Raymond:
The Indian textile industry had just broken the shackles of the quota regime. The government's benign subsidized loan scheme for this sector made it more appealing. What better time to recommend one of the most established names in Indian textile manufacturing and retailing?
The Indian textile industry had just broken the shackles of the quota regime. The government's benign subsidized loan scheme for this sector made it more appealing. What better time to recommend one of the most established names in Indian textile manufacturing and retailing?
In September 2006 Raymond had a reasonable debt to equity of 0.7 times and net profit margin of 15% which was one of the best in the sector. Since then the stock has fallen and continued to fall, till it has sold off vistually all it's businesses except fabrics and retail.
While our judgment of the management's ability to takeoff the joint ventures with foreign partners was faulty, forex losses on sales as well as external borrowings aggravated the matter.
Economic recovery in the developed markets too did not shape up too well over the last two years. The management still remains quite unsure of where its focus lies.
2) Punj Lloyd:
We had recommended Punj Lloyd in 2008 backed by our optimistic assumption about the company consolidating its position as the second largest engineering and construction player in India. Its foray into the oil and gas pipeline business was especially encouraging.
We expected the company would grow due to a strong demand from sectors like pipelines and terminals, aggressive forays into newer segments, and execution of large scale domestic and international projects.
But unfortunately execution delays and cost overruns marred the performance of the company. Our attempts to meet the management to get some clarity on the future direction of the business were also in vain.
In addition to this, after some change in the senior management, the new members seem very reluctant to share the long term outlook for the company.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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