In Issue #005, we examine a) Gujarat's infrastructure push with the 2036 Olympics as a catalyst & b) taking advantage of forced selling opportunities aka Bajel Projects Limited
Shankar, would like to hear your thoughts on some research related to directors comp for PSP projects.
PS Patel’s compensation was 4.09 Cr as March 2018 and went up to 15 Cr as of March 2023. (Yet to get the latest figures). During the same time, the companies net profit went up from 42Cr to 133Cr. PS Patel’s compensation has improved 4x whereas the PAT has grown 3x. Ratio wise, the comp is > 10% of the PAT (even though < 10 % of EBIDTA) Is this desirable?
Few thoughts:
Even after factoring in delayed revenue from projects such as SDB, why is the board giving so generous compensation to one individual?
When the PAT fell ~20% YOY (FY '22 to FY '23), PS Patel’s compensation was seen rising from 14.8 Cr to 15.6 Cr for the same timeframe. Isn’t compensation linked to performance? What is in it for shareholders?
From what I know, PS patel does not offer shares to employees. How can this organisation sustain from this one man army. This does not sound well.
Please help me understand if this is par for the course? These certainly don’t seem like a good situation.
Shankar - thank you for another gems of insights. I have couple of questions:
1) I have seen almost all of your videos on various strategies posted on YouTube. What is your recommendation on various strategies? Should one allocate funds to each of those in separate buckets?
Magic Formula
Peter Lynch
Coffee Can Portfolio
Monopoly Stocks
Free Lunch Portfolio
CANSLIM
PE = 1
FRAGILITY Scorecard
Ambit 10 Bagger
Strong Micro / Mid Caps
Trending Value Strategy
2) I am reading "You Can Be a Stock Market Genius" by Joel Greenblatt. Bajel Projects and GHCL Textiles - both seem to fit in the spinoff category that he is talking about in the book. I wonder, how one can find the spinoffs / demergers? Is there any source one can follow? If one can get to know about spinoff / demergers sooner, one can study them well for better returns.
1. I'll recommend a filter-test-adopt approach i.e.
a) first understand which ones suit your style of investing e.g. personally, I am not keen on Free Lunch portfolio but really like the momentum+value approach. So an initial filter is needed
b) test it out with an experimental portfolio or real money. One can even backtest it if the requisite software is available
c) then adopt it (e.g. momentum+value is very much a part of my strategy)
2. Spinoffs, demergers etc. are made known via corporate announcements. Use this: https://www.screener.in/announcements/ to keep a track of what's happening
Thank you Shankar Sir for this wonderful and well written article. Just want to know currently the market cap of BAJEL LTD. is above 2000 cr. which is coming under small cap category. Will the institutional investor try to sell their stake ?
Thank you! The part on institutional investor's potential intention to sell was covered in the post. Can you please have a look at that & reconnect if any clarification is needed?
Sir, I got your point. There might be potential selling by the institutional investor. But my question is a bit generic and I am curious if the market cap above 2000 cr is considered a small cap category, then will the selling be applicable in that case?
2000 crores is not a smallcap -- more of a microcap. Infact as of this weekend, Bajel Projects is ranked #959 in terms of total market cap.
Two points here -
1. A good way for you to see if HDFC Small Cap or Nippon will hold onto Bajel Projects is to look at the constituents of this fund. This will give you an idea on how low each of these schemes is ready to go in terms of market cap. Normally eveyone has restrictions like say, 5000 crores or more etc.
2. Many funds are looking for needle movers. E.g. HDFC Small Cap is ₹26,000 crores of AUM. Bajel Projects is ₹2,000 of total market cap. From this, HDFC Small Cap shareholding is 5.6% .. so ₹130 crores --- that's 0.5% of the AUM. Again, mandates come into play.
Thanks! Yes, I did mull over this news item. In this particular case, an amount of ₹631 crores (incl. interest) is due as per last contention and in my view, there are enough indications that the same will get resolved. Here's why?
1. Per PSP's filing to the court, the SDB is neither making the payment nor rejecting the bill presented by the firm (that's an acknowledgement)
2. The services were provided (building completed) in Jun 2023 and SDB has not presented a counter-claim
3. The lower court directing the SDB to furnish a bank guarantee of ₹100 crore services & after the High Court squashed that, the HC's instruction requiring expeditious resolution is a welcome step
What I think happened here is that SDB is awaiting cash from their office tenants and once they have that - the payment will be released. The building itself was inaugurated on 18th of December so there would have been some delays with tenants settling in only now
Really liked this , thank you !
I'm happy you found it useful
thank you for the tip. just bought PSP stock :)
Most welcome
Value Info, Thanks
Most welcome!
Hi Shankar, really loving your newsletter. In fact, I love it more than your videos. Keep posting. Thanks a lot.
Thank you. Glad you are liking it!
Thank you sir , so insightful.
Most welcome, Arnav. Glad you found it useful.
