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The curious Case of a company whose stock went from Rs 40 to Rs 900
We deep dived into the financials of the company!
What we found was astonishing!
A thread for the benefit of all investors
(1/10)
We deep dived into the financials of the company!
What we found was astonishing!
A thread for the benefit of all investors
(1/10)
Acquisitions:-
The company acquired two companies for 165cr
Both acquisitions were routed thru a private corporation of the listed company
The accounts of the private company are even more questionable
The routing of the transaction is really difficult to understand
(2/10)
The company acquired two companies for 165cr
Both acquisitions were routed thru a private corporation of the listed company
The accounts of the private company are even more questionable
The routing of the transaction is really difficult to understand
(2/10)
Intangible assets:-
Intangible assets form more than 80% of the Gross block!
Assets such as customer relationships are listed as intangible assets.
These are extremely hard to value!
Any permanent writedown in these assets will significantly erode the asset base.
(3/10)
Intangible assets form more than 80% of the Gross block!
Assets such as customer relationships are listed as intangible assets.
These are extremely hard to value!
Any permanent writedown in these assets will significantly erode the asset base.
(3/10)
Buyback:-
The company initiated a buyback at a huge premium of 55% to the prevailing CMP.
How was this price decided? Why was such a huge premium paid?
(4/10)
The company initiated a buyback at a huge premium of 55% to the prevailing CMP.
How was this price decided? Why was such a huge premium paid?
(4/10)
Goodwill write off:-
On account of Covid-19 the company arbitrarily took an impairment loss of 48.7cr.
Company has most of its assets in goodwill and there is no way to measure goodwill, as it is solely at the managements discretion!
Are there more write-downs coming?
(5/10)
On account of Covid-19 the company arbitrarily took an impairment loss of 48.7cr.
Company has most of its assets in goodwill and there is no way to measure goodwill, as it is solely at the managements discretion!
Are there more write-downs coming?
(5/10)
Related Party transactions:-
A lot of business the company does is with its subsidiaries.
Too much business with related parties is a big red flag.
With not much known about the subsidiary companies, it is impossible to judge the nature of these transactions!
(6/10)
A lot of business the company does is with its subsidiaries.
Too much business with related parties is a big red flag.
With not much known about the subsidiary companies, it is impossible to judge the nature of these transactions!
(6/10)
Nature of expenses -
Due to change in a/c policy, depreciation shows a massive jump
Some entries in other expenses show a jump as high as 8x without any explanation
Write down on MF investments meant the company took a loss
A/c receivable Write down is just normal
(7/10)
Due to change in a/c policy, depreciation shows a massive jump
Some entries in other expenses show a jump as high as 8x without any explanation
Write down on MF investments meant the company took a loss
A/c receivable Write down is just normal
(7/10)
Constant Trading in the stock by the promoter:-
As it can be seen clearly from the snapshot below
Promoter stake continues to fluctuate.
Not to mention the low promoter stake or the absence of any big DII
(8/10)
As it can be seen clearly from the snapshot below
Promoter stake continues to fluctuate.
Not to mention the low promoter stake or the absence of any big DII
(8/10)
Investments in subsidiaries:-
Apart from goodwill+ intangibles,
Another significant portion of the assets are investment is subsidiaries.
With no market quotes available for these companies it is difficult to understand the actual value of the assets!
(9/10)
Apart from goodwill+ intangibles,
Another significant portion of the assets are investment is subsidiaries.
With no market quotes available for these companies it is difficult to understand the actual value of the assets!
(9/10)
Conclusion
Charlie Munger says -"Liabilities are always true. It is the assets that need to be verified"
While we have dropped some hints, we have not even scratched the surface on the no. of red flags the company has
We leave it to the reader to make sense of what's going on
Charlie Munger says -"Liabilities are always true. It is the assets that need to be verified"
While we have dropped some hints, we have not even scratched the surface on the no. of red flags the company has
We leave it to the reader to make sense of what's going on
