3. Is Management’s role important
Motivation to manage earnings
How to smell a rat : Clues
Examples from our own investing history
View’s of value investing gurus on Management
4. What does Buffett has to say about management ….
“The extraordinary business does not require good
management,” Buffett said in the interview, which was
conducted in Omaha, Nebraska.
“When a management with a reputation of brilliance
tackles a business with a reputation for poor
fundamental economics, it is the reputation of the
business that remains intact.”
5. Competence Vs EthicsCompetence Vs Ethics
We humbly think that Buffet’s views are more with regards to
the competence of the management, meaning that even a dumb
management can make money off an excellent business.
However, our entire focus in this ppt is on management’s
intentions, incentives, ethics and willful actions to destroy value
6. External Pressures
Analyst’s forecast
Contractual agreements & debt covenants
Roaring stock market
Pressures within the company
Merger attractiveness
Short term focus
Personal factors – Compensation,
bonus, promotions, job retention
7. Executive compensations
- Bonus, Stock Options etc.
“If we had to name a single father of the
bubble, we would hardly need a DNA test to
do so. The father is executive compensation
made manifest in the fixed price stock option.”
– John Bogle
9. Dr. Howard M. Schilit
• He is founder of the Financial Shenanigans Detection
Group, LLC, and an international leader in
forensic accounting and corporate governance.
The seven shenanigans:
1. Recording revenue too soon
2. Recording bogus revenue
3. Boosting income with one-time gains
4. Shifting current expenses to a later or earlier period
5. Failing to disclose all liabilities
6. Shifting current income to a later period
7. Shifting future expenses into the current period
10. How to smell a Rat : Clues
1. Dishonest Management
2. Inadequate control environment
3. Changes in auditors, outside legal counsel, or CFO
4. Changing in accounting principles or estimates
5. Large deficit of CFO relative to net income
6. Substantial disparity between sales and receivable growth
7. Substantial disparity between sales and inventory growth
8. Large increase or decrease in gross margins (GP/sales)
9. Recording revenue when risks remain with seller
10.Presence of commitments and contingencies
11. How much the company’s operating profit get converted
into cash flow from operation.
Lack of commensurate operating cash flow is a red flag,
which one needs to study further in detail
Source: Capitaline
REI Agro
Rs cr. FY-12 FY-11 FY-10 FY-09 FY-08
EBITDA 835.7 779.1 616.4 450.1 321
CFO 439.7 215.5 -764.1 -293.2 -720.9
Cash Flow Conversion 0.53 0.28 -1.24 -0.65 -2.25
12. Rising receivables vis-à-vis
sales growth
E.g.:- REI Agro
Increasing working capital
requirement as % of sales
Mar-12 Mar-11 Mar-10 Mar-09 Mar-08 Jun-07 Jun-06
Working capital 1847 1928 4542 3202 2481 1465 828
Net Sales 4225 3724 3693 2448 1735 1085 959
Working capital/Net sales 44% 52% 123% 131% 143% 135% 86%
Working capital/Net sales
Rs cr.
13. High contingent liab’s against PAT is a threat signal.
One needs to go in detail and understand the reason,
magnitude and probability of materialisation of such
liabilities . E.g.
14. Where to find updates on issues related to
corporate governance:
www.watchoutinvestors.com
Initiated by SEBI
www.ingovern.com
Founded by Shriram Subramanian.
He has over 17 years of banking and capital markets
consulting experience.
Previously served as a Practice Lead for wealth and asset
management at Infosys Consulting, managing a team of
globally located consultants.
15. www.iias.in
Founded by Anil Tandon and Amit Singhvi
Anil Singhvi has over 30 years of experience, out of which 22 years
in Ambuja Cement including as its managing director CEO.
Amit was the managing director of Fitch Ratings (till June 2011),
before that Amit was senior vice president and head of corporate
banking at ICICI Securities.
www.sesgovernance.com
Founded by Mr. J N Gupta and two
other young professionals
Mr. J N Gupta has over 35 years of diversified professional
experience in public and private sector including two terms with
securities market regulator (SEBI) in India.
Mr. J N Gupta,
Ex. SEBI Executive Director
16.
17. Owning your cake and eating it too.
Sun TV Network chairman and managing director
Kalanithi Maran and joint managing director Kavery
Kalanithi receiving an annual compensation of Rs 57
Crs. Individually which is 16.41% of Net Profit of the
Company for the FY 2011-2012.
