There is no doubt that many new age businesses will do fantastically well for quiet a while.

But, will they turn out to be good stocks, is up for debate.

One needs to see how much of the growth has already been built up in the current price.

Risk-reward 🤔

Sugar Industry Insights (Feb 25, 2020)
Last few years sugar industry has been a beneficiary of government largesse. Sugar cycle turned in 2015. Post that there has been surplus production.

Government has helped the industry by various incentives like export subsidy, ethanol blending, allowing cane juice to ethanol conversion, msp, etc. UP and Maharashtra are the 2 major states in sugarcane plantations.

The 2 largest players in the world are Brazil and India. In Brazil sugarcane is used for ethanol a lot lot more than in India. Brazil is way ahead of any country in ethanol from cane.

US is the largest producer of ethanol in the world followed by Brazil. US uses mainly corn for making ethanol.

Indian sugar scenario: Sugar still constitutes 85% of revenue in sugar companies. So, essentially it has to do well for sugar companies to be profitable. We have had record production in last couple of years. Sugar opening stock at end of last sugar year was 14.5 mt.

A recently listed IPO (Sep 21). Promoter did OFS at X alongwith fresh issue. Made record for highest subscription ever. Company currently at more than 5X of OFS price.

Let's glance a bit on Financials.
1/2

Mcap - 3500 cr
Company does about 150 cr revenue. And about 15-20 cr in profits.

I am at a loss of words on valuations.

Maybe market is smart, promoters dumb and value investors like me dumber 🙂

My exp of almost 3 decades in the market tells me, this will end badly.
2/2

A thread on my experience and observations of the grocery delivery apps in India.

@Grofers @bigbasket_com @JioMart @flipkart supermart, @amazonIN and DMart Ready.

Live in Pune. So my experience is of this city. User experience may vary according to location.

1/11

1)@Grofers - good app, good delivery timelines, decent prices, limited selection, delivery free above a certain threshold is a negative, point and Grofer cash not very good. Offers on checkout not proper and visible . Limited vegetables.
2/11

Private label selection, prices decent. Overall decent experience.

With advent of others may face stiff competition. Maybe acquired or merged with someone.

3/11

2) @bigbasket_com - good app, good delivery, timelines, decent prices, decent selection, delivery free over a threshold is a negative. Overall decent. Will face stiff competition. Will be acquired by someone.
4/11

3) @JioMart - started poorly. But improving by the day. Each experience better than prev one. First delivery was 4 days, then 2 days, then 1 day. Last delivery on same day. Not intimating delivery schedule is an irritant and needs improvement.
5/11

Accidents happens when one doesn't look at valuations.

A supposedly platform stock listed in 2019. OFS price was 320 Rs. High of 6396 made yesterday.

Mcap crossed 1 lac crore.

Company was affected by CoVid so will talk a bit on pre-CoVid nos.

1/3

Sales of 2300 cr in FY20. NP 730 cr. Company has a monopoly given by the govt. Business is good and many extensions taking place, which will take time to bear fruit, if at all. But valuation-wise it had gone bonkers.

2/3

Stock corrected 40%+ in 2 days. This is what can happen when one doesn't heed valuations. And ignores the risks to the business. And only looks at blue sky scenario.

A good company may not be a good investment, at any price.

3/3

When a consumer company advertises only on biz channels and not on GEC and mainstream channels, you should be alert about the management's intentions.

#investing

@Sanjay__Bakshi @katalystwealth Yes Sir. Extremely difficult to predict the top. Often top comes much before the best results. One needs to have some kind of strategy to exit. Maybe something like a multiple of replacement cost, P/B, historical upcycle margins, etc. But there is no exact science to predict top.