Koutons Retail India Ltd

My heart goes out to those who buy high priced scrips and later regret when the share price crashes – in the last few weeks many shares gradually started sliding swiftly, some quite sharply. Well, this is a short story about Koutons Retail India Limited which is indeed sad but interesting.

This is a scrip in which the biggies [ read FII’s and DII’s ] had quite some stake at one point in time and for some reasons best known to them, offloading of the shares by them happened and those who were not alert to such happenings were in for a shock.

The 52 week high-low of Koutons was Rs.451 - 44.60. And sadly on Friday 10, December, the shares touched Rs.44.60/share! Those who bought the shares when it was quoting in 3 digits must surely be repenting if they are still clinging to it thinking it will bounce back – it may but God knows when and to what extent it will rise..

The FII’s and DII’s holding in March 2010 was 14.46 and 9.99 per cent respectively, In September 2010, FII’s stake went down to 7.94 and DII’s to 0.69 per cent! This is what I could obtain from BSE website – no idea whether the bigges have got out of the scrip completely..

Kouton which has a MCap of Rs.136 crores has a 3 year CARG top line of 8.73 per cent and PAT of 3.51 per cent – no wonder the scrip is quoting at a very low PE of around 2.5 and the FII’s are still clinging to 7.94 per cent! Maybe some folks like the brands the company sells and are happy with the fundamentals but in the world of stocks you need to monitor investment sentiments too which can drive a stock like crazy up or down. I thought and keep thinking that the FII’s who employ the best brains in the world are the smartest guys on the street. But sometimes I wonder if this is really true. Find out and let me know. Agreed, you may make money and save money by following the biggies but you need to go through the fundamentals and consider the opportunity cost of capital too – probably those who invested in Koutons had other better options but they thought the foreigners and our mutual fund experts are brilliant guys and hence took the plunge along with them. And these very same folks are now gasping for breath.

So, the next time you buy 3 or 4 digit shares, be careful. Check the fundamentals and observe top line and bottom line trends over a couple of years, profit margins, debt levels and do look at the depth of competition prevailing in the market and find out whether the company is doing the right things to survive and grow in order to emerge a winner in the years to come. Don’t blindly buy and sell shares which the biggies do – instead do yourself a favour by buying what you like best and then leave the rest to Almighty God who may or may not be tracking the markets! Hope you got it.

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