What to do with KRBL and Avanti feeds?

Friends –if you have followed my stock calls, you would know that I have invested in KRBL and in Avanti feeds.

Both have had problems lately and I would like to share my views

KRBL – I entered first time in April end 2014 – the price then was Rs. 60 and over time I have bought more. Happy to have invested in the story of India Gate basmati rice and I have made money. Before investing, I study the company as thoroughly as possible. Amongst the many enquiries that I did on KRBL, I remember enquiring about management honesty from a friend of mine who was in rice trading and based in Singapore – he had dealt with KRBL and his succinct comment was that “in India no one is clean”.

I should have taken that hint.

Last week’s news that one of KRBL’s wholly owned subsidiaries in Middle east, called RAKGT, was used by their independent director for money laundering Rs 110 crores for the Augusta Westland case caught me ( and most investors) by surprise. Here are the details.

Surely it is difficult to prove. The management has, as expected, come out and said that they are clean and this had nothing to do with KRBL.

But I believe that this a case of management doing what they are supposed to do.

There can’t be smoke without fire.

Based on my gut feel, I am exiting KRBL.

Governance is of utmost importance and I believe that I will not be a share holder in a company that has a taint such as this.

If you find one cockroach, there is sure to be more hidden out there.

Avanti feeds -this has been a great multi bagger in the past few years. After studying this company for quite some time,  I bought the stock rather late, in Nov 2017, at a price of 2800 (pre-bonus and pre-split) – I have subsequently bought more of it.

Post all those purchases, the stock tanked in May 2018   – the details are here.

And now I am sitting on a 26% loss.

Here too, the management came out and explained that

• the situation would improve -it is cyclical.
• the shrimp prices in US had gone down and it would slowly revert back.
• they are adding capacity

Here too, the management is doing what they are supposed to do and we must take our own call.

Surely, if I had known that this would happen, I would not have bought the stock in Feb 2018.

But now that I have bought it, I have decided to wait it out for two more quarters – to look at the financial performance for the next two quarters and then take a call to exit or stay invested.  But I am not going to invest more to this stock for two more quarters till I see their financial performance.