I saw the following post on torrent cables on ranjit kumar’s blog. In addition, I found this analysis on amit’s blog.

The fundamentals look enticing

– RONW – 30%+
– No debt
– A 25%+ growth in topline and bottomline
– Operates in the power cable industry which seems to be doing well and is a growth industry.
– Lower valuation than all its competitors

However I am concerned about the following

– Inventory and debtors has increased in the last few years (debtor days is at 60 from almost 20-25 a few years) back. As a result the company has a very low free cash flow. Most of the cash flow has been used up by the incremental working capital
– Cannot get the annual report for the company. As a result I have no idea on how the company is planning to reduce inventory and debtors.
– The company was in BIFR from 1999-2002 (not sure on dates). Why did the company land up in BIFR and why will it not land up in a similar position in the future?

Comments welcome on the above analysis (which is very superficial as of now)

PS: An apology to all who requested me for prof bakshi’s interview. He has however posted the interview on his website. I would strongly recommend reading the interview (I have done it twice and really learnt from it)

2 Comments

  1. Alok says:

    Torrent cables is a turnaround story. It became a BIFR when cable industry was down and out in early 2000. (even Cable Corp the largest at that time was loss making)

    The positives are a good management, conservative financing, positive industry outlook.

    however, the stock has more than doubled in last 1-1.5 years(i bought at 80 Rs).It could react negatively in a falling market.
    Also there do not seem to be any capacity addtions to my knowledge.
    But definitely a good long term buy looking at financials.

    Alok

  2. Rohit Chauhan says:

    Hi alok
    i had a look at the financial and but for a few issues found the financials to be fine.
    however i believe the turnaround was complete quite sometime back and is priced into the stock.
    also the wcap increases and lack of cash flow is a problem and unless it is temporary, could be masking some problems

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