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Sectors in Focus

Major Corporate Developments This Week

1. Hindustan Aeronautics - its LCA IOC contract value has been revised up to Rs. 5,077.95 crore from earlier Rs. 2,700.87 crore.
2. IIFL Finance - the Reserve Bank of India (RBI) asked the company to stop sanctioning or disbursing gold loans with immediate effect on certain material supervisory concerns.
3. NLC India - government plans to divest up to 7% of its stake in NLC India through an offer for sale (OFS), aiming to raise Rs. 2,000-2,100 crores.
4. IIFL Finance - Fairfax India Holdings Corp. committed to infuse $200 million in IIFL Finance.
5. HUDCO signed a Memorandum of Understanding (MoU) with Maharashtra State Electricity Distribution Company Ltd, for providing of credit of up to Rs. 5000 Crore for the largest feeder level solarization scheme in India under PM-KUSUM Scheme.
6. Tata Motors will increase the price of its commercial vehicles effective 1st April 2024, up to 2%. The price increase is to offset the residual impact of the past input costs.
7. HCL Technologies announced a partnership to deliver new generative AI (GenAI)-led solutions. The offerings will help enable enterprises to adopt ServiceNow’s GenAI capabilities across the business quickly and efficiently.
8. The Hydrocarbon vertical (L&T Energy Hydrocarbon – LTEH) of Larsen & Toubro (L&T) has secured an order from the Oil & Natural Gas Corporation (ONGC) for the MHN TCPP PGC BGC Project (MTPBP), off India’s West Coast.
9. JSW Steel reported consolidated Crude Steel production for the month of February'24 at 21.5 Lakh tonnes, grew by 5% YoY. Capacity utilisation at Indian Operations level stood at 92% for February’24.
10. KPI Green gets order for 9.40 MW Solar Power Plant under captive power producer segment.
11. JM Financial - RBI prohibits firm from financing against shares and debentures.
12. Centurm Electronics received an order for Realization of space-based EW Payloads from Defense Research and Development Organisation (DRDO).
13. Ajmera Realty & Infra India has successfully secured credit facilities totaling Rs. 500 Crores from two leading financial institutions: Standard Chartered Bank and ICICI Bank. These funds will be utilized for the execution of Ajmera Manhattan, a luxurious residential project situated in Wadala, Mumbai. Additionally, a portion of the funds amounting to Rs. 200 crores has been utilized towards the partial prepayment of the GCP loan availed from HDFC Bank.
14. Tata Power, Union Bank renewed partnership to boost rooftop solar adoption among residential consumers.
15. Allied Digital Services gets order worth 190 crore for MIDC Taloja Smart Industrial City Project.
16. Tata Motors - JLR UK February sales up 35% at 2,255 Vs 1670 units.
17. Tata Motors - the company announced the decision to split its passenger and commercial vehicle businesses.
18. Power Mech bagged orders worth Rs. 658.57 crore from Madhya Pradesh Government & Gujarat Mineral Development Corporation (GMDC).
19. Coforge has announced a multi-year strategic partnership with Carnival UK. The collaboration aims to enhance the two cruise lines' Quality Engineering (QE) and Testing capabilities across all operational domains to ensure seamless holidays and exceptional guest experiences in the digital era.

TechnoFunda Investing Quote from Legends -

Paul Samuelson, a Nobel Prize winner in Economics Science, uses an exciting metaphor to teach the importance of long-term investing. It takes time for paint to dry and for grass to grow. And the person who is watching those two processes must be patient. In the same way, investors must patiently wait and watch as their portfolio grows. Samuelson admits that waiting is not as exciting as buying and selling regularly. However, successful investors have learnt the value of waiting. Anyone who wants excitement should take $800 to Las Vegas. But for those who want to build wealth, calmness and patience trump excitement.

