V-Guard, a company in Kerala suitable for investment

K. Aravind

Investor gurus say that buying stocks from companies that do business that they know and understand directly is a great investment method. In that sense, V-Guard is a stock that we can consider for sure. The products of this Kerala-based company are very simple to understand. We can be witness to their sales directly. The company excels financially and in management as well.

The COVID-19 period has adversely affected the business of V-Guard as well as that of other companies. Business is not likely to be the same anytime soon. But V-Guard’s story is likely to be a little different in a situation where it will be difficult for many other companies to continue their business.

The good rains have given hope that the agricultural production will be good this year. Naturally, the demand for agricultural and domestic products of the people in rural areas may improve. Therefore, the business of V-Guard pumps, fans and kitchen appliances will continue. At the same time, demand for products such as AC stabilisers may decline. Recently, the company has been focusing on the AC stabilisers segment.

While one cannot expect a strong return to business as before, V-Guard is more likely to outperform other companies that have lost much of their business.

The most important feature of V-Guard is that it is a debt free company. The company has a surplus of Rs.857 crore. Out of this Rs.85 crore is cash or equivalent in cash. The term cash is king in times of crisis has much relevance now. Only companies with sufficient surpluses can survive this crisis. For those who are still in the business of having the necessary surplus money, it will be a little easier to hold on to tide over this crisis. Therefore, V-Guard is a relatively safe stock.

The company is also much ahead in corporate governance excellence. V-Guard’s management is known for its efficiency, transparency and financial discipline. Management devises precise strategies to diversify products and expand the market when needed.

The stock is currently trading at 35 per cent below its 52-week high. V-Guard is a stock that can be accumulated with each fall.