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.

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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.

Been lazy on the posting front but keeping track of the results. Q2 FY27 has been pretty strong, hardly any disappointments so far. Some of the results/calls/business trajectories I liked: Orient Electric Sterlite Tech Garware Hi Tech Coforge SG Finserve Tips Music The Indian Hotels Company International Gemological Institute Steel Strips Wheels Jayaswal Neco

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.