18. No Independent Remuneration committee:
The Chairman and MD of BGR Energy Systems Mr. B. G. Raghupathy
(Left) take salary of 25.92 crore that rose up by 180 percent during
2010-2011and which is 8% of Net Profit of the company.
The chairman and MD of JSPL, Mr. Naveen Jindal (Right)
o Receiving salary package of Rs 73.42 Cr. (1.83% of Net Profit)
o Company does not have a separate remuneration committee, so
effectively MD is deciding his own salary.
19. Vis-a Vis
Mr. Arun Jain :-
The Chairman & Managing Director of Polaris Financial
Technologies Limited did not draw remuneration from
the Company, (salary & bonus) except certain essential
perquisites not more than Rs. 20 lacs.
Acting like shareholder of the company by taking
dividend only.
20. Insider Trading allegations
Jaiprakash Associates Limited. (JAL)
SEBI has imposed penalty totaling Rs 70 lakh on three
senior executives of JAL, including Executive Chairman
Manoj Gaur, and their relatives for involvement in insider
trading.
They were found to have bought shares of the company
during the period from October 11, to October 21, 2008
when trading window was closed while they were in
possession of the unpublished price sensitive
information.
21. Orchid Chemicals
V K Kaul, as a director on Ranbaxy’s board, was
an insider to the subsidiaries decision to purchase
Orchid shares starting 31st
March, 2008.
Four days before 31st
March, Bala Kaul (Wife)
purchased 50,000 shares of Orchid chemicals and
sold them two weeks later for a Rs 43 lakh profit
(Profit of more than 30%).
23. Subsidiary Juggleries :
Number of unaudited subsidiary
Skumars Nationwide
Red Flag:- Twelve subsidiaries with total assets of 988cr
(20% of total consolidated asset) remain unaudited
according to auditor’s report from annual report FY11.
24. Aftek Ltd.
In 2007, with around 400 Crs of cash on books, net of
cash, co was trading a multiple of <3.
Red Flags - In FY-06 company fully acquired “Arexera
GmbH” by paying Rs.54.82 Cr. for 50.77% stake.
(Previously held 49.23% at Rs. 46 Cr.) So total valuation
comes around Rs.100 Cr.
Management didn’t disclosed that this acquisition is from
(promoters), as we can see from FY’6 AR excerpts:
25. Revenue of the subsidiary was not more than Rs. 1 Lac.
Hence acquisition was effectively at P/E of 100.
In the FY-09, company decided to close this wholly
owned subsidiary with 29 Cr. Of loan receivables. And in
total Rs.129 Cr. Of loss marked in the P&L as
exceptional item in the year.
26. Undisclosed interest of Directors in
company transactions.
Vikas WSP
• Revenue above 1000 Cr., available at the P/E multiple of 2 &
a negligible P/S ratio.
• Red Flag:
• Company has made transactions with the firm namely, Vikas
Chemi Gums (India) for the purchase of goods (Gaur Splits-
Raw Materials).
• These directors did not disclose their interest in the company
with whom the transactions were made and hence faced trial
in the year 2000.
(Source: Watchout Investor)
27. Once Buffet Said- Problems in a company are like
cockroaches in the kitchen. You will never find just one
Non Payment of Dividend
It has been complained by the shareholders that the
company declared an interim dividend at the rate of 50%
in April, 2001 but the same was not paid to the
shareholders within a stipulated period of 30 days
thereby violating the provisions of Section 207 of the
Companies Act,1956.
28. Curious accounting policy with
regard to goodwill
Opto circuits
In FY12, goodwill has reduced from Rs 627 Cr to 449.7
Cr , with no entry in the P&L account.
This impairment has directly adjusted against reserves.
No sign of impairment loss in the Profit and loss account.
29. Capital Allocation
Cheviot Company Ltd.
The company has been consistently profitable and has good free
cash flows. Company has Net Cash of Rs. 142 Cr. and current Mkt.
Cap is Rs 145 Cr. So effectively stock with Rs. 295 Cr. Of revenue
is available at Rs. 3 Cr only.
Red Flag:
Making continuous loss in direct investments. Which is not the core
business of the company.
30. During mid 2012, Company was available in the market
at cash bargain price of Rs.70 per Share. But we didn’t
invest as management didn’t seem to be deploying
surplus cash, neither in expansion or acquisition nor
distributing to shareholders through healthy dividend or
buyback.
Historically company has utilised surplus cash through
buyback options. In April 2008 company announced a
buyback followed by series of buy back offer in
November 2010 and in April-2012 (31% of Public Float.).
Nucleus Software
Sasken Communication Technologies Ltd.
