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Wednesday, August 25, 2010

What is in a name? Try these companies whose activities differ from their name

When I first began investing, I thought that a company's identity is revealed by its name. But years of poring through annual reports, websites, conference call transcripts and talking to seasoned investors, convinced me that this is not generally true. Companies may not reflect their name because
  1. Profits come largely from a peripheral segment(Jindal Steel's profits majorly come from captive power plant output sold in open market
  2. Legacy business no longer is the focus/revenue leader(Hence Tata Tea changed its name to Tata Global Beverages to reflect its product range and global reach
  3. They have ventured into a new activity but have not bothered to change the name
I'am referring to the 3rd category in this post. Some companies in this are
  1. Makson Pharma(http://www.makson-group.com/history.html):-Apparently a pharma company's, it is one of India's premier contract manufacturers in the confectionery segment
  2. Karuturi Networks(http://www.karuturi.com)-It is not into networking equipment but is India's largest flower exporter(and recently agricultural produce also)
Moral: Study the company's segments and business description before assuming that it does a certain activity

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