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The silent flute and not so popular company within its sector (may be because of the mix and concentration of its products). But when you are investing for long term, popularity (short term trend) really doesn’t matter to real long term investor.

This is the business with all the qualities we admire. It is a debt free business with high returns on equity and rich with strong cash flow. But last year we found weakness in their cash flows, they had to withdraw cash from their bank to execute their investments and working capital obligations (there is no harm in doing it).

But that condition points to the weakness in generating cash from its business. Bajaj Corp was able to generate only 75% of cash from its operations compare to its reported profits for the year 2012, which is 45% less to its previous year! (They generated 120% cash to their 2011 results)

Looking at very closely to this business, we found that inventories have risen almost by 200%. Is this a sign of slow down in business or any new strategy they have implemented?

Last year they issued fresh equity of around 297 Crore (My question to you all is to dig out what plans do they had to do with it?). This equity raising had diluted shareholders equity and also has impacted on their ROE.

Finally, Value operations had given quality and performance rating of A2 to this business on its 2012 and overall financial standing. Now a million dollar question is, is it worth to buy this business today? The shareholders of this business have contributed so far (March 2012) Rs 428 Crore in this business. They succeeded in generating profits of Rs 120 Crore (March 2012) and today if you want to buy this business as a whole, the asking price is Rs 2,330 Crore (last price traded: Rs 158).

The shareholders of this business are asking close to 5 times to what they have contributed so far! Value operations expect its intrinsic value for 2013 to be Rs 86 per share on expected EPS of Rs 9.77 per share.

What do you think about this business? Is it worth to buy or sell at current price?