Sir, you had written regarding ganesh housing? Where is the article I'm not able to find it here.
Pls share the link or can guide me to it.
Thanks
Please read this post carefully. You'll see Ganesh Housing there.
Shankar, would like to hear your thoughts on some research related to directors comp for PSP projects.
PS Patel’s compensation was 4.09 Cr as March 2018 and went up to 15 Cr as of March 2023. (Yet to get the latest figures). During the same time, the companies net profit went up from 42Cr to 133Cr. PS Patel’s compensation has improved 4x whereas the PAT has grown 3x. Ratio wise, the comp is > 10% of the PAT (even though < 10 % of EBIDTA) Is this desirable?
Few thoughts:
Even after factoring in delayed revenue from projects such as SDB, why is the board giving so generous compensation to one individual?
When the PAT fell ~20% YOY (FY '22 to FY '23), PS Patel’s compensation was seen rising from 14.8 Cr to 15.6 Cr for the same timeframe. Isn’t compensation linked to performance? What is in it for shareholders?
From what I know, PS patel does not offer shares to employees. How can this organisation sustain from this one man army. This does not sound well.
Please help me understand if this is par for the course? These certainly don’t seem like a good situation.
One more quick question please - what's the best way to know which co's are planning CAPEX?
The earnings call transcript. Most analysts would ask questions on proposed and current status of committed capex
Thank you !
Shankar - thank you for another gems of insights. I have couple of questions:
1) I have seen almost all of your videos on various strategies posted on YouTube. What is your recommendation on various strategies? Should one allocate funds to each of those in separate buckets?
Magic Formula
Peter Lynch
Coffee Can Portfolio
Monopoly Stocks
Free Lunch Portfolio
CANSLIM
PE = 1
FRAGILITY Scorecard
Ambit 10 Bagger
Strong Micro / Mid Caps
Trending Value Strategy
2) I am reading "You Can Be a Stock Market Genius" by Joel Greenblatt. Bajel Projects and GHCL Textiles - both seem to fit in the spinoff category that he is talking about in the book. I wonder, how one can find the spinoffs / demergers? Is there any source one can follow? If one can get to know about spinoff / demergers sooner, one can study them well for better returns.
Hello Vikrant ji
1. I'll recommend a filter-test-adopt approach i.e.
a) first understand which ones suit your style of investing e.g. personally, I am not keen on Free Lunch portfolio but really like the momentum+value approach. So an initial filter is needed
b) test it out with an experimental portfolio or real money. One can even backtest it if the requisite software is available
c) then adopt it (e.g. momentum+value is very much a part of my strategy)
2. Spinoffs, demergers etc. are made known via corporate announcements. Use this: https://www.screener.in/announcements/ to keep a track of what's happening
Thank you Shankar ji !! Much appreciated.
Thank you Shankar Sir for this wonderful and well written article. Just want to know currently the market cap of BAJEL LTD. is above 2000 cr. which is coming under small cap category. Will the institutional investor try to sell their stake ?
Thank you! The part on institutional investor's potential intention to sell was covered in the post. Can you please have a look at that & reconnect if any clarification is needed?
Sir, I got your point. There might be potential selling by the institutional investor. But my question is a bit generic and I am curious if the market cap above 2000 cr is considered a small cap category, then will the selling be applicable in that case?
2000 crores is not a smallcap -- more of a microcap. Infact as of this weekend, Bajel Projects is ranked #959 in terms of total market cap.
Two points here -
1. A good way for you to see if HDFC Small Cap or Nippon will hold onto Bajel Projects is to look at the constituents of this fund. This will give you an idea on how low each of these schemes is ready to go in terms of market cap. Normally eveyone has restrictions like say, 5000 crores or more etc.
2. Many funds are looking for needle movers. E.g. HDFC Small Cap is ₹26,000 crores of AUM. Bajel Projects is ₹2,000 of total market cap. From this, HDFC Small Cap shareholding is 5.6% .. so ₹130 crores --- that's 0.5% of the AUM. Again, mandates come into play.
Thank you so much sir for clarifying this doubts. Now I understand this thing more clearly.
Keep them coming bro.
Thanks! Yes, I did mull over this news item. In this particular case, an amount of ₹631 crores (incl. interest) is due as per last contention and in my view, there are enough indications that the same will get resolved. Here's why?
1. Per PSP's filing to the court, the SDB is neither making the payment nor rejecting the bill presented by the firm (that's an acknowledgement)
2. The services were provided (building completed) in Jun 2023 and SDB has not presented a counter-claim
3. The lower court directing the SDB to furnish a bank guarantee of ₹100 crore services & after the High Court squashed that, the HC's instruction requiring expeditious resolution is a welcome step
What I think happened here is that SDB is awaiting cash from their office tenants and once they have that - the payment will be released. The building itself was inaugurated on 18th of December so there would have been some delays with tenants settling in only now
Maybe. Personally I try not to generalize, makes it easier to find mispricings
Thanks for your views