Saturday, March 8, 2014

V2 RETAIL - FROM Rs.1000 TO Rs.10 , WILL IT REVERSE FROM HERE ?

' Crisis' -  is a possibility both in life and business . Individuals /entrepreneurs approaching such situations in different ways .Some of us will try to run away from crisis and a minority will face such situations,learn from mistakes and came out with more success than ever.Let us look into business field .Last five years were very tough for entrepreneurs worldwide due to many reasons.Many well known industrialists shut their shops due to their inability to face challenges and we have many examples even from India for that in recent times .Let us look into an interesting story of an entrepreneur who is fighting for survival .

                                                                                     Vishal Retails ( Now V2 Retails)  , promoted by Ram Chandra Agarwal was a hot stock ever since its listing.Company  came out with an IPO  in 2007 @ Rs.270 which oversubscribed by a whopping 81 times.Stock hits a high of Rs.1001  in 2008 which now quoting around Rs.10. Reason for this sharp fall is very well narrated in the below link ,so I am not reproducing the same as such.



Read further only after reading the content of the above link.

 The Second Innings




What attracted me into this penny stock is the willingness of promoter to accept his faults and his confidence and hardwork  to succeed again . Company sold its old business to  TPG and Sriram Group in 2011 for Rs.70 Cr (liabilities to the extent of Rs. 823.20 Crores and assets of Rs. 393.78 Crores transferred in this deal )Ram Chandra Agarwal lost everything he had built over 24 years .But, like many others he is not ready to surrender.Now he is in the process of building brick by brick what he lost .He confesses that he had committed lot of mistakes in Vishal Retail ( Read it HERE : Ram Chandra Agarwal on What he learned from Vishal Retail's 10 big mistakes) . 

With the little corpus left after paying back major portion of debt and his personal savings he re started the same business with some differences and with lot of precautions to avoid his earlier mistakes.He changed the name of his company from Vishal Retail to V2 Retail ( V2 –Stands for value and variety).As on 31 October 2013,company opened 15 V2 retail outlets. Delhi (3),Himachal Pradesh (2),Bihar (5),Uttar Pradesh(1),Karnataka (1),Jharkhand(1) and Odisha(2). This time V2 store initially selling only textile items and aiming the middle class in Tier II and Tier III cities.If the recent sales figures are any indication ,he is doing the right thing this time .
 


 Click on the figure for a better view

In latest December quarter company reported a turnover of Rs.70 Cr which is an improvement over 100% compared with same period last year. On the bottom line company reported a profit of Rs.3.26 Cr v/s Rs 97 lakhs . Diwali and other festival sales falls in December quarter and this figure may not repeat in March quarter .But I strongly believe after a long gap of many years this company will report positive numbers in this full year. Promoters also exhibiting their confidence by pumping additional capital to the company . Board will meet on 21 March 2014 to consider the allotment of  3952720 shares to Mr.Akash Agarwal (son of Ram Chandra Agarwal ) who  just  completed  MBA from Luncaster University of UK and joined the company recently.


There is lot of negatives to avoid this stock  - history of failure in the same line of business,accumulated losses,pledged shares ( pledging of promoter holding  was a  pre-condition for sanctioning debt re-structuring package) ,contingent liabilities ..etc..etc,etc ).Against all these odds there is only one positive – attitude of promoter and his confidence and hard work to regain everything he lost.In a recent interview he express his confidence to make V2 among the largest 5 retail chains in India in next 5 years. Only time will tell the fortunes of Mr Agarwal in this second innings. If there is any truth in the proverb – “Well began is half done” ,this time he may succeed .I hope ,our B-school students will learn  the story of V2 and Agarwal  as a case study in few years down the line to understand the up and downs of business .

 Stock price appreciated recently  after the  declaration of its December quarter result ,but even now V2 is trading at the cost of a single glass tea or coffee.Whether to take the risk or not ,it is up to you .Stock is trading @ Rs.14  and listed in both exchanges.


 A must watch video in the below link

Rags to Riches  - LINK HERE


Link to Company Website HERE

 Suggested  Readings

1) The Second Innings -  LINK

2) V2 boss hopes to learn from Vishal mistakes, get second-time lucky - LINK

3) Vishal founder goes slow, steady with V2 Retail - LINK







Disc: I have vested interest in V2 Retail
# Information from publicly available documents have used to prepare this report  without extra verifications in some cases .So do own due diligence before acting on.

40 comments :

  1. Sir what's your take on latest pledging of Cox & Kings promoters, i have asked this question several time, please answer.

    ReplyDelete
  2. Unpledged promoter holding: 1.94% only

    ReplyDelete
    Replies
    1. As mentioned pledging was necessary to get approval for CDR package and the pledged shares not sold even when the share price reached as low as Rs.7 . So I don't expect any damage from that side at a time company started to perform well.

      Delete
  3. Sir,

    Thank you for this recommendation.
    Alphageo has appreciated alot since you last recommended it.
    Is it a good time to exit ?

    ReplyDelete
    Replies
    1. For any stock correction is possible at higher level and that is an integral part of healthy up move .Whether one can trade in between depends on their ability to track price movements ,consideration of paying capital gain ..etc.

      Delete
  4. Sirji....
    Excellent Pick. Congratulations.....Interesting story of Mr. Agarwal. Like you I also hopes that he will score a century in his second innings...

    Regards
    Jeffry

    ReplyDelete
  5. Dear VP

    From Monday it again started UC as like Nath Bio Gene and hopes to reach till 50.

