STURDY INDUSTRIES - BETTER TO AVOID

This company is projected as a mutibagger by

many sources and many readers are asking my

opinion on this . Considering various factors ,

even if the industry in which company is operating

is promising  ,Sturdy is not giving any confidence to

me because of the following reasons.

1)      Even if company showing improvement in sales ,

no growth in profits in proportion of sales growth.

Out of the 145 Cr sales posted in last qtr 100 Cr are

from trading activities  and only balance 45 are

from core activities  and even this dramatic

improvement in  trading figures are unbelievable.

2)      When we invest in a small company and ready

to hold it for a long time on expectation of mutibagger

return ,we should give priority to the integrity of the

promoters of such a company, which lacks in the case of

Sturdy Industries.We can take few indications for this.

First one is ,Company’s proposal to merge two promoter

owned companies M/S Nuline India Private Ltd and

M/S Swati Storwel Private Ltd was rejected  by the

Himachal High court with a fine of Rs.50000 and court

also commented that  at every stage of the proceedings

the petitioners have tried to withhold information from the

court or to mislead the court.You can access the  said

court order HERE. I think this not the quality of a good

promoter. Secondly, In a filing to BSE dated 15.07.2010

company informed BSE that FII's has withdrawn their

consent to invest in the Company . I  think this also is

not a good sign at all and it may happen either the said

FII studied the company well after committing an

investment and decided to avoid it because of the

quality of company ,or this FII commitment never

happened earlier and company published such a news

only to lure retail investors to rig the price ..

Thirdly,Company  recently came out with an

unwarranted stocks splits when its price was

around just Rs.25. In case of stocks splits of

companies quoting  at lower level ,90 out of

100 cases are only to create artificial volume to

attract retail investors and make an easy way to

exit the promoter and related parties .Before such

an exit , promoters itself may take additional shares

in order to make additional profit even if there is no

proposal for any new investment by the company.

3)      Big investors are always in a better position to

know the happenings in any company than small retail

investor. So their action is also a point to note.

In June 2009 ,large investors holding in this company

were almost 30 % and now it is just 8 % . Some of them

are even completely exited. (You can access the sample

selling details HERE).This also is not a good sign for any

company.I strongly believes that the recent BUY tips 

on this counter from various sources were only to

attract retail investors  in order to create liquidity for an

easy exit of some big players.

 

In nut shell , This company is not an attractive

one for me by any means to give  multibagger

returns. In a bull market  any company may move

ahead due to many reasons other than

fundamentals , but while buying such stocks ,don’t

forget bull market will not continue forever .

So take a decision by yourself