20 Questions you should ask Mgmt at AGM!

It’s a given fact that to know more about a company’s business, you need to grill
management a lot. This can happen only at concalls (which are conducted by majority of
companies quarterly but the questions are limited to few) or at AGMs. Not alone does it
help it to make an investment decision but it also helps you to decide whether a business
has MOAT to stand strong in tough times.

The following are few questions one should ideally ask mgmt when interacting with
them. Of course, the same will go for a change w.r.t to industries like BFSI.

Revenue related:

1. What has been the most notable trend among your customers over the past year?

2. What is your competitive advantage and why do customers buy from you? What is the
revenue recognition policy of the company

3. Who are some of your top customers? How much does top 10 contribute to revenue?
Are you able to serve them as well as you would like? What would be the impact on
business if they were to leave suddenly.
4. What are the various line of activities company undertakes. How much does each
contribute too? Has your customer base changed over the last year? If so, how?

5. How many customers are repeatable? How effective is the retention rate of such
customers?

6. What is the order book of the company? How much of this order book convert into
revenue in the coming year? Any new big orders won by the company or has company
participated in any recent tenders?

Expense related:

7. What are the risks associated with the sourcing of raw material, or holding the line on
costs of services? How has the pricing on raw material being? Are you able to pass on
price increase to your customers?

8. What would be the impact on costs of sourcing inputs in case of competitive

pressures?

9. What is the turnover rate at your company? How does that affect your profitability
when you factor in training and hiring cost? Is there Succession plan in place? Do your
employees feel part of your company? Are they given ESOP’s?

10. What percentage of total cost is fixed cost? What has being the trend. How will it be
in coming year? Is it in line with industry/competitors? Any one time cost incurred by
the company during the year? Was it budgeted?

Balance Sheet related:

11. What is the best use for the cash on the company’s balance sheet? Is the company
planning to raise capital in order to fund future growth? Why is the company not
returning back the funds as Dividends or buyback to shareholders in case it’s not put to
best us?

12. Why is the company not borrowing funds to leverage its return? Is the company
unable to obtain loans? If so, why

13. How is the working capital cycle looking for the company? Why is loan borrowed by
company to meet working capital needs? Is the company facing liquidity crunch.? Bad
debt policy of company and run rate maintained?
14. What are the intangible assets not capitalised in books which is crucial to the
company? What security measures exists to protect such IP if any? Ballpark value of
such intangibles?

15. What is the present capacity of the company.? How much of it is utilised? What are
the projected capex to be incurred by the company? How would it impact the topline?

16. To what extent does new disruptive technology impact the business? What are the
technology adopted by the company? How much is spent on R&D by the company?

Others

17. What part or aspect of the business is giving you the most trouble now?

18. What is the average monthly cash burn? Is expenditure and income broadly in line
with the budget? (+ 10%) In case of variance, are they satisfactorily explainable?

19. What are the other business scope which is currently being ignored but which has
huge potential for the company? What are your plans on those? Who are your key
competitors?

20. If there is any contingent liabilities in the Annual Report, do ask for nature of the
same as well as status and will it be provided by company?

Few of the above questions needs to be linked with each other to get a holistic
picture. But do your homework by knowing abt company through their Annual Reports
as well as website before you grill them.!