First let me thank you all for writing so many emails to us. I will do my best to reply each and every email.

Talking about emails, I have found a pattern of emails I receive everyday. There are normally two
kinds of emails I receive, I have bought XYZ company at Rs 820 one month back and today it is trading at Rs 720. I am sitting on huge losses. What should I do? Do you think it will go back to Rs 820 levels? What do you think about the price of XYZ Company?

The other kind of emails asks questions like, what do you think about quality earnings of XYZ? How would you interpret Balance Sheet of XYZ Company? Is company investing in attractive assets and will generate good returns in future etc.

So with this background let me start this blog.

You can divide the ‘analysis of businesses’ in two categories. One is ‘quantitative analyses’ and another on ‘quality analyses’.

There is no perfect recipe but the best recipe is a mix of both quality and quantitative analysis. It all depends on you what aspect of business you consider to do analysis.

Our model is purely based on quantitative analysis and we emphasize to you all to add quality analysis on competitive advantage (economic moat), quality of management and prospects of business. According to us these drivers cannot be measured absolutely through quantitative analysis.

This is the reason we say that our model is a research tool, and to any investment decision you have to add your analysis on quality. Once again let us underline that Stock of any company is a piece of that business, not a piece of stock market or any paper.

Before buying any stock, look at it as a business and think that you own that business as a whole. Switch off the stock market and analyse its business.

I had received plenty of comments and emails to share my view on various companies. So I thought to do this exercise with you all and I invite each and every one of you to participate actively in sharing your views.

We will share appropriate quantitative data that can help you take decision on quantitative analysis and we want you to colour up your favourite company with your quality analysis.

Remember, the attractiveness of any business depends upon what money is gone out of investors pocket and what comes in through their business activity.

1. Repro India:

Repro India

 

2009

2010

2011

Reported Profits

16.52 Crore

17.56 Crore

22.79 Crore

Dividends Paid

2.62 Crore

3.15 Crore

6.34 Crore

Retained Earnings

13.23 Crore

13.90 Crore

15.88 Crore

Capital Employed

96.34 Crore (2008)

109.57 Crore

123.49 Crore

139.43 Crore

Capital Raised

0.00 Crore

0.02 Crore

0.06 Crore

Return on Equity

16.05%

15.07%

17.34%

Debt

105.90 Crore

135.31 Crore

156.09 Crore

Net operating Cash Flow

9.13 Crore

31.24 Crore

14.18 Crore

2. Veljan Dension

Veljan Dension

 

Sep 2008

Sep 2009

March 2011

Reported Profits

8.51 Crore

4.71 Crore

16.97 Crore

Dividends Paid

0.90 Crore

0.90 Crore

1.35 Crore

Retained Earnings

7.46 Crore

3.66 Crore

15.40 Crore

Capital Employed

29.18 Crore (2007)

36.64 Crore

40.30 Crore

55.70 Crore

Capital Raised

0.00 Crore

0.00 Crore

0.00 Crore

Return on Equity

25.86%

12.24%

35.35%

Debt

18.94 Crore

13.25 Crore

14.73 Crore

Net operating Cash Flow

4.75 Crore

14.80 Crore

5.94 Crore

3. Josts Engineering

Josts Engineering

 

2009

2010

2011

Reported Profits

1.26 Crore

2.33 Crore

4.40 Crore

Dividends Paid

0.57 Crore

0.76 Crore

1.53 Crore

Retained Earnings

0.59 Crore

1.43 Crore

2.62 Crore

Capital Employed

4.81 Crore (2008)

5.40 Crore

6.83 Crore

9.45 Crore

Capital Raised

0.00 Crore

0.00 Crore

0.00 Crore

Return on Equity

24.66%

38.07%

54.05%

Debt

0.31 Crore

0.11 Crore

0.03 Crore

Net operating Cash Flow

1.54 Crore

2.83 Crore

1.86 Crore

4. Oriental Carbon & Chemicals

Oriental Carbon

 

2009

2010

2011

Reported Profits

7.63 Crore

29.46 Crore

37.38 Crore

Dividends Paid

1.54 Crore

4.12 Crore

4.12 Crore

Retained Earnings

6.81 Crore

24.56 Crore

32.50 Crore

Capital Employed

60.90 Crore (2008)

68.22 Crore

92.78 Crore

125.28 Crore

Capital Raised

0.51 Crore

0.00 Crore

0.00 Crore

Return on Equity

11.82%

36.60%

34.28%

Debt

22.56 Crore

18.64 Crore

56.54 Crore

Net operating Cash Flow

17.66 Crore

36.31 Crore

26.74 Crore

5. Rolta

Rolta

 

2009

2010

2011

Reported Profits

293.09 Crore

254.59 Crore

401.43 Crore

Dividends Paid

48.31 Crore

52.39 Crore

56.47 Crore

Retained Earnings

238.41 Crore

184.78 Crore

289.71 Crore

Capital Employed

1185.64 Crore
  (2008)

1424.16 Crore

1609.12 Crore

1898.97 Crore

Capital Raised

0.11 Crore

0.18 Crore

0.14 Crore

Return on Equity

22.46%

16.79%

22.89%

Net operating Cash Flow

360.27 Crore

404.88 Crore

692.67 Crore

Debt

996.73 Crore

1258.76 Crore

1463.56 Crore

6. Polyplex

Polyplex

 

