I am being introduced to a new investing perspective which I thought existed but never gave it the kind of brain storming it deserved. Thank you for sharing these insights.

I would like to share some examples here, taking a leaf from ramki's book. There is a small company by the name of Cheviot Co. Limited... its purely a dangerous play given thats its into jute processing, a sector thats dying no doubt. But look at this company's financials... and just see how this co. is doing well....this qyarter may not be that well but else this company is doing simply great .... I beleive its doing the value addition which Ranki is talking about. Sometimes, your input may be of cyclical nature but if you are doing such a value addition that benefits your customer, you can command a premium. This sort of companies may fly off all of a sudden and if you can be little bit swift you can make decent money in such companies.Take another example, west Coast Paper.... its doing so well inspite of being in a cyclical sector. Again, I beleive we can seize a decent upside in this company. Usha Martin is another classic exmple. So, can be said of Kanoria chemicals. This is one company whose financials can teach you a lot of lesson.. this company added tremendous debt and bought massive assets and as a result its depreciation and interest cost surged.... but this quarter this co. produced a stellar. Its not the qyarterly performance I am talking about. I am trying to feel how does a company makes a transition. Its ultimately the management's foresight and trust me we need it for non-cyclicals as well. For that space is far more competitive.Look at how people are looking at Corus deal... there is so much sceptism.... I may be little bit harsh but I am disappointed by the way the analysts have interpreted this deal. So, even though a few quarters may not be outstanding but I beleive we need not take such a myopic look. I am not trying to be jingoistic over here, but I beleive if you want to grow big there are risks which you neeed to take. And I was surprised nobody talked about that part.... nobody taked about risks. I was simply wondering whats the worst possible case and the best possible case. And we need to take a rational view.A company making 15 rupees quarter every quarter meaning they can make 6 times their capital every year. This figure translate into 3000 crores. Let us assume they pay 13 rupees as dividend, that would imply 47 Rs. as retained translating into 2350 crores per annum.Looking at TISCO's Annual Report, we can easily see that TISCO can raise 15000 crores by way equities by issuing rights in the ratio of 1:1 at a premium of 290 rupees per share.And trust me, people will jump at 300 rupees. The total equity will become 24000 crores.Now, it can easily rise 36000 crores of debt on this amount.So, total cash availability will be 36000+15000 crores, which is 51000 crores. It has a debt of 2500 crores. So, we can deduct that... so, we geta figure of 51000-2500=48500 crores.This year it will make 2350 crores after dividend. So, total funds availability will be 50850 crores.the scheme will result in dilution of equity but now just imagine the value addition it brings to the shareholders. We can get multiple of current turnover with just double the equity at current level. In case we get the same return on scale as does TISCO, assume the return to the shareholders post the deal?

Thanks Vivek, For TISCO - I always felt the same QUALITATIVITY .. BUT your QUANTITATIVE explaination made it more vivid/clear for me to understand how to express the same feelings i was having QUALITATIVELY !!

We can get multiple of current turnover with just double the equity at current level. In case we get the same return on scale as does TISCO, assume the return to the shareholders post the deal? ------------

Edited by vipul - 01/Feb/2007 at 5:48am