Sekhar

While in Tier-1 cities, you can find dozens of good schools. But once you move to Tier-3/4 towns or villages, you might find only a handful of genuinely good schools. Millions of families in India belong to the middle-class and below-middle-class segments. Some struggle to make ends meet every month, while others manage to move one step at a time, create opportunities and help their children succeed. The same applies to listed companies. We have thousands of them, but many will disappear or fail over the next 7–10 years. A handful, however, will go on to become much bigger businesses. What's the common characteristic here? Maybe God's divine blessings or a bit of luck. But, more often than not, it comes down to hard work, discipline and managing things better. One word that captures all these attributes is MANAGEMENT. The headmaster/headmistress and a handful of dedicated teachers would have made all the difference to those few good schools. Similarly, disciplined, hardworking and financially conscious parents would have made the difference to those families and their children's futures. We keep looking for good stock ideas. Perhaps we should change the starting point. Look for good management teams with ethics, hunger, aspiration and a willingness to work hard. These are the businesses that have the potential to create consistent wealth for shareholders. Laurus Labs, Sansera Engineering, Sona BLW, Innomet Advanced and OBSC Perfection are a few examples. Listen to their concalls, follow their media interactions and observe their behavior. Look for signs of inconsistency, lack of discipline, excessive storytelling or capital misallocation. Equally importantly, look for evidence that management walks the talk. When you don't find these red flags and continue to see evidence of execution, you know you have a business worth shortlisting. Once we shortlist a company, at what valuation to buy and at what valuation to sell is a personal choice, driven by conviction and data. But perhaps we should change the sequence. Start with management, hunger and aspiration. Don't start with valuations and PAT. Happy Diwali!

