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17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

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🔆 Quick glance

  • Market Overview: Crisp overview of markets & macros
  • Good Reads: 5 good reads from across the globe
  • Outlier Stock: DFM Foods delisting
  • Capitalmind on YouTube: Markets taking U-turn, Forced selling as a special situation

What’s up with markets? 📉📈

The market continued its downward streak into the second week of December. The Nifty 50 is down -3.3% from its all-time high.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

On monthly basis, Nifty is down -1%. Yet, on the yearly time frame, it does worse than gold. Crude went below $80 while gold closed flat and silver is down -1.4%.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

On valuations, the price-to-earnings (PE) ratio for the Sensex was at 23.2, and there’s a graph below for historical comparison.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More


DFM Foods gets price momentum, what’s cooking💡

Capitalmind Outliers is our proprietary discovery tool that helps you identify potentially promising stocks that have technical trends in their favour. In each edition of this newsletter, we pick a company from Capitalmind Outliers and bring you what we think may be behind the surge in its stock prices.

We’ve previously discussed, Prataap Snacks, a packaged food company, in a past edition of this newsletter here; today, we’re discussing one of its competitors undergoing a special situation: DFM Foods (New Delhi, ₹2,256 crores), which makes and sells extruded snacks under its age-old brands Crax and Natkhat, and under neoteric brands Curls and Fritts.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

I’m never sure what the adage “Nostalgia isn’t what it used to be” implies, but in the case of DFM Foods, selling nostalgia isn’t how it should be. But then, I am equally not sure about what fuels forgotten brands such as Nintendo and Converse in the West, and Royal Enfield and Thums Up back home, to rise back from the ashes, and make triumphant comebacks. What’s troubling is, earlier DFM hadn’t been sure either: the company’s topline grew at just 7.5% per year during FY16-FY19, a time when the extruded snacks’ market was growing in double digits.

It was roughly the end of that period when Advent International, like many global private equity players do, valiantly decided to join the fray, hoping to turn things around with picking up a 74% stake of the company. A management overhaul under Mr. Lagan Shastri’s (of Hindustan Coca Cola Beverages fame) helm, and changes to the business model ensued, but as the pandemic struck, things didn’t go as planned.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

Still, the brand holds promise, at least to Advent anyway. What’s more: some of its listed peers aren’t doing better.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

Fast-forward to what’s happening now: DFM Foods is undergoing a delisting process.  Why? It could be that Advent wants to dramatically restructure without being bothered by other shareholders, or it would rather not share what comes after a turnaround, among other things. But a delisting is not a bad thing, as Deepak explains in the linked post above: shareholders may get more for their shares than they are worth now from the promoters, who could be willing to pay a premium for taking the company private.

Here are the murky details: the floor price is set at ₹263.8, and the bidding window started on the 13th, which will close on the 19th of this month, that is, Monday. Then, a “discovered price” will be calculated based on the bidding, and the promoters will have an option to accept the discovered price, make a counteroffer, or simply decide not to proceed with the delisting.

All things considered, they need an additional 16.3%, or 81.95 lakh shares for the delisting, and they’ve received bids for 26.73L shares until Friday close. Other than getting the necessary number of shares, it’s a game of deciding how much premium Advent is willing to pay, and the shareholders seem optimistic.

17-Dec: Markets taking U-turn, Forced selling as a special situation, DFM Foods delisting & More

(Disclaimer: The information conveyed in this post is intended for informational purposes and shouldn’t be considered as investment advice. Please do your own research before making investment decisions)


What we are reading? 📝

  • Being right is the enemy of staying right because it leads you to forget the way the world works. Read – Why competitive advantages die
  • The only good plan is the one that you will be able to stick with. Know thyself — and invest accordingly. Read – An Investor for all seasons
  • There’s been far more money made by people in Wall Street through salesmanship abilities, than through actual investment abilities. Read – Financial gaslighting
  • Lucky fools do not bear the slightest suspicion that they may be lucky fools. Read – Humble Dollar
  • It is impossible to live in the past, difficult to live in the present and a waste to live in the future. Read – The herald of the change

What’s on Youtube? 🎙

Our latest episode, had three key discussions: 1) Markets taking U-turn? 2) What is Forced selling? 3) Q&A

Tune in to watch Deepak Shenoy and Nihit candidly discuss events of the market.

(If you have questions you would like to ask us, do join in LIVE every Friday at 4:00 PM on our Capitalmind youtube channel)

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