📚 Book I'm Reading This Week ​​​​​​100 Baggers: Stocks That Return 100-to-1 and How To Find Them Chris Mayer’s book 100 Baggers is a comprehensive guide to finding stocks that can return 100-fold over the long-term. Chris studied companies that have achieved 100-fold returns from 1962 to 2014, and found that they all shared similar characteristics, such as high returns on capital, sustainable competitive advantages, and strong growth prospects. The book covers these characteristics of companies that have achieved 100-fold returns in detail, as well as strategies for finding these types of stocks. In the book, Chris provides numerous examples of companies that have achieved 100-fold returns and analyzes their performance on how they became 100 baggers. He also discusses the psychological barriers that can prevent investors from holding onto these stocks for many years. List of All Books I have Shared →

TechnoFunda 101 - Power Capsules

Learn technical as well as fundamental concept in a simple way

Understanding Cash Flow from Operations: A Crucial Analysis for Investors

In the complex world of investment, dissecting a company's financial health is paramount. Among various metrics and financial statements, the Cash Flow from Operations (CFO) stands out as a fundamental indicator of a business's financial robustness. This section delves deep into CFO, outlining its significance, components, and practical implications for investors.

The Essence of Cash Flow from Operations

Cash Flow from Operations reflects the actual cash generated by a company's core business activities. It doesn't merely focus on profitability on paper but emphasizes cash - the lifeblood of businesses. By understanding CFO, investors gain insights into how efficiently a company converts its operations into cash, which can be used for expansion, reducing debt, or returning value to shareholders.

Key Components of CFO

1. Receivables:
   • Represents money owed to the company by its customers.
   • The proportion of Receivables to Operational Profit signifies the percentage of profits on credit.
   • A lower percentage is preferred as it indicates that more cash is being realized from operations.
2. Inventory:
   • Consists of unsold products awaiting sale.
   • Inventory levels should be monitored relative to Operational Profit; a lower percentage indicates efficient conversion of inventory into cash.
3. Payables:
   • These are the obligations or debts the company has yet to pay.
   • Unlike Receivables and Inventory, Payables are added back to Operational Profits as this cash is still with the company.
4. Working Capital Changes:
   • The formula (Receivables + Inventory - Payables) gives us the changes in Working Capital.
   • Efficient businesses often operate on negative working capital, utilizing the suppliers' money to fund operations.
5. Direct Taxes and Exceptional CF Items:
   • Direct Taxes paid out in cash are deducted from the profit.
   • Exceptional Cash Flow Items refer to extraordinary income or expenses affecting cash flow.

Formula for CFO Analysis

To calculate Cash Flow from Operations, use the formula:

CFO = Profit from Operations - Receivables - Inventory + Payables - Direct Taxes ± Exceptional CF Items

Further Ratios and Analysis

• CFO / Profit after Tax (PAT): This ratio highlights the portion of cash generated that translates into net profit for shareholders.
• CFO / EBITDA: Reveals the percentage of cash generated as part of earnings before interest, taxes, depreciation, and amortization. Noteworthy as depreciation and amortization are non-cash expenses that impact profitability but not cash flow.

Practical Application

Investors should compare a company's CFO over several years to discern patterns of growth, stability, or decline. Real-world examples often illuminate how successful businesses consistently grow their CFO, while those struggling manifest fluctuating or declining CFO.

Conclusion

In summary, Cash Flow from Operations encapsulates the essence of a company's operational efficiency and financial health. Its analysis, when done thoroughly, unveils undercurrents that profit and loss statements might not reveal, thereby guiding investors in making informed decisions. By prioritizing CFO in financial analysis, investors can gauge a company's capability to generate cash organically, essentially highlighting its potential for sustainable growth and operational resilience.

🚀 My Content For This Week 🎬 YouTube: 100 POWERFUL PERSONAL FINANCE PRINCIPLES​ ​ 📋 Twitter: Vivek Mashrani, CFA @MashraniVivek Understanding Mean Reversion in Investing 📈💡 In the dynamic world of investing, one concept stands out as a guiding principle: mean reversion. Let's understand this concept and how it drives investment strategies and market dynamics. 🚀 4:58 PM • Mar 9, 2024 0 Retweets 0 Likes Read 2 replies ​

🎙️ My Weekly Podcast For You

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Keep Compounding...

Vivek Mashrani, CFA Founder, TechnoFunda Investing

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