Friday, May 06, 2011

Contrarian Piramal- what we can learn

I was reading about Ajay Piramal who cashed out from his pharma company for a never seen before valuation. He sold his company to Abbott for 60 times earnings. Later he sold his diagnostic business to super religare. He is sitting on a huge pile of cash from these 2 deals. He is on the prowl yet again.

Meet the contrarian investor. Contrarian is a state of mind. To move against the general belief. to go against the crowd. And what you gain in the investing world by being contrarian, is very favorable valuations. You get to buy cheap or get to sell expensive. Just as Piramal demonstrated.

In 90s the MNC pharma companies were fed up of the India market and were looking to sell off and get out. There were hordes of them which meant valuations were cheap. Piramal bought them very cheap. All of a sudden in a decade, the MNCs felt there was no other place better that India. All of them wanted a piece of the action and were buying. too many buyers meant higher valuations on limited offers. that's when Piramal decided to strike the biggest ever deal with Abbott. Piramal may not be in a hurry to invest his surplus till he gets the right price. A great contrarian investor he is, he will look for cheap valuations.

I am right now investing in a very small sanitary-ware company. its a small cap available at cheap valuation. It is not tracked by analysts thus available very cheap. They are growing at a good pace and have a very strong balance sheet. I believe it will get to 3X to 4X in as many years. The company sailed through global recession, profitably. It has never given up profit margins for top line growth – speaking volumes about their focused approach and business acumen. There’s not a single year during which they have witnessed a de-growth. its fairly cheap and corrections can make it even more cheaper. i can see you smile as you identify what i am speaking about.

Happy weekend,


gaurav said...
This comment has been removed by the author.
gaurav said...

Hi Naresh..
A very detailed and good article.

What are you views on oil sector. Oil is depleting from our mother earth and it'll definetely go up in coming years. What's your thoughts on this?

avv said...


I came across your blog while researching Piramal Health. Nice blog.

On the lighter note if you are done investing in the sanitary ware company then how about sharing the name!,,

Naresh Pisharody said...

hi Avv, pl mail me separately i will share the same