Archive | April, 2013

Arshiya International: Requiem for a dream

14 Apr

Sudden Death: Highlights

Untitled

  • The last 52 weeks have seen the price of this share dip from Rs. 163.2 to 15.45.
  • The company has moved for CDR 
  • Some post-mortem articles have been written by a few websites, here are the links to a few good ones: valuenotes and outlookindia

Bottom line is that the company was juggling a high debt business in a time of systemic failure of the national banking industry. Bad things happen to vulnerable companies in bad times.

Any opportunity to gain by purchasing the stock?

A few of the following things will determine this:

  • Acceptance of the company’s CDR proposal
  • Sustained improvement in the debt levels of the company post CDR

How to identify such disasters before they happen to —stay away/make money?

The gospel to be followed here is

  • Too much debt is bad.
  • Cash flows are sacred
  • Keep your antenna up to pick up signals of distress and exit on time. Make sure that you are especially wary about mid cap firms, as their downfall is more sudden and drastic.

I am not quite sure yet whether this is a bottom fishing opportunity or a trap. So I will do the best thing that I can do when confused, stay away from it.

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