2009

2010

2011

Reported Profits

154.02 Crore

137.33 Crore

1336.54 Crore

Dividends Paid

11.19 Crore

12.79 Crore

31.98 Crore

Retained Earnings

136.18 Crore

26.76 Crore

927.28 Crore

Capital Employed

500.06 Crore (2008)

636.24 Crore

663 Crore

1606.27 Crore

Capital Raised

0.00 Crore

0.00 Crore

15.99 Crore

Return on Equity

27.11%

21.14%

117.79%

Debt

681.32 Crore

853.95 Crore

728.33 Crore

Net operating Cash Flow

205.68 Crore

246.74 Crore

490.42 Crore

7. Unity Infraprojects

Unity Infraprojects

 

2009

2010

2011

Reported Profits

70.33 Crore

85.63 Crore

96 Crore

Dividends Paid

6.02 Crore

7.41 Crore

8.41 Crore

Retained Earnings

63.30 Crore

145.98 Crore

86.17 Crore

Capital Employed

355.47 Crore (2008)

418.77 Crore

566.20 Crore

652.37 Crore

Capital Raised

0.00 Crore

1.45 Crore

0.00 Crore

Return on Equity

18.17%

17.39%

15.76%

Debt

482.08 Crore

686.63 Crore

869.04 Crore

Net operating Cash Flow

-113.52 Crore

-175.77 Crore

51.17 Crore

8. Sintex Industries

Sintex Industries

 

2009

2010

2011

Reported Profits

327.37 Crore

331.12 Crore

458.38 Crore

Dividends Paid

15.09 Crore

16.38 Crore

17.74 Crore

Retained Earnings

153.74 Crore

253.96 Crore

454.67 Crore

Capital Employed

1539.18 Crore
  (2008)

1692.92 Crore

1946.88 Crore

2401.56 Crore

Capital Raised

0.00 Crore

0.00 Crore

0.01 Crore

Return on Equity

20.26%

18.19%

21.08%

Debt

2296.42 Crore

2630.34 Crore

2773.79 Crore

Net operating Cash Flow

147.63 Crore

-260.37 Crore

957.91 Crore

9. Castrol India

Castrol India

 

Dec 2008

Dec 2009

Dec 2010

Reported Profits

262.37 Crore

381.06 Crore

490.31 Crore

Dividends Paid

185.46 Crore

309.10 Crore

370.92 Crore

Retained Earnings

45.39 Crore

19.43 Crore

-65.14 Crore

Capital Employed

430.18 Crore (2007)

475.57 Crore

495 Crore

553.50 Crore

Capital Raised

0.00 Crore

0.00 Crore

123.64 Crore

Return on Equity

57.93%

78.52%

93.53%

Debt

2.79 Crore

0.00 Crore

0.00 Crore

Net operating Cash Flow

161.67 Crore

566.01 Crore

514.76 Crore

10. CRISIL

CRISIL

 

2008

2009

2010

Reported Profits

140.57 Crore

160.78 Crore

205.47 Crore

Dividends Paid

50.58 Crore

72.25 Crore

144.18 Crore

Retained Earnings

81.07 Crore

76.30 Crore

-39.23 Crore

Capital Employed

276.45 Crore (2007)

357.52 Crore

433.82 Crore

394.46 Crore

Capital Raised

0.00 Crore

0.00 Crore

-0.13 Crore

Return on Equity

44.35%

40.63%

49.61%

Debt

0.00 Crore

0.00 Crore

0.00 Crore

Net operating Cash Flow

164.66 Crore

174.19 Crore

145.95 Crore

Many investors who are regular to our blog know that we ask you to do research on any company in five main drivers. They are:

1. Look for long term prospects of business.

2. High ROE with sustainable competitive advantage (business moat)

3. Surplus Cash Flow

4. Less or no Debts

5. Excellent Management

Any business ‘reported profits’ can be manipulated or what I say is not real profits unless and until are matched or read in conjunction to cash flow. Why I say this because in ‘Income Statement’ the ‘Depreciation’ is a normal accounting standard where Accountant cuts the Depreciating Asset in 20 or 30 blocks and deducts from the Asset value every year.

I think that ‘Depreciation’ should be replaced by estimate money required to replace that asset after 20 or 30 years. Imagine if an aeroplane bought today costs 100 Crore, twenty years after it will cost far
more than 100 Crore.

Warren Buffet mentioned once that, do not buy a shares of any company if you are not ready to hold it for next ten years. We also think that every investor needs to think independently and correctly as said by Charlie Munger and have to ride this journey by themselves. We have only designed tool to help you in that journey and are now very close to launch its first release.

Switch off your stock market and look at above ten businesses and share with us which business as a whole attracts you to become its sole owner. Things will start looking crystal clear. Share your clarity
with us all.