31. Curious revenue & Expense
recognition policy
Jyothy Laboratories Ltd.
• Story: In the month of May 11, Jyothy Laboratories
announced the acquisition of Henkel’s stake in its Indian
subsidiary Henkel India, gaining a foothold in the
detergent market. Jyothy has borrowed money of Rs.
460 Cr. on its balance sheet and lent that money to
Henkel to manage debt on its books.
• Next quarter Jyothy booked other income of 14.82
crores. Nearly about 12 crores of it is interest paid by
Henkel India to the parent for the money that Jyothy has
lent to it.
• (Source:Ninad Kunder’s Blog)
32. But, there is no corresponding interest
expense booked in Jyothy’s account
against the income that they are booking.
On the concall the management said that since it
is a zero coupon debenture which is being
redeemed at a premium, the company is allowed
to write off the redemption premium ( which is
essentially interest) from the reserve and surplus.
So magically they are booking interest income
in the profit and loss account and expensing it
out in the balance sheet.
33. Vijay Mallya Vs Kumar Birla
- With whom you would like to park your money
Sincerity, Simplicity, Integrity
However attributes above no way guarantees success.
34. Escorts Limited (EL)
Escorts
Construction
Equipment
Limited (ECEL)
Escotrac Finance
and Investments
Private Limited
(ESCOTRAC)
Escorts Finance
Investments and
Leasing Private
Limited (EFILL)
100% subsidiary
JV- 49.81%
J V- 49.81%
Holds
49.81% in
each
other
12.83%
6.5%
Escorts
Finance
Limited.(EFL)
9.49% 31.68%
26.70%
(Source: Ingovern.com)
35. “EFILL and ESCOTRAC are classified as joint
ventures even though Escorts holds 99.62%
in each either directly or indirectly.
Hence, they should be classified as subsidiaries. EFILL
and Escotrac hold a total of 19.33% in Escorts, which
tantamount to violation of Section 42 of the
Companies Act 1956.
Besides, as at 31st
March,2012 promoter held 27.67% of
shares. But actually they holds only 8.34% and rest
19.33% is indirectly held by Company on its own
through its two Joint Ventures.
36. After the proposed merger of its WOS
and two joint venture company and through
a convoluted structure and cross-holdings and
unclear valuation, the promoter group holding is
increasing from 27.67% to 37.68% due to the above
amalgamation of the two joint ventures and wholly
owned Company. But actually company increases its
own holding in its own company by 19.33 % to 30.49%
indirectly by creating Trust.
The above transaction leads to a 13.84% dilution for
existing non-promoter shareholders because of
Company increase its own holding in its own company.
37. Akzo Nobel proposed to absorb three unlisted group
companies at a higher valuation, a premium of approx
30% to akzo India.
As a consequence of the amalgamation, promoters will
increase their stake from 56% to 66%.
The proposal was then withdrawn among heavy investor
criticism
(Source: www.ingovern.com)
38. Diluting minority stake through
preferential equity:
Falcon Tyres
As per the annual reports, company receives interest free
loan from undisclosed body corporate of Rs. 132 Cr.
Further, this loan seems to be distributed to three different
unrelated parties.
(Source: Neeraj Marathe)
40. These 'unrelated parties' are being allotted
equity shares pursuant to conversion of the
unsecured loans into equity shares, at a price
calculated as per SEBI guidelines. This will lead
to massive dilution.
Three words need to be pondred upon :-
‘interest free loan’ – Really, why?
'outside parties' – Who are they?
“Three outside parties” – Why? Not hard to
figure out
41. Promoters pledge their shares as collateral to
raise working capital or short term loans, to increase
their holding or to fund an acquisition.
Historically pledging of shares by promoters resulted into
huge loss for minority shareholders.
(A) Plethico Pharmaceuticals Ltd.
Plethico’s founder has pledged 82% of the company’s
paid-up share capital to borrow funds used to help grow
the company’s business.
Later two lenders had taken control of the stock.
Stock declined around 50% over four days of trading
occurred amid fears the lenders would sell the stock.
42. (B) Glodyne Technoserve
• As on June 30, the promoters of
Glodyne have pledged 81% of their shares as collateral to
raise working capital or short term loans. Stock price fell
20% for two successive days in late July.
• In a regulatory filing early AUG, the company said lenders
had taken control of some of its pledged shares.
43. Halonix Ltd.
Halonix is globally 4th largest player in Halogen
headlamps and domestically a market leader with 70%
market share.
