Thread by @niveshaay

Multiple Learning, Meticulous Process, Multi-bagger Returns and Multiplex Story: A long thread on HLE GLASCOAT (earlier Swiss Glascoat Equipments)

@arvind_kothari @csvikramsharma

#HLEGlascoat #GMM #Glascoat #Learnings #Investing

We initiated our first note on HLE Glascoat in March, 2019 at price of Rs. 180. It surely wasn’t easy to pick a company with a market cap of just Rs. 125cr in 2019 when the small-cap market was going through a really tough phase.

But last week, HLE Glascoat Mcap crossed 6,500 crore, even beat GMM Pfaudler’s Mcap. The first learning out of this beautiful journey is "Never stop hunting for opportunities or mispriced bets, no matter what the state of market is."

"Research is a continuous journey, not a one day destination." We are tracking glass lined equipment business since 2016 and took part in GMM Pfaudler’s wealth creation story. We even used to track Swiss Glascoat continuously.

The biggest trigger for us in Swiss Glascoat was the Change in management and Scheme of Merger.

We did not know how big this would turnout but our confidence only grew with time when we attended the AGM, met the Management and continued our Research and Scuttlebutt.

“Market mei sirf story bikti hai”? False. At the end it always comes down to the Performance and Execution. The story was always about GMM Pfaudler that being the market leader, it will continue to remain the leader even in the future.

Even after the promoter of GMM did a OFS which was clearly detrimental to the public shareholders yet Star fund manager and Promoters came on TV to justify the decision. Even if that time someone considered HLE with unbiased mind, one could generate far better returns.

Myth v/s Fact: The myth is HLE is the 2nd largest player but the fact is HLE was the market leader in Filter and Dryer Segment and 2nd in Glass Lined Equipment.

Silence makes the biggest Noise. Articles, News, Social Media were always flooded with GMM and its management but one hardly could ever notice anything about HLE and its new management.

The numbers of HLE Glascoat just proved to be too good to take on GMM. Management was targeting 500 crore turnover in next 3 years by 2022 which it almost achieved beforehand by a year.

Deep dive into valuations: During the time of merger, if someone just did a quick run through over the financials of the co, one could figure how comparatively cheap HLE Glascoat was and the potential synergies that would come from the merged entity.

Luckily we did this exercise, which we often do at Niveshaay, and this just turned out to be a blockbuster.

The 2019 Smallcap market was badly hit & the Market cap Bias was strongly active among investors. Many great investors ignore companies having the Market cap Bias. But one should always look at the potential market size of the business rather than their current market cap.

HLE Glascoat is one such example where people had biases because of its Mcap, New Promoters, Past track record, Merger, 2nd Rung player, etc. and even when the performance kept on coming and mgnt kept on delivering, the price didn't just move initially because of these biases.

Because of the sharp jump in share price, even we sold 25% of our holding when the share price jumped 7-8x. Today when we look things in the hindsight, the Share Price Bias was something which even we couldn't avoid.

We all are filled with biases but the only bias we should have as investors is to be biased towards nothing.

What an Amazing Journey it has been.

our coverage on HLE GLASCOAT.
March 2019: niveshaay.wordpress.com/2019/03/12/the…

November 2019:
niveshaay.wordpress.com/2019/11/11/swi…

February 2020:
niveshaay.wordpress.com/2020/02/13/hle…

August 2020:
niveshaay.wordpress.com/2020/08/22/hle…

February 2021:

https://twitter.com/niveshaay/status/1360544720913526785?s=20

June 2021:

https://twitter.com/niveshaay/status/1404350108880175109?s=20