Thyrocare technology, management quality report.
Article published as on Friday, 23rd April, 2020 at 10:30 a.m.
What are the most important factor while analysing a stock? Vijay
Kedia was once asked.
Vijay Kedia replied management, management and management.
I agree with him, quality of management, their integrity and
honesty are most important factors while doing fundamental research, and most
difficult factors as well.
Logic behind this is, if you have a good management, you don’t
need to worry if a business is doing well or not, the management will take this
burden and perform their best as they will be answerable to the shareholders.
Coming back to Thyrocare, before analysing financials and business
module let us understand quality of management.
In one sentence-
The quality of management at Thyrocare technology is top notch.
How did I come to this conclusion, I have seen many interviews,
read con-call transcripts, notices sent to exchanges and annual reports.
The kind of communication maintained with shareholders and
transparency in disclosure is what made me come to this conclusion.
Let us understand case by case.
· Case 1
Understanding the background of the promoter.
Dr. A. Velumani- he is a son of
landless farmer, from Tamil Nadu, he has a very humble background. Watching his
interviews can provide an insight to his values and principles.
He has not taken any loan in his life and even after setting up
his company he has kept it debt free and grown it organically.
· Case 2
While reading a concall transcript I came to know about an issue
related to Nueclear healthcare ltd (it is into PET/CT imaging) a wholly owned
subsidiary of Thyrocare tech.
As the gestation time for business of Nueclear healthcare is high,
auditors raised concerns for some impairments made onto it.
As Nueclear healthcare was into some losses, auditors had
questioned about the decision of management.
Dr. A. Velumani gave a formal offer in June 2019 as to buy the
business of Nueclear healthcare at the
investment cost as to prevent public shareholder from any losses.
This was an offer made, there are many formalities like board
meeting, approval from shareholders and valuation of business etc.
In September 2019 there was an auditor meet after that there was
the board meeting without the
presence of promoters. After long deliberate discussions they decided it was in
interest of all shareholders to retain their subsidiary.
· Case 3
I was told that even if management is honest but they can’t
prevent each and every wrong doings at ground level, they cannot micromanage
things.
Well presence of good management and auditors is like a police.
The crime will not vanish, but will definitely reduce.
Here is another experience
As soon they came to know of wrong doings at their franchisee,
they cancelled their licensee. And notified stakeholders through notice on
exchanges.
This is called transparency in disclosures.
· Case 4
Thyrocare was going to announce dividend but deferred it.
This is just a small thing, but noticing this can provide an
insight to how much proactive management is and how much it cares for small
shareholders.
Let me explain!
Board meeting concluded on 1st February 2020, at 7:30 p.m.
As abolishment of dividend distribution tax was introduced in
union budget on the morning of 1st February.
Most Indian companies declared huge dividends as it would be tax
free in the hand of promoters.
But if the same dividend is given on or after 1st April, small
shareholder earning below taxable income could receive 20% more in dividends.
Though this decision does not look important, but on deeper
analysis it shows how the management is taking into account interest of small
shareholders also.
· Case 5
Remuneration for Dr. A. Velumani for FY 2019-2020
It was just Rupee 1 per month.
(Similar to Nandan Nilekani the chairman of Infosys.)
This shows that, Dr. A. Velumani is doing an honorary work towards
the company.
As his hard working will benefit himself as he is a major
shareholder in his company.
The growth of the company will directly benefit him, and other
investor’s as well.
Conclusion
· Analysis of
quality of management is important because it prevents us from investing in
fraudulent business.
· And the reason I
would like to buy Thyrocare technology is because of its excellent management.
· Well the level of
transparency in disclosure of details along with other experience mentioned
above makes me believe that Dr. A. Velumani is a person of honesty and
integrity, some may compare him to Narayan Murthy of Infosys.
· This was my
analysis of management of Thyrocare technologies.
(18th, April, 2020 the time of writing this article the price of
Thyrocare is 542.60 INR. Also one must do his/her own research before
investing)
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