A Rare Combination of Deep Value + Massive Growth Potential
An Iron & Steel Company with Multiple Triggers
It’s been long since we posted but the gap is simply because we did not find anything that we could buy at “Fair Value.” Our existing 8 holdings we wrote about earlier have done fairly well.
Update on Performance of Holdings Shared in Our Blog since we Posted (Average period of 4 months):-
2 of them are 2x+
1 is just shy of 2x
3 are 70%+
2 are close to our buying prices
Our Latest Find
We are massively bullish on the Iron & Steel Sector but alpha is created by companies that have captive mines, produce specialized steel, and have manageable debt. Our latest find has all 3 of those characteristics plus deep value due to a significant equity holding in another listed steel company with tremendous growth potential.
Some Key Stats
Market Cap < 5000 crore
Equity Holding in Another Listed Iron & Steel Co > 3000 crores as of date
Revenue > 3000 Crore with 10% + OPM
Debt < 1000 crore
Captive Mines including a recent allotment
Continuous Expansion + Specialized Steel leading to better margins
BV > MCap
The above stats are broadly what shapes our thesis, we see debt risk offset in multiples by its equity holding in the other steel company. In this post we won’t detail our deep dive into what steel they are making, what their mines’ royalties are, and how they aim to pay off their debt but the broad thesis.
Final Remarks
This company is close to its 52-week high but we do aim to make this a core position with staggered buying over the next few months. We do see consistent growth in revenue, margins, and debt reduction all in parallel if our thesis plays out. We do see a potential 3x-5x in 3 to 5 years.
Please note that Iron and steel is a cyclical industry with debt-funded projects that often go wrong in bad markets. Please also note mining is an extremely high risk given the regular and other risks.
We want to emphasize that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. It is crucial for readers to conduct their own due diligence and exercise caution. Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss this in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reach out at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com