Timepass talk on a Diwali! 1. Between the Lines: Signals from the Concall Room Divi's Laboratories: "...with the futuristic capacity, we will be in the top 3 players [in Peptides SPPS]..." KSH International: "...EBITDA per tonne of approximately ₹85,000 per tonne should be sustainable..." Azad Engineering: "...All 6 customer-dedicated facilities are now commissioned— 44,800 square meters for 4 global OEMs namely Mitsubishi Heavy Industries, GE, Vanova, Siemens Energy, and Baker Hughes. Sigma Advanced Systems: "...the fundraise is primarily to fuel our growth coming in from M&A, right, new acquisitions. We've been working on multiple opportunities over the last 6 to 8 months, and I think next quarter, Q4, is when we expect to close these transactions..." VA Tech Wabag: "...Our order book has surpassed ₹20,000 crores, while our net cash position has surpassed ₹1,000 crores, achieving record levels in both parameters. Aditya Infotech: "...In the 12 months to September 2026, our share of the total market including the unorganized segment was about 42%, which at the time of our IPO was 30%...In October, we repaid all our borrowings, and now the company is debt-free..." Sansera Engineering: "...I'm happy to say we have already won in this quarter our first business from Safran...in the semiconductor business, we are making good progress towards adding the customer number 2..." 2. Timex Group India - Shared on June 7th, see below for the latest update Financial Year 2025-26 marked a structural turning point for Timex Group, ending as a milestone year that fundamentally transformed the company's scale and profitability profile. Total revenue surged 48% year-on-year to ₹800 crore. The growth was driven by a decisive shift toward premiumization. The core Timex brand expanded 62%, fashion powerhouse Guess grew 51%, and luxury anchor Versace delivered 48% growth. At the same time, e-commerce and quick commerce channels recorded a phenomenal 90% increase, highlighting the strength of the company's omnichannel strategy. More importantly, profitability significantly outpaced revenue growth as operating leverage began to play out. What makes this performance particularly noteworthy is that it was not driven by a single exceptional quarter. Revenue growth remained consistently strong throughout the year, with Q1 growing 55% YoY, Q2 40%, Q3 26%, and Q4 an impressive 74% YoY. The company's sales strategy appears to be creating a sustainable high-growth trajectory. Historically, Q2 has been the strongest quarter due to festive-season bookings, while the remaining quarters were relatively subdued. This year, however, Q4 revenue reached almost 96% of Q2 levels, indicating a far more balanced and resilient demand profile across the year. What to Expect in FY27 and FY28? Management is positioning the company to enter the ₹1,100-1200-crore revenue club, targeting a base-case growth rate of 35-40%. This expansion will be supported by a significant increase in local manufacturing capacity, which is expected to rise from 6 million units to 10 million units annually. While the company continues to prioritize growth, EBITDA margins are expected to stabilize in the 15–16% range. Additionally, employee expenses and administrative overheads appear to have largely normalized, creating the potential for substantial operating leverage as revenues continue to scale. Latest update (post Q2FY27): Posted highest-ever quarterly revenue of ₹359 crores. E-commerce grew 75% in Q2, led by Flipkart, Myntra, Amazon, 3P and quick commerce. The Baddi plant is operating at 100% capacity (6 million units/year) and ran double shifts to meet demand. Investing $1.2 million to double the Baddi plant's capacity to 12 million units by May of next year. In the ₹2,000–10,000 segment, the competitive landscape is largely a duopoly between Titan and Timex. While Titan's core brand business is still nearly 4x the size of Timex, management sees significant headroom to capture market share and scale up. The company sees a potential to reach an EBITDA margin of ~20% in the future through operating leverage. Last but not least, festive season shopping fell in Q2 last year, whereas this year it has shifted to Q3. Hence, do expect some fireworks in Q3FY27! 3. Navin Fluorine How they make money: Navin earns its revenue from three verticals. The business operates across i) High Performance Products (refrigerants and inorganic fluorides) - 51%, ii) Specialty Chemicals (agrochemical and industrial intermediates) - 30%, and iii) CDMO (pharma synthesis) with emerging Advanced Materials - 19%. HPP (High Performance Products) is the biggest and covers refrigerant gases (HFCs, R32 coming), AHF/HF sold to merchant and high-purity buyers, and the HFO supply contract with Solstice Advanced Materials (the old Honeywell/Orchid business), which is a pass-through-priced, long-tenure contract on a dedicated asset. Specialty Chemicals is mostly agrochemical and fluorination intermediates made in the multi-purpose plants (MPP-1/MPP-2) at Dahej on a campaign basis. It is running at roughly a ₹350 cr per quarter run rate, and the Nectar/Chemours project is being added. CDMO is largely Fermion/darolutamide, made in dedicated cGMP plants, with a USD100M target for FY27 and a pipeline of other molecules behind it. Advanced Materials (data centres, semiconductors, defence, the DRDO/TDF project) is being incubated as a fourth vertical, expected to be 10-15% of the pie by 2030. What’s working well: Q2 revenue was ₹1,191 cr (+57% YoY), EBITDA ₹407 cr (+66%) at a 