Saturday, July 13, 2013

GOKALDAS EXPORTS - ONLY FOR HIGH RISK INVESTORS









In 2007 ,world’s largest Private Equity firm  Blackstone bought  close to 70 % stake in India’s largest garment exporter Gokaldas Exports by paying Rs.660 Cr .Mandatory open offer for  20% stake came @ Rs.275 per share.Due to bad timing this turned as one of the biggest blunder of Blackstone ( So far ) in India and the total market capitalisation of Gokaldas now  is only below Rs.100 Cr.Stock is now trading around  its lifetime low of Rs.25.Company turned to huge loss just after the completion of acquisition and the pain is still continuing.Many of the factors which added fuel to fire was beyond the  control of management .The most important factors were - sharp appreciation of Rupee during that period against US dollar , poor off take by customers due to pathetic situation of US Economy ,Sharp increase in cotton prices..etc. Gokaldas is India’s largest garment exporter with more than 1000 Cr sales and 30 factories across India with an employee strength of 30000 people. Company manufacturing  about 2.5 million garments in a month .Company supplying its products to many well known brands like Adidas,Levi’s ,Nike,Reebok..etc and  earning more than 90 % of its income from export .Close to 65 % is coming from US market alone.This higher dependency of US market negatively impacted the company when there was a weak economic situation in US .Even after acquisition of the company by Blackstone in 2007 ,till 2011 its operations were controlled by the old management .But in 2011 Blackstone appointed their own nominees  to run the company in a professional way. But even this didn’t bring any fruits due to the impact of above mentioned negative factors.Only in last quarter ( March ) Gokaldas reported some improved performance .Its loss reduced from Rs.51 Cr to Rs.10 Cr in March quarter.From a debt of Rs.350 Cr in 2010 now it reduced to Rs.250 Cr.

                                                                                   I believe ,many of the recent developments including the revival of US economy ,sharp depreciation of Rupee against Dollar,stability in cotton prices ..etc will help the company to perform better going forward.Chances for a turn around is higher in this FY .As I mentioned above, this  company is fully owned by world’s largest private equity firm ,and normally the ultimate object of such firms are encashing these type investments when good opportunities arises.Hence , I think they will try their level best to get a better valuation for the company .Since it is a high risk high profit kind opportunity ,those with high risk appetite and willing to loose even the capital may take limited  position @ CMP of Rs.29.Stock listed both in NSE and BSE.


Link to Company website HERE

Disc: I have vested interest in Gok.Exp. 

26 comments :

  1. Hello Sir, What to do with Godrej Ind now? I am holding @280 for long term. Book profit or add more? Pls advice.

    ReplyDelete
    Replies
    1. Hold @ CMP ,add around Rs.280 in any dip.

      Delete
  2. sir, in comparison between heritage and Britannia which one do you prefer?

    Sachin
    indore, MP

    ReplyDelete
    Replies
    1. Risk element is different in these two stocks.Select one based on your risk profile.

      Delete
  3. Sir,
    what should be done with Yes Bank,with this family feud lingering on,will it impact stock price and valuation?

    Should i switch to ING Bank?

    ReplyDelete
  4. Dear VPji, pls let me know which one is better in terms of future growth prospects?
    CARE or MCX
    Pls reply at least this time.

    ReplyDelete
  5. Sir, if you noticed, Gokaldas did Not cross 10k volume mark in last 3 months, which is again raising concerns of to be included in PCA?

    -Amit

    ReplyDelete
    Replies
    1. New Periodic Call Auction list based on past three months volume already declared and this company not included in this list.New list already applicable wef 8/07/2013

      Delete
  6. Dear Sir,

    can we add Sequent Scientific following JV deal with Shasun Pharma. I can wait for 3-5 years

    http://www.business-standard.com/article/companies/shasun-pharma-sequent-ink-deal-on-veterinary-products-manufacturing-113071500041_1.html

    Pls suggest

    ReplyDelete
  7. Recommended this stock for long term even without this deal

    ReplyDelete
  8. Dear sir,

    Your views on your erstwhile posting Pidilite industries at current cmp, & why there is a sudden spike in Sabero organics...is it a buy sir.

    ReplyDelete
  9. Sir,

    Should I book profit in La Opala ?
    I bought at 209.

    Thank you.

    ReplyDelete
    Replies
    1. If you are ready to take medium risk ,you can still Hold it.

      Delete
  10. Hello sir ,
    I have been constantly viewing your blog and have a high respect for your views on stock fundamentals. Sir , you have never revealed your identity . May i know the reason ?

    Anyway , from your write ups , and my own research , i have found very common similarities between you and stock analyst Aasish chugh .
    Even most of your recommendations on this blog match with his hidden gems advices , both in write ups and timings.

    I know you will not put up this comment on your blog and neither reply me and if you put also , you will never admit the connection between you and Aashish chugh. Anyway sir , i love your blog and will keep following it.

    Just remember me as a person to first discover something about your identity . thank you sir.............

    ReplyDelete
    Replies
    1. Dear Raj Singh
      Similarity is limited only in the way of thinking ,I think so.

      Delete
    2. The location mentioned in his profile is "COCHIN, KERALA, India". So its very unlikely :)
      -SJ

      Delete
  11. Sir,
    Another request to you.....please sujest some low value good stock like marksans pharma....
    thank you...

    ReplyDelete
    Replies
    1. Very difficult to find low price (penny type) and high quality together.Only possibility is turn around cases but risk is high in that case.Already suggested some low price turn around type stocks like Nitco Ltd.

      Delete
  12. Dear VP,
    What is ur view on Vimal Oil after increasing finance cost for this quarter even though the top line has increased considerably.

    Regards

    Neil

    ReplyDelete
  13. Sir,
    Congrta to you and all readers. Heritage Foods declared 1:1 Bonus shares.

    You views sir and thanks to you.. Its an boon for small investor like us to get guidance from you.

    Nitco was in UC today and I also added Gokaldas export.

    Thanks,
    Rishant

    ReplyDelete
  14. Whats your view on tata steel. Its going down daya by day.

    ReplyDelete
  15. dear sir,

    i bought orient bell ceramic at 300 shares 96 when u recommended it. now it is hovering around 47-48. what is ur opinion now whether to hold it or book loss.

    ReplyDelete
  16. Sir, Any new Update for GOKALDAS EXPORTS as on Sept'2016, as I had bought in SIP mode from May'2007 to Aug'2011 @ Avg. Cost 145/- on all above Good News & Analysis during 2007-2008 and been stuck there. Further any hope OR Revival of same...???
    Pl. provide vineetagarwal07@gmail.com (9717173598)...Regds...Vineet Sgarwal

    ReplyDelete

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