Why bear the burden of more baggage and then apply balm – why, my friend why?

Friends, Indians and my countrymen, are we mortals not burdened with lots of problems that we need to embrace more burden? Why do investors keep buying stocks of baggage companies as if folks out there will buy new baggage every time they change the way they travel – Aritocrat whilst travelling by a Luxury Bus, a Delsey while travelling by Train and a Carlton while travelling by air? Sure, guys may do that if they have inherited wealth or money enough to burn but no man or woman of sane mind will keep buying suitcases and baggages off and on as if it were a wardrobe. Yeah, I am talking of VIP Industries Limited. The company manufactures plastic moulded suitcases, handbags, briefcases, vanity cases and luggage. It has acquired UK luggage brand Carlton in 2004. It provides travel products, hard and soft-sided luggage, bags, backpacks, duffels, shoulder bags, waist pouches, sling bags, duffel trolleys, vanity cases, office bags and satchels, suitcases, and briefcases. The company offers its products primarily under the VIP, Carlton, Delsey, Footloose, Alfa, Aristocrat, Skybags, and Buddy brands. It also manufactures molded furniture under the Moderna brand.
VIP Industries has a Market Cap of Rs.1768 crores, a PE of around 25 plus and a Book Value of Rs.60.92. The company generated a turnover of Rs.646 crs and Net Profit of Rs.57 crores in fiscal 2009-10. Face Value of its shares is Rs.10 and though the company paid dividend of 50 percent for fiscal 2009-10, there is no reason why anyone should HOLD or BUY a scrip like VIP Industries Ltd when price of scrip is hovering around Rs.618.05/per share.[ today’s closing price on BSE ] For half this price, you can buy much much better scrips that has potential to double/triple your money in 1 or 2 years time. So, those holding or thinking of buying VIP Industries, do think again. Yeah, if you are planning to go on a honey moon, shell out money over and above Rs.618.05 and buy a Carlton to impress your other half but just forget buying a stock that’s quoting > 10 times its Book Value. I just keep wondering who’s holding and buying such stocks! Anyway, those who already have VIP Industries Ltd can ride the ongoing bull market momentum and get out on obtaining the pre set profit target.

But anyway, thanks to companies like VIP Industries, the mightest survivors on planet earth who could not and cannot ever be destroyed by the mightest armies in the world, can thankfully find a cozy place to dwell in these luxury baggages, if the owner fails to chuck napthalin balls into it whilst the baggage lies idle until the next journey!

And those who are yet holding VIP Industries Ltd must be quite sick for not selling it near the peak of Rs.801/share. Result: Frustration followed by headache. And to make matters worse, just think if the guy who owns VIP Industries Ltd also happens to own Amrutanjan Healthcare Ltd. This guy had it. Just in jest, I believe the simple reason being : the 28 year old Zandu Balm is the hottest selling stuff as folks who return home after seeing Dabaang have the sheared movie ticket in one pocket and Zandu Balm in another pocket. Now, who’s going to buy Amrutanjan Pain Balm except perhaps the shareholders of Amrutanjan! Munni in Dabaang has done her magic and now folks holding on to Amrutanjan Healthcare Ltd need to perform their magic by just dumping the stock on obtaining their pre set profit target and investing the proceeds in much better scrips. Amrutanjan did sales in range of Rs.75 to 93 crores in last 5 years and profits were in range of Rs.6 to 14 crores and that too erratic. Where is the growth and what sort of growth can you expect from such a company going forward and what makes you think the share price will grow from current levels. The LTP of this scrip was Rs. 761.30/share. And guys still holding on to Amrutanjan must be kicking themselves for not selling it at near peak of Rs.1345/share!

With due respect to the sentiments of the holders and prospective buyers of above two scrips, I would not be shocked to know if these folks are applying balm on their foreheads under a moonlit sky – then it doesn’t matter whether it’s Zandu Balm or Amrutanjan Balm! Those who are holding onto one or both these scrips may probably be applying balm whilst praying for the price to reach its previous high. And those who are contemplating buying one/both these scrips may be wondering whether they should at all buy such scrips at such high prices whilst applying balm!

Moral : 'Munni Badnam Hui' but for Heaven’s sake “ you no badnaam hui” by holding on to or aspiring to buy VIP Industries Limited and Amrutanjan Healthcare Ltd.

For a change, let me know if you folks liked this post. I would love to hear from you folks.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd