Build a short case on a consumer durables maker whose revenue rose 25% while receivables rose 70%, with operating cash flow at 30% of EBITDA, 40% of promoter shares pledged, 55 times earnings and a 3% annual cost to borrow the stock. Size it and set the stop.

The short is that Vasantsena's reported growth is not turning into cash: receivables grew 70% on 25% sales growth and only 30% of EBITDA arrived as cash, at 55 times earnings. Size it at Rs 30 crore, 2% of NAV, set by liquidity rather than the Rs 45 crore the risk budget allows. Stop at a 25% rise, a loss of Rs 7.5 crore, and close early if receivable days fall back below 50 with cash conversion above 70%.

A shopkeeper who doubles sales by letting every customer pay later can show a great year in the sales ledger and still run out of cash. Vasantsena booked Rs 500 crore more revenue, but Rs 173 crore of it is still owed by distributors, which is why only Rs 105 crore of its Rs 350 crore EBITDA arrived as cash. Receivable days went from 45 to 61. Had they stayed at 45, receivables would be Rs 308 crore; the Rs 111 crore excess equals 51% of a year's net income. Either distributors are being given longer credit to take more stock, which pulls future sales forward, or some of those sales will never be collected.

A catalyst and a reason the market has not priced it. At 55 times earnings the stock is priced for the reported growth to be real, so the catalyst is any result that shows it is not: a receivables write-down, a quarter of weak sell-in as distributors work off stock, or a cut to guidance. The pledge adds pressure: 22% of the company's shares sit with lenders, and a large fall can trigger margin calls that force sales. That can speed the fall, but it also makes moves sudden in both directions. Say what the bull would argue: a new distribution channel can genuinely need longer credit at first, and if collections catch up the earnings stand.

Size from what you can lose, then check you can get out. The risk budget allows a loss of 0.75% of NAV, Rs 11.25 crore; with a 25% stop that is a Rs 45 crore position. Liquidity allows less: trading 20% of Rs 30 crore a day for five days covers Rs 30 crore, so the position is Rs 30 crore. A short is sized more cautiously than a long because its losses grow as it goes wrong: after a 25% rise the Rs 30 crore short is a 2.5% position, and a squeeze in a thinly traded stock can gap through any stop. Borrowing costs Rs 0.9 crore a year, so the thesis needs to play out within a few quarters.

Two stops, one on price and one on the thesis. The price stop sits at a 25% rise, a loss of Rs 7.5 crore, 0.5% of NAV. The thesis stop matters more: if two quarters show receivable days back below 50 and cash from operations above 70% of EBITDA, the reason for the short has gone, and the fund covers whatever the price. Add two practical exits: the lender recalls the borrowed stock, or the borrow cost jumps, which often signals a crowded short. The limit of the case is that it assumes the scenario probabilities; the interviewer will push on them, so show which number would have to change for the short to stop paying.