34.2% margin, and PAT ₹269 cr (+81%). H1 PAT of ₹513 cr already gives an EPS of ₹100. All three segments grew sequentially. HPP benefited from better refrigerant gas placement than the market average, the AHF plant ramping, and higher HFO volumes. Specialty gained from squeezing more campaigns out of existing MPP plants, and CDMO from the Fermion base plus new qualification campaigns. Gross profit held despite input inflation because forex tailwinds, pricing actions, operating leverage and efficiency gains offset sourcing costs. Working capital is at 72 days, capex is funded comfortably (H1 capex was about ₹300 cr), and the Solstice HFO contract was extended from 7 to 11 years (to December 2032) with about USD180M of added revenue potential. This protects the base beyond FY28, though the implied ~USD45M/yr run rate versus the earlier ~USD58M drew few "ouch" comments. Management says the pass-through pricing makes simple averaging misleading and that volumes are guaranteed higher. What to expect for the rest of FY27 and FY28: Management guided FY27 margins to stay in the H1 range (~34%), while keeping the long-term 30% EBITDA guidance unchanged. Q3 and Q4 should add several visible steps. The MPP debottlenecking (commissioned end-September) is not yet in the numbers, and R32 should give incremental revenue in Q3 with a full ramp in Q4. The Chemours project is due in Q3 with orders already in hand, and cGMP-4 Phase 2 (~₹125 cr) should start by the end of Q4. Specialty should reach about 60-65% of Nectar’s peak annual revenue in FY27, with the rest in FY28, and CDMO should reach the USD100M order-book target. FY27 capex is guided at about ₹700 cr, at the low end of the ₹700-1,000 cr annual frame. Management says FY28 growth is “pretty much baked in” from the capex already in place, so expect continued 20-25% type growth, with cGMP-4 (₹900-1,000 cr peak potential, split across Phase 1 and Phase 2) mostly a FY28-FY29 story. Advanced Materials adoption capacity arrives by Q2 FY28. The main swing factors are geopolitics and input costs (fluorspar, sulphur and gas are all rising), the pace of AHF utilisation, how much of the current refrigerant pricing proves durable, and whether Chemours adoption (a ~15-month read after commissioning) justifies the larger scale-up. 4. Innomet Advanced How they make money Innomet is a Hyderabad-based maker of engineered metal products with two divisions. i) Metal powders (about ₹38 cr in H1, roughly 68% of revenue) are specialty powders sold by weight to parts makers, additive manufacturing and surface-coating customers. Almost 100% of this is water-atomised, and gas-atomised spherical powder has only just started with a 50 kg unit. Realisation rose from ₹959 to ₹1,487/kg. ii) Tungsten heavy alloys (THA) (₹17.6 cr, about a third of revenue) are dense, high-value parts and fragments for defence (Pinaka, Astra), aerospace (AS9100D-certified) and other niche uses, sold per piece or per kg (₹25,000-35,000/kg indicated), with about 87% exported. Tungsten feedstock is now partly captured through the 57.5% acquisition of Swastik Tungsten, which was consolidated only for the last few days of H1. Exports were 46% of H1 revenue, against 15% a year ago. Management gave segment EBITDA margins of about 12% for powders and about 22% for THA, which blend to the reported ~15%. What’s working well H1 revenue more than doubled to ₹55.7 cr (from ₹23.5 cr), already above all of FY26. EBITDA was ₹8.24 cr at a 14.8% margin, up from 4.4% in H2 FY26 when tungsten prices squeezed profits, though still below 18% a year ago. PAT was ₹4.75 cr and EPS ₹3.64. Powder volumes rose 39% with 55% higher realisation, and 18 new customers were added (including Oerlikon and Medicoat). THA grew about sixfold and its mix rose from 14% to a third, which should lift margins as it grows. Exports rose about sevenfold, helped by China-plus-one sourcing, defence restocking and aerospace certification, and powder sales to the US continue despite the 50% tariff. The tungsten supply problem is described as solved by Swastik, with sourcing vendors up from 2-3 to over 60. Pricing discipline has improved (buying only against confirmed orders, shorter quote validity), and the balance sheet looks fine, with debt-to-equity at 0.36x, net worth up to ₹55 cr, and ₹37.5 cr of preferential funding (about ₹14 cr received). What to expect for the rest of FY27 and FY28 With ₹55.7 cr delivered and ₹36.7 cr of orders in hand, FY27 revenue should clear the ₹100 cr target, and management says H2 will be “much better” than H1 if all goes well. Tungsten prices have stabilised after a sharp rise, so deferred customer orders (Indian defence programmes and Israeli buyers still in test mode) may start flowing. Powder capacity rises from 620 to 800 tpa this year, then to 1,350 tpa in FY28 and about 1,600 tpa with the DRDO-backed atomiser. THA’s current output is about 60 tpa (2-2.5 tonnes a month), and the 120 tpa expansion could support about ₹150 cr of revenue at current prices. Management guides FY28 growth of 30-50% (35-50% for the next two to three years) with better margins, and a long-term EBITDA margin of 16-20%. Their view is that existing assets can reach ₹400-500 cr, while the ₹1,000 cr vision depends on a new greenfield project and fresh fundraising that is “not even on the drawing board”. Swastik’s bottom line won’t improve until it moves up to carbide and pure-tungsten products, at least six months away. Tungsten hexafluoride for semiconductors is a “moonshot”, and the spark plasma sintering furnace and the EIGA atomiser for reactive powders (titanium, zirconium) are early-stage. But if the company has to achieve ₹1,000 Cr in revenue, Tungsten Carbide is perhaps the most realistic growth avenue to get there! 