Arman Financial and Ganesh Polytex: Avoid!!

Arman Financial:
CMP: 30.30
Market Cap: 12.35Cr
Debt: 9.79Cr (March 2009)
Reserves: 3.25Cr (March 2009)
ROCE: 15.20% (March 2009)
Debt to Equity: 1.34

ARMAN FINANCIAL SERVICES LIMITED was originally incorporated on 26th November, 1992 as an erstwhile Arman Lease & Finance Ltd. The company is a public limited listed company. It issued 28,00,000 Equity shares of Rs. 10 each on 21st August, 1995 aggregating to Rs 280 lacs after receiving an overwhelming response from the public for its public issue which was oversubscribed by 7 times in the category of small investor and more than 22 times in case of applicants with application of more than 1000 shares.

The main objects of the company consist of providing a wide spectrum of financial services both Fund based and Non Fund Based activities which includes term loans, collateral free credit, other forms of credits, thrift and savings and insurance. Arman also plans to render financial services to people by acting as intermediary for banks and financial institutions in the cities, towns, villages of India

1. Company is in Micro finance area which is a "Hot" area.

2. Arman has -ve cash flow from operations for past 3 years or so..
3. Promoter shareholding is decreasing (There is however accumulation of shares in hand of few public investors)
4. Interest cover ratio is 1.68

Conclusion: Company maybe in a hot area of micro finance but since the company does not have access to cheap funds it is always going to be difficult to survive. Banks are supposed to enter into this area (indirectly) and we could see greater competition. No dividend.. low promoter holding.. public shares in the hands of few... stock has already given returns of 350% greater than the Sensex. This is an Avoid at all cost. There could be a freak valuation ... but still whosoever is going to buy the stock at a higher price is going to be the greater "Fool"
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Ganesh Polytex:
CMP: 47.55
Market Cap: 63.57Cr
Debt: 61.36Cr
Reserves: 14.12Cr
ROCE: 15.63%
Sales TTM: 198.97Cr
Debt to Equity Ratio: 2.75

Conclusion:
Ganesh Polytex produces polyester staple fiber and textured/twisted yarn. company has increased capacity and is expecting a very bright future.. Ganesh has positive cash flows from operations ...unfortunately the stock is already priced at a premium. Debt Equity ratio is high.. and there is preferential capital of 4.5Cr all this makes Ganesh Polytex a very expensive proposition. The company is also in a fiercely competitive business (every business is competitive unless you have a monopoly!!) so I think the promoters are being too ambitious.. Negatives have not yet been factored into the price ..Avoid at the best.. if you like the Indian textile story one should look at Arvind group (now Arvind Mills also has the real estate twist)