Looking at these figues any investor says WOW!! what a company…. The Intrisic value goes above Rs 500 last year same period. It was trading at almost 50% discount rate to its intrisic value. People who got at last year this time levels( 250-275), Good job done!! You are true value investor. But then company wanted to stretch themselves overseas. They got into 19 countries last year. Was is it in the interest of shareholder? Is it the answers given by management satisfies you as a shareholder? Thse are the questions every investor should ask themselves. Last year this share traded between Rs 256 – Rs 385. People had faith in management but could not justify whether the management has taken the right decision on going overseas.

Year 2011: The gearing has gone up to 53%. This says that the company loaded themselves with debt. Well you need money to expand your business. So obviously they leveraged their Balance sheet and they got into 19 countries. The EPS for 2011 was reported 15.69 down from 23.67.This brings the ROE for last year to 14% down 11% then previous year. The question investor should ask is, is it worth expanding business at cost of less 11% of ROE? The net cost of servicing the debt went up to 218.13 crore Rs from 17.8 crore. WOW!! Thats a big pie of operating profits going towards cost of financing. If you add this money to net profit and redo your calcullations, you will come to conclusion that results are not bad compare to 2010. They dont match the 2010 results but not short more than 10-15%. Intrinsic value for this company looking at 2011 results come to around Rs250.And the price in the market is trading at premium of around 60%. That is the reason you will see that preasure for this stock to go down from current levels. Well frankly speaking I don`t know where the price is going. As I cant predict the price.:)

Conclusion: As a Value investor, I wont be taking fresh positions untill I see improvement in results in coming quaters. I myself have parked my money at 260 and 320 levels. The management has asked 4-6 quaters of time to see the reflection of this expanding business in value wise. I would keep a track of every quater for this company. The most important thing I would like to see is paying of its debt in quaters ahead and improve their operating profits, as I am not comfortable with their gearing levels at this stage. Finally I won`t hesitate to offload from this position if I get any better opportunity in future with any other company. This company I will grade as B1 instead of A1, which I graded last year.
Cheers
Aziz
(Value Investor for valueoperationsdotcom)