5. Indo Count Industries How they make money Indo Count is a bed-linen and home-textile maker that sells to large retailers, mainly in the US. It runs in two segments. The core business is bed linen made in India (sheets, duvet covers and similar), with a FY27 revenue target of about ₹4,000 cr and EBITDA margins of roughly 15% or better. Core revenue is about 70% US and about 30% non-US. The new businesses have a FY27 target of about ₹1,500 cr. They are split roughly two-thirds utility bedding and one-third branded. Utility bedding (quilts, comforters, blankets and similar) is made in three US facilities. The branded side is built around Wamsutta, a US brand the company acquired, plus licensed brands such as Tommy Hilfiger. Revenue comes from product sales: volumes in million meters multiplied by realisation, plus the margin from branded and utility products. Management said gross margin should be viewed on an annual basis and should stay in a 50–55% range. Cotton is the main input cost. The company holds 4–5 months of inventory as a cushion and passes cost increases on to customers with a lag of one to two quarters. Most sales are on FOB or CIF terms, so freight increases are borne by the customer. What’s working well Execution is strong across the business. Q2 total income was ₹1,699 cr (+57% YoY, +39% QoQ), and EBITDA more than doubled to ₹259 cr at a 15.3% margin, against a full-year guidance of 13%. H1 revenue of ₹2,923 cr is about 52% of the full-year target, and H1 EBITDA margin is 14.4%. Management attributed the growth to market-share and wallet-share gains. Core margins are above 15%. The new businesses have reached about 30% of revenue, with Q2 revenue of about ₹502 cr and about 60% of the FY27 target already done. The three US utility plants are running above 65% utilisation. Wamsutta’s move into US retail, beyond direct-to-consumer, is a big driver on the branded side. The balance sheet is at its best: net debt is ₹518 cr (0.2x equity, the lowest ever), cash is ₹315 cr, annualised ROCE is 21.4% and ROE is 15.3%. Management also said working-capital days are down by at least three weeks since March, and the pass-through mechanism has protected margins so far. Two caveats: Q2 gross margin fell, and management put that down to product mix. The new businesses’ EBITDA margin is still only “lower double digit”. What to expect for rest of FY27 and FY28 For FY27, management said it will exceed the ₹5,500 cr revenue guidance and the 13% EBITDA margin guidance. Volume guidance is 105–110 million meters, with 51 million done in H1. The margin could reach 14–15% for the year, but management said it will not go beyond that. Rough arithmetic from the H1 run-rate suggests revenue of about ₹6,000 cr or more, though management gave no number. The new businesses’ margins should rise from lower double digits toward the core’s 15% over the next two to three quarters as the US plants fill up. The ₹250 cr capex is spread over 12–18 months, with only about ₹40 cr spent in H1. Most of the spinning capex should land in FY27, and the effluent treatment plant will probably spill into FY28. For FY28, the stated goal is ₹8,000 cr of revenue by CY28 (double the FY25 base of ₹4,000 cr), and management said this needs no growth capex. Utility plants should reach full utilisation and the branded business should reach about $100 mn, both by CY28. The UK FTA took effect in July and the EU deal is still pending, and non-US revenue should grow by more than 20% in FY27. Management will give FY28 guidance next year. Net debt should keep falling as free cash flow comes in. That's all for this edition. Wishing you a Sunday filled with festive sparkle, glowing diyas and plenty of Diwali cheer! Disclaimer: None or buy or sell recommendations. This publicly available information is shared for learning and education purposes.

Happy Diwali, My Friends!

Diwali haters are back big time...!

On peptide capacities, Divi's management has stated that they aspire to become one of the top 3 global players! What does that actually mean in terms of capacity, competitive positioning and the opportunity ahead? Discussed in this post!

Ashok Atluri, Chairman & MD of Zen Technologies, recently mentioned that the board had prohibited him from making future predictions! Perhaps the Board of Divi's should do the exact opposite and push its management to answer a few questions and make some predictions! #DIVISLABS #divis

If the trailer delivers ₹1,127 Cr in PAT, just imagine the interval bang in March 2027! #divis

And the Emperor delivers! #divis

Reading about the collapse of Ueno Bank in Paraguay. The primary reason appears to be related-party lending! This incident reinforces why having a strong and independent regulator is so important. We are fortunate to have the right minds governing the RBI (largely). Apparently, nearly 60% of Paraguay's adult population had an account with this bank. That's a massive reach, making the fallout even more significant. Interestingly, Carlos Carvallo, who headed Ueno before becoming the central bank governor, was also involved in the regulatory oversight of the institution. That kind of explains the why the compliance issues might have been overlooked for too long, allowing the problem to reach a point of failure.

Symbiotec and Supriya - Two sides of the same Pharma coin!