Niteen S Dharmawat, a sebi registered analyst is having a dream run in a not so popular stock – KNR Constructions. Here is the story unravelled in his own words.
KNR Constructions is one of the truly long term holdings for me where I completed 10yrs from my first purchase. It tested patience multiple times. It feels good to hold something that has gone 50X fm the lows that I bought once (adjusted for split and dividends). I was lucky.
It was not all hunky-dory. When I bought it 1st time at ard 100 (Rs 20 after adjusting 5:1) I was told:
1) it is a Hyd co
2) does not trade 250 shares in a day
3) infra co days are over
4) infra cos don’t make money, they are just cash guzzlers (they showed some charts too)
They all proved right also when the stock went down more than 50% after my initial purchase. I had nothing to offer but to re-read annual reports and go through the con calls.
But when they were saying all these, they missed the following
1) as if the companies from all the other cities are saints. A company has to be selected on its merit and not on its location. We should avoid such biases
2) it was an illiquid counter that time as promoter holding was close to 75% and the free float was low. Anyways when the time horizon is very long term, it is not going to make much of a difference if one is buying in an individual capacity with limited capital.
3) the days were over for flamboyant infra cos so well managed, disciplined cos will have a bright future
4) infra cos are not fancy but they can offer value if they are creating right assets, generating operating cash flows to fund business growth and mindful of risk mgmt.
Let me also add one more fact. I avoid meeting management, going to the AGMs. I believe that most of the time, we end up getting biased, many may disagree on this. I do not have the skills to extract the info that I may need while talking to them without getting biased.
Instead, I try to do scuttlebutt, talk to the company employees, vendors, suppliers, customers, competitors, go through ARs, Concalls etc. KNR is no different. I NEVER attended a single AGM in the last 10 years and never met promoters.
However, I attended several con calls, asked questions, gone thru ARs and corporate ppts, made several notes, gone through NHAI documentations, spoke to some of their close competitors and how they feel about KNR and some other cos etc/etc. All these provided valuable inputs.
My learnings are
It helps if you do your work. When you have doubts, look at the things with a magnifying glass. You get better clarity and that may help you in building conviction.
You can be in a company that is 50% down with no returns for 2 years while other cos might be doing great and you may feel stuck. Your homework and conviction will help you reap the benefits. NOTHING ELSE.
In the end, I thank God and have deep gratitude that it worked.🙏
This is a case study that I wrote 4 years ago about my KNR journey: dharmawat.blogspot.com/2017/01/knr-co…
Disc.: holding and recommended to clients too. Above is only to share the experience. We may decide to hold, buy more or exit. Do not consider this as recommendations of any sort.