Cr Kuiper: FY27 guidance $60-70 mn, normalized margin ~8% -> FY27e EBITDA~ 30 Cr (Q1 margins ~4%, FY26 margins ~5.7%) Oilmax: Oilmax valued at 2582 Cr including AESL stake worth 1009 Cr SOTP: Services business at 15x ~1700 Cr Kuiper at 10x ~300 Oilmax oil/gas/mineral asset ~1550 Cr Total Value ~3550 Cr Expected fair value/share ~390 Rs Oilmax blocks are not listed so a haircut is justified. At 10% haircut, FV is ~375 Rs, at 20%, FV is ~357 Rs Disc: Haven't mentioned negatives. DYODD

I have a theory...

No specialised wealth manager in India trades at 50000 Cr market cap currently. Some of these becoming 10x in 10 years is not unreasonable given their base. Assuming take rate/margins & PE de-rating cancel each other out, AUM needs to grow 9-10x i.e. 24-25% cagr over this period. With 10-12% nominal return expectation on underlying client PFs, it requires 12-13% net flows cagr for a decade. Defensible? I think so. Organised wealth is barely penetrated. UHNI pool is expanding fast and product complexity (AIF/PMS/Private credit) keeps pushing DIY money towards wealth managers.