Valuations are made in heaven – HMT India

24Apr10

These are the figures for the company “HMT India” since 1989 which I assume is the time they got listed.

Total Sales in 21 years: 10,000 Crores
Total profit made for shareholders in 21 years: -970 crores (Yes, there is a “-” in front of the number)
Total dividend paid in 21 years: 7 crores
Average RONW over 21 years: -50%
Average ROA in 21 years: -9%
(Difference between RONW and ROA highlights how using leverage badly can screw performance further. Borrowing at 10% and investing at -9% is not a good idea of investment.)

The only reason this company has still not entered into BIFR I guess is because of their share capital which is 1200 crores and has not eroded fully.

An analysis of their cash flows for last 15 years throws up the following:

Total CFO (for last 15 years): -587 crores
Total CFI (for last 15 years): -557 crores
Total CFF (for last 15 years): +1157 crores

So, here is a company which is still in existence and is losing money and capital without any remorse year on year. Last year they lost 70 crores on a sale of 160 crores.

So any guesses what the market capitalization of this company is?

6000 crores!!

I have not looked into their annual report to understand whether they have any assets which can give them sufficient liquidation value. They are now going to merge with HEC and their losses would be used for tax gains. But I cannot digest the Valuation!!

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4 Responses to “Valuations are made in heaven – HMT India”

  1. 1 Nirman R Shetty

    Hello,
    I am just curious about a certain point that I noticed – you have company financial data from 1989, and yet you say you are not referring to the annual reports. Where do you get your financial data from? If you could kindly let me know, since that is the one big problem I face while wanting to evaluate companies – getting accurate data and data from long enough in the past.
    Thanks for your help,
    Nirman

    • Hi Nirman,

      When I typed this out, Economic Times website had a excellent option of looking at financials since 1989. However, unfortunately they brought about some changes in their website and now have only last 5 years data. So yes, I am as helpless as you are on historical financials these days!

      Pradeep

      • 3 Nirman R Shetty

        Thanks Pradeep for your prompt reply. Appreciate it.
        Have a good one.
        Thanks,
        Nirman

  2. 4 aditya

    pradeep,
    firstly ur blog was coming up very nicely…u shudnt stop blogging
    Secondly, i am interested in the source you had fr annual reports fr 15k 🙂
    Aditya


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