    ReplyDelete
  6. I don't know if V2 retail with be revived or not but I would definitely place my bet on Mr Ram Chandra Agarwal's dedication and "never-say-die" attitude. ......If not v2 retails this person will flourish some where else.

    ReplyDelete
  7. Value Pick Sir - Super writeup as always.
    Hope Ram Chandra succeed big time

    ReplyDelete
  8. Congratulations sir,.....keep it up and thanks so much.We will try to get into this if available.Thanks again.

    ReplyDelete
  9. Hello sir, thanks for this recommendation. Regards, shailesh

    ReplyDelete
  10. Hello sir,I have interest in wockhardt, can u guide us regarding the company future prospects, as per the co MD he's saying in future they would be focussing more on r and d in the coming years, would the company benefit more due to this, when can you see the stock performing again,as from many months the stock is within a range, can this stock also become a multibagger as arbindo pharma as I think they were also facing the same issue, kindly give your feedback on this. Thanks, shailesh

    ReplyDelete
    Replies
    1. Already expressed my opinion on Wockhardt ,search blog. Since the Shendra inspection is about to happen ,the mentioned price in my posting ( Rs.250-300) may not happen .

      Delete
    2. Thank you for your feedback

      Delete
  11. Only concern is the growth of e-commerce sites which cater to the apparel section like Myntra, Flipkart even in smaller cities. They don't care for profitability and I wonder if they can drive out the old-format retail stores like V2. No position as of now.

    ReplyDelete
  12. Dear VP
    Thanks for this low value recommendation on V2, excellent research and writeup.
    Sir I have also been studying Alok Industries and seems they too have been through similar downturn, however not really sure of the promotoers commitment, unlike Mr Ram Chandra Agrawal, appreciate your view on Alok Industries.

    ReplyDelete
  13. Help sir, can u kindly give your view on godrej properties, rallies India and radio khaitan for next 5 years, thanks shailesh

    ReplyDelete
    Replies
    1. No stock is a blind hold for next 5 years for me.

      Delete
  14. Sir, how would you rate Glenmark --- I believe in holding long term. Will it appreciate from it's current levels? Thank you.

    ReplyDelete
    Replies
    1. One can HOLD it for long term ,but don't expect same speed in appreciation going forward.

      Delete
  15. Sir your view on Ashapura Minechem for next 6 months if you are tracking the same. Thank you in advance.

    ReplyDelete
    Replies
    1. Nothing to comment about any investment in stocks with a fixed time frame.

      Delete
  16. Hello Sir,

    What is your recommendation for Loha Ispat IPO ? Please advice Crisil grade is 3

    ReplyDelete
    Replies
    1. Tata Steel is available at half of the valuation Loha Ispat is asking . So purely on valuation basis it is not very attractive .But it is stock market and many other non fundamental reasons may drive any stock in short term.

      Delete
  17. Hi VP whats your view on ramsarup Industries after the BIFR order abating the reference and earlier reports that the banks wanted a change in management ? Pls see http://bifr.nic.in/asp/sopupload/67_2012_1922014.pdf and http://www.livemint.com/Companies/ZFZqNbVqDUdGtao5ARSQvL/Ramsarup8217s-lenders-decline-loan-recast-seek-new-manag.html
    Regards
    Raj

    ReplyDelete
    Replies
    1. Bankers may not have faith in them.

      Delete
  18. sir this script is not showing in equity list

    ReplyDelete
  19. Dear VP, I wanted to know the perspective and reasoning of different senior investors like you and hence I have a question for you:

    Which sectors do you feel will be tremendous wealth creators in the coming decade? The sector that comes to my mind is rural finance. A lot of market veterans are of the opinion that organised agriculture while some of them feel that consumption story catering to India's ever increasing population is going to be the theme moving forward. Sir, what is your take?

    ReplyDelete
    Replies
    1. I prefer to stick with themes related with Agriculture and Water.

      Delete
  20. VP,
    V2 Retail has few problems, I am stating those below...

    - Promoters have pledged 96.61% of their holding

    - The company has delivered a poor growth of -36.27% over past five years.

    - Company has a low return on equity of -68.09% for last 3 years.

    - Company has low interest coverage ratio.

    - Contingent liabilities of Rs.65.05 Cr.


    Do you still feel that its worth investing?

    Ramesh, Indore, MP

    ReplyDelete
    Replies
    1. Just one question .If everything above is positive at what price this stock will trade ?

      Delete
  21. Hi VP....I really liked your analysis style..Detail and Sharp....But for V2 and all other in similar sector i believe Online store are big threat.......will wait for Fipkart and snapdeal IPO...what u say????

    ReplyDelete
  22. V2 has plans to go online as well.
    http://retail.economictimes.indiatimes.com/news/apparel-fashion/apparel/former-vishal-retail-becomes-ebidta-positive-plans-to-enter-ecommerce-in-next-six-months/36355987

    ReplyDelete
  23. VP Saab as retired marine forces officer I completely empathised with agarwal bhai.Seeing his grit/determination I am reminded of my fellow faujis in hostile envioronment fighting so that even 1 nano millimeter of land is not given up.Rising from adversity is a quality only a chosen few have & I am putting my one month pension in the script recommended some time ago at my risk ofcourse.Pse post an update friend on V2 so that I have better inputs from a thorough professional like you.

    ReplyDelete
  24. Dear Sir

    just came across your site today, being my first visit, can I look to enter V2 retail at the current levels or would you recommend I look at any other script from your recommended names. Appreciate your initial guidance please. Thank you.

    ReplyDelete
  25. What's your views on Porwal Auto

    ReplyDelete

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