SHRENUJ & COMPANY – A DIAMOND AVAIL AT DISCOUNT

Industry

Diamond Cutting, Jewellery & Precious Metals

Logo of 'Shrenuj & Company'

THE MARK OF TRUST

By just having a glance at the fundamentals and the current market price, anybody can say that it’s a value pick for your portfolio. But why the stock value is going down day-by-day creating panic among the investors? Few questions not exactly answerable, but can have the analysis to come to certain conclusions. I strongly recommend to buy this gem stock based on the following cues that deliberately indicating to worth buy it.

Negative Cues

Unlike many other analysts, who mostly discuss the positivity first, I prefer to put before you the stock’s negativity  first.

  • Very huge debt of Rs. 1648.6 Crores, at the end of fiscal year 2016. Trade circles are attributing the problem to its ‘Aggressive Overseas Expansion’.
  • Promoters pledged 72.25% out of 50% of their total share holding
  • Currently Diamond Industry is facing many problems around the world.
  • Indian Government is not paying much attention to this industry
  • BSE is going to suspend the stock from trading, in the case if  the company is not able to comply with the norms, by March 21
  • The exchange also said that 15 days after suspension, trading in the shares of non-compliant companies would be allowed on restricted basis or in Trade for Trade basis in Z group only on the first trading day of every week for six months.
  • Net Loss widened to Rs. 38.32 Crores in the period ended March 2016, as against Rs. 4.9 Cores in the preceding quarter. The company has shown a net profit of Rs. 2.5 Crores in the period ended March 2015.
  •  Net sales also drastically decreased by about 62%

 Positive Cues

  • The business has a very traditional inheritance of over 100 years. Successfully managed, energized and guided by the strong management. I would like to mention here their passion towards the business in their words – heritage, Innovation and Passion. I really appreciate the confidence it reveals, that’s how much they love and bringing it up since from generations. That’s what the most of the businesses are lacking nowadays.
  • In its industry, one of the first Gems and Jewellary Company to be listed on BSE, had introduced the Laser Technology for  Diamond Processing in 1987. They are the first, to bring such technology back to India. It indirectly speaks -How innovative the business is!
  • They have created a number of new and unusual polished diamond cuts through their business unit ‘Trapz’, several of which are patented – innovative.
  • Brand Name matters a most. A very good brand names like Amante, Arisiya Bhavya, Caro 74, Hot Diamond etc. are their own assets. 
  •  Promoter holding is around 50% – Which is of major interest.
  • There is a major interest of funds like India Max Investment Fund (6.37%), HSBC Private Bank (Suisse) (5.28%), and Bridge India Fund (4.67%)

Check for the target price here.

Buy – But Why?

  1. There is a hope that in the nearby future Government may pay attention and give relaxations to this industry.
  2. ‘Debt-Restucturing’ in any form may bring back the business, its previous glory and life, which the company is currently planning. For example, consider ‘3i Infotech’.
  3. There was a news that, a Senior Banker told to ET, ‘This is the case of a company finding itself in a difficult business environment.., the situation looks tough. We have not found any evidence of fund diversion. We are willing to negotiate with the management and perhaps restructure the debt, if the promoters are willing to bring in around Rs. 300 Crores. The legal process is in full stream.” – As bankers are ready for negotiation, it’s good for the company, to come up with some solution.

    Previous book value was around Rs.48. Now, even after deducting the Rs.1500 Cr. Debt, it’s still standing at Rs.30. So, it’s really a gem stock availing at a discount, That’s what I think

What you people are thinking I don’t know. For me there will be a solution for this debt problem. At last, the company is in the hands of very efficient management.

The decision is yours.

Thanks for reading! And, don’t forget to comment! And, start the topics on your remaining stock picks in the forum. I will answer.

All The Best For Your Stock Investments!


About the Author:

Certified Financial Planner And Stock Analyst