So, I’ve exited my 2 years old bet, Asian Granito yesterday. Original idea post. This was a long time coming. I think some bias did come in to give the company more time to recover but I’ve been contemplating it for the past few weeks. Here are the primary reasons for exit:

1. I-T department Raid May 2022 – This was the first red flag that happened. I waited for a follow-up on this story but it didn’t come which was surprising (or I missed it). This kind of silence is pretty damning imo.
2. CFO Resigned June 2022 – This was an interesting thing. If the company hadn’t done anything wrong, why did the CFO resign? For public relation and image retention? Maybe.
3. Performance went kaput – After the incident, from the same year FY 23, the performance of the company went into the gutter. Is it cleaning of books or the price of gas as the company claims.
4. Gas price only hit Asian Granito? – As claimed by the company the price of gas is the factor making it difficult to stay profitable, then how did competitors like Kajaria improve PAT margin and small players like Exxaro and Somany maintain/increase profit in FY24? If the erratic behavior of gas price is the biggest factor, seems like competitors are handling it better than them.
5. Targets are dwarves – In this video they’ve claimed to target 6000 cr. sales by 2030 which is 4x in 6 years. Given my long-term strategy, this is not what the company I want to own.
6. Better use of capital - Looking at some other better investments. Will post DD on taking action.

Am I worried?

No. This investment as said in the initial post was a mid-term play on undervaluation and not mainly on the business fundamentals. This comes from a time in my investment journey when I wasn’t following my current strategy of deep research giving deep value.

This was a failed investment.

Learning

Quality of business is more important than being deeply undervalued.

Performance

12% profit over 2 years.

Disclaimer: You’ve been blessed with a brain and hopefully some money, use them. Don’t depend on mine. I am biased and de-invested.