The Curious Case of Mr. Robert Vadra "Gandhi"

The recent news reflecting upon supposed financial misdemeanor by DLF and Robert Vadra is coming to the point of "Loans and Advances" by DLF and Robert Vadra's companies. DLF gave Mr. Robert Vadra Rs. 60 crores interest-free to Robert Vadra through "Loans and Advances" items on Balance-Sheet. And as viewed from certain newspaper reports, Robert Vadra's companies gave supposed salaries to Robert Vadra through "Loans and Advances". The issue of Loans and Advances seems devious ones..

Often one can find huge sums of Loans and Advances on a company's Balance-Sheet and there's little or negligible information regarding that in the Schedules of the Balance-Sheet. It was always supposed that Loans and Advances can be mismanaged to one's benefits and the current case of Robert Vadra and DLF is pointing towards the same.

Its time the companies come forward in a more transparent way towards the same and the shareholders must take the habit of questioning them.

Why one should be wary of ESOPs?

ESOPs or Employee Stock Options are a modern instruments of incentivising employees by corporations or companies. But as we move forward, ESOPs are becoming controversial regarding their usage both from the point of shareholders as well as employees.

Firstly, ESOPs straightaway dilute the equity of the company, thus hampering shareholders' interests. Nobody likes to see his stake being diluted.

Secondly, as a motivational instrument too, ESOPs are becoming controversial. If an employee is issued ESOPs, then the benefit that employee will have from ESOPs will be reliant on the overall performance of the company and that'll come from the collective performances of all the employees or co-workers. Why should an employee's special efforts be put ransom to the efforts of other employees? In a way, ESOPs are unfair to employees too. Rather, they should be compensated straightaway in form of salary raises, bonuses, perks or incentives. So, ESOPs fail this purpose too.

Thirdly, the expense on ESOPs are not accounted in the expense sheet, thus inflating profits and artificial stock price increases.

Thus, budding investors must be wary of ESOPs and must ask the management regarding its true utility.

Is it worth buying Cash?

I was checking into Piramal Enterprises Limited. This company was in news after it sold to Abbott its formulation business for a huge sum of money. Kudos were levied upon Mr. Ajay Piramal for selling the business so high. He's now being regarded as India's biggest "value investor". He's considered a brilliant manager by almost all investors in India. His company Piramal Enterprises Limited has been considered as a "value" bet by a management guru from Gurgaon and he talks about adding Mr. Ajay Piramal as a manager  to this bet. Sounds convincing...

Bajaj Corp

A newspaper article..

http://timesofindia.indiatimes.com/business/india-business/Bajaj-Almond-Drops-volume-growth-to-sustain-at-18-20-levels-Analysts/articleshow/16641521.cms

Speciality Restaurants Limited - Mainland China

Last night I was looking over the recently concluded IPO launch of Speciality Restaurants a.k.a. Mainland China. From the front, it immediately reminds you of Jubilant FoodWorks a.k.a. Domino's Pizza and it bullish run in past two years. Speciality Restaurants owns a number of other brands too like Oh!Calcutta, Bengali Sweets, Flame n' Grills etc. They have disclosed their statements from 2009 to 2012.

What's wrong with various stock investment forums?

There are lots of stock investment forums on internet and their owners work very hard in operating and maintaining them. Most of them are investment professionals and have long stints in stock markets. Some of them have even turned activists, often taking business managements to their tasks. But something is missing with these stock investment forums.

What's "value" for value investor?

A "Value Investor" in its conservative sense relies only on numbers in absolute terms. For him the underlying value has utmost importance. Now, this underlying value might derive from unlocked assets, cash or maybe future growth. For a value investor, everything needs to be optimum: the buying price, growth and future cash flows. He come to a value based upon these suppositions. From the outside, you might feel that a value investor is only relying on the present value in the business. But this isn't so. His present value takes into consideration the future cash flows. The "Discounted Cash Flow" model is based upon this supposition of which a value investor is a die-hard fan. But here is the pitfall too.

What is Margin of Safety?

Yesterday, I read Seth Klarman's book "Margin of Safety". I approached that book to answer some of my questions. But, rather, it increased my doubts on numerous accounts. Seth Klarman tries to dig deep into the concept of "Value Investing" and then through Margin of Safety, tries to discuss on value investment approaches. Primarily, it was all about "Discounted Cash Flow " model. The only shortcoming which I felt was that Seth Klarman didn't talk anything about business models. He didn't say anything about "Why a certain business model must be favoured?". Though he talked about the importance of cash flows, but he ignored discussing about the choice of businesses.

How long to stay invested in a stock?

Yesterday night, I was speaking with a very respected friend, elder and we discussed about investments & businesses. We started talking about strategy and then he revealed that he was invested in two stocks. I definitely endorsed his strategy, since I, myself am invested in a single business and am enjoying the benefits of that greatly. We started talking about his picks and then I realized that both of his stocks were pretty richly valued in terms of PE. I, then suggested, him to move to a stock which was equally good & of high quality but quoting at undervalued prices. Later, I realized that this was worth writing an article.

What is an ideal business?

What's a business meant to be? Surely, its not for emotional gratification. Its meant to earn you money more than what you invested in raising the business over a period. You expect returns. 

You can't alone run a business. You need co-operative efforts of employees for which they get paid. So, employees are a great asset for the business, but not at the cost of returns from the business. So, definitely, business isn't welfare. Any incompetency & any expensive labour needs to be sorted out.

Business is also run by machines and machines need buildings and buildings are erected upon lands. These all comprise "fixed assets". Their expense come up firsthand while initiating an enterprise. The amount paid for the "fixed assets" must be conducive enough for the profitability of the business. Lets us take the example of land. If the land cost is so prohibitive, then it can affect the expansion of the business which relies upon setting up manufacturing units for itself. Second is the case of machines/technology.