Management Analysis of any Company।

The post covers the title. Management analysis of any company means to examine the management of the company. If your friend wants to borrow money to expand his business or any other reason then you find obviously two points in him. First point is the ability of returning the capital and second point is his or her honesty. If he is not honest then in spite of having money he do not return the money. An honest person returns the borrow money obviously in any way but a dishonest person do not do this. As we see on most of the cases the people who do not pay his borrowing money are not borrowed money by anyone.

Management Analysis of any Company।

This two points are also also applicable in stock market. You should check before investing in stocks of stock market the ability and honesty of management who thinks about company’s growth and shareholders. To run the programme of any company by management and their ability is necessary to know for you. There is no formula to identify the honest and able managements of any company. To check the honesty and ability of management you should examine some different things. Most of the investors just focus on quantative matters like pe ratio,margin,eps,sales,valuation etc and they underestimate the management analysis of any company.

But the reality is that if financial ratios are good but management is bad then it may be dangerous for investors. The same is happened with Satyam computers and other companies like this. We know obviously Mr. Ratan Tata and we have a different faith on him. When we do management analysis of Mr. Tata’s any company then it is quite easy for us.

Because we know about him and his honesty and also see his interviews. He often come to news,tv channel and tell the people his journey,his dream,company’s future goals etc. You should have to know management details before analysis the management. You can make opinion on the management of any company when you have the details of the management of the company. 

To collect the management details is the first step of management analysis. A famous investor,Vijay Kedia do the thing with very interest. When he has free time he sees the management video or read about management or sees the videos of CEO’s interviews etc. There is many way to collect the details of management of any company. 

1. DRHP(Draft Red Herring Propectous): when any company bring their ipo they publish the drhp. Drhp is a one type of biodata of the company. Management details are also given there. So drhp is the option to collect mangement details. If you want the drhp of hdfc bank then just type hdfc bank drhp on google and search then you can get the pdf file of drhp. In this way you can get the drhp of other companies. The drhp of the companies that come in stock market about 25-30 years ago is quite impossible to find out. 
2. Random search on google:
3. wikipedia:
4.  Linkedin:From here you can collect the details of managements. 
5. Mangement’s interviews and speeches:   You can find this in youtube. 
6. Company’s annual report:There is a session,named ‘Management Discussion and Analysis’ in annual report. You can read there company’s past performance and future strategies that are necessary to know for investors. So you should make a habit of reading the annual report. 
7. Hear the company’s earnings conference calls:In this call management tells about company’s performamce. You can know about the earnings like profit or loss and also future plans. Earning calls are placed after quarterly published result. There is also a QnA section where institutional investors and high net worth investors(HNI) ask question to management. As a result you can know more insights of the mangement of company. You can get the conference calls on the company’s website or direct calling them

There is some some small things or incidents that you should check them. To know about fraud,cases,scam upon management you can type the terms before company management name(like cox & kings cases) and search on google then you can get the whole details. Generally company shares his profit into shareholders in two way. 

• Dividend.
•  Share buyback.

The main purpose of share buyback of the company should be the profit of the company and also the investors. The owner of PC jewellers gave the company’s share in his relatives as a gift and there was also some complaints on them. For this share price of the company came into 150 rupees from 550 rupees. In this situation pc jewellers without financial strength brought share buyback plan of 424 crore rupees so that investors may buy the share.

On this time the share price was continuing in 200 rupees and they brought the share buyback plan in 350 rupees. So it was obviously seemed not for the genuine profit of investors. It was looked like that the plan was only brought for saving the share price. You can understand the management from this type of small incident. 

This small topics are also covered in PANTANJA. so gain your knowledge from all bacause this can be helpful for you in trading.  You have to develop a skill to do management analysis in good way. And the name of skill is ‘Read between Lines‘. Let’s understand it with an example. A famous investor,Vijay Kedia attended the annual meeting of a IT company in Dot Com Boom time. There he observed that a member of management was dancing because of the share price of their company was increasing. And the condition of other promotors was same.

Seeing this Mr. Kedia understood that management have no faith upon the upwarding of share price. So he suddenly sold the stock. And when the dot com boom burst the share price also fell downward. So read between lines or the statement that the management does not say should be understood by their behaviours by you. You should develop the skill. You should also watch on management’s salary. Some management only think about themselves.

Such there is many managements who try to increase their salary in company’s bad time. This behaviour is not right for management. You can check the management’s salary from company’s annual report. You can download annual report from company’s website or moneycontrol.com . Company’s management should be stable. It means same management should be stayed for long times. It is not a good signal if company’s top management is being changed after a short period. 

Now the paragraph is about promoter’s stake. If promoters increase their stake then it is seen as a good signal. And when promoters reduce their stake then it is seen as a negative sign. But it is not right fully. So you should understand the real reason behind the increasing or decreasing the stake. According to SEBI rule minimum 25% stake should be necessary to do public share for a listed company. For this the promoters who have the stake of more than 75% should sell their stake. Normally it is a bad sign.

But here the stakes are reduced because of fulfill the sebi’s rule. And you should also know about the stake that the company keeps as a pledge to take loan. If promoters keeps most of their stake as a pledge then it is also not a good sign. Basically, company’s employee knows deeply the management of their company and also the company. So you can take advice from the employee when you do management analysis. 

If you have any query related to management analysis  please comment below so that the topic can be covered.

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