Patanjali Special Situation + German Inflation mania
Sep 12, 2022 12:41 am
Good morning my rocking readers,
To sum up the current market situation, India is doing very well. Rest of the world is in a temporary mess.
Inflation bites Germany, hard.
As you see from the above chart, the situation in Eurozone is grim.
It is particularly grim in Germany.
So much so that the production costs for Toilet paper have gone through the roof.
Hakle, a century old German toilet paper maker which survived World War 1, The Great Depression & World War 2, has filed for insolvency last week as massive price increases for energy and pulp drove it over the edge.
It is quite sad and happening to many players there.
Infact in England, pet owners have reportedly even given up on their pets and left them outside the houses as inflation has started to bite even harder than covid financially.
(Context - A westerner abandoning his/her pet is like an Indian abandoning his/her children).
Conclusion: For now, India is very well placed. And while short term blips can always happen, I am pretty certain it is India's decade ahead.
(I run the risk of creating a temporary TOP for the market but I will say it anyway).
Indians have begun investing seriously and our market could very well keep rising for the next 10-15 years in unabated fashion.
Again, short term blips aside, do NOT miss this unbelievably beautiful India story.
Patanjali Special Situation - A Cigar Butt? or Compounder?
Patanjali management recently gave guidance on growth which extrapolated to approx 50rs EPS in FY24 as per our understanding and 57-58rs EPS in FY25.
(These are estimates and could well go wrong).
Also, the merger of the unlisted business into the listed entity at a very attractive valuation is a very positive corporate governance measure.
The rationale for Negen PMS to buy Patanjali was that the Special Situation here is the improvement in corporate governance via merger of unlisted Foods business at an attractive valuation and a valuation catch-up story with the peer group which trades around 35-40x valuation.
Some facts about Patanjali:
1- Largest Palm Oil plantation in India.
2- Transferred entire Foods portfolio into the listed entity - this is extremely positive. More important that market gives it credit for.
3- Company is Debt free post the FPO.
Disclaimer - I want to make it very clear that this is not investment advice. Your Negen PMS already owns Patanjali and views could be biased. We may also end up selling this at any time. So please do not consider this as investment advice and always do your own work.
No one has paid us to write this Newsletter.
Kindly consult your financial advisor before acting on the contents of this Newsletter. Stock market investing has the risk of losses.
That is it from me today friends. A lot more to discuss.
An unprecedented opportunity is unfolding in India. Yes, market will fall from time to time and no one can predict that but just forget about that.
Remain invested, aggressively do 'Opportunistic SIP' at every dip.
And if anyone discourages you from equity investing ---> Kung-fu chop them =)
More Special Situation case studies and ideas coming your way.
Founder & CEO
Negen Capital PMS
Negen Capital Startup AIF
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