During March-2011, Halonix was available at Rs. 100
almost 40% discount to Actis's cost of acquisition of
Rs.170, trailing PE of <10 and at Rs.300 Cr. Mkt. cap.
With selling of loss making general lighting subsidiary,
company was moving towards debt free status and
along with expansion plans, it was overall a rosy story.
Red Flag:
Actis owns 66% of Halonix Ltd. The association
announced hiving off a loss-making CFL business to an
associate of Actis during august 2010.
44. Investors welcomed this news and share price rose by 100%
from Rs. 80 to Rs. 160 in 6 months following a restructuring
proclamation in Feb 2010.
Halonix board then dumped the restructuring without proper
explanation months later. Recently on 11th
Sep, 2012, a board
meeting was called to take decision on this restructuring but
again deferred.
45. Company making losses again and again and
management wanted to increase their remuneration.
Mr. Ashish Kila (Perfect Research) and ‘Unifi capital’ -
shareholders of Halonix Limited raised their voice
against these resolutions being passed during the
company AGM and cast their vote against it.
46. Excerpts from the minutes of Halonix AGM :
Now further, Unifi capital has taken the matter to SEBI
and Enforcement Directorate.
47. Indo Asian Fusegear Limited.
(Now Eon Electronics Limited)
The Company sold its Switch Gear Business and
received Rs. 305.7 Per Share Cash, but they declared
only 3% special dividend payout. The Stock fall over 42%
in 2 Month.
48.
49. Royalty payment to promoter:
The Wadias disclosed the plan to charge royalty to
group companies - Bombay Burmah Trading, Bombay
Dyeing, Britannia Industries and GoAir - of 0.1 per cent
from the current fiscal year, which will be increased to
0.25 per cent of their profits for employing the family
brand and benefiting from the shared services of the
group.
Decision was not put up for voting from shareholders
HUL pays 1.31% royalty to their promoter as royalty but
for technology & brand value to gain benefit in their
sectors.
50. Deccan Chronicles Holdings Ltd.
Laden with debt, its owners facing fraud and forgery
charges, its stock in free fall and its survival uncertain.
the current problem of Deccan Chronicle is due to
unrelated diversification and the management’s loss of
focus.
DCHL defaulted on redemption of Rs 250 crore worth of
unsecured redeemable non- convertible debentures.
Total exposure of banks to DCHL stands at around
Rs.5,000 crore,
51. Share Conversion issue
Triveni Engineering
The company had in a 2003 scheme told shareholders
that their shares would be converted to preference
shares unless they opted for non-conversion.
Of the 70,000-odd shareholders at that time, only less
than 400 opted for non-conversion.
The promoters, bound by their agreements with lenders,
did not participate in the scheme and consequently, their
holding in the company increased.
52. Company received 404 complaints relating to the
scheme. Some shareholders said they had not received
the intimation of the scheme, and as such they could not
opt for non-conversion.
“Silence is not acceptance”
Some complaints said, "the promoters had taken undue
advantage of the small shareholders of the company by
not participating in the scheme“.
53. Notorious Promoter
Picadily Agro
Mr. siddhartha Vasistha, popularly known as Manu
Sharma is son of Chairman of the company.
Manu sharma shot a waitress for refusal to serve him a
drink.
Would you like to partner with such a management
54. Unrelated acquisition at high valuation
Satyam Computers
Ramalinga Raju, chairman and founder of Satyam, tried
to pass a RPT worth US$1.6 billion as a deal with
‘Maytas Infra’ in the year 2008.
Ramalinga Raju’s immediate family owned more than 35
percent of Maytas Properties.
Red Flags in the deal:
Unrelated business
Board approved the deal without shareholder approval.
Company did not even release the name of the adviser
to the deal.
55. It was later found that the deal,
estimated to be worth only US$225 million.
The acquisition attempt was seen as an attempt by the
Raju family to exploit Satyam's cash resources, as the
transaction would have left Satyam in a debt of around
$400m.
After protests from the institutional shareholders, the
deal was abandoned.
Raju stated that the aborted Maytas deal was actually a
last attempt to "fill the fictitious assets with real ones“.
After all of this boards independence been questioned.
And finally financial irregularities in company’s account
came into light.
56. Replacing Auditors:
IFB Industries- Is history repeating itself ?
In 1997 Bhadra & Bhadra has made several
qualifications in the company's annual report for the 18-
month accounting period to December 31, 1997. Later
auditor replaced by Deloitte.
Now again IFB has replaced deloitte with BSR & Co. as
Deloitte have expressed their unwillingness to continue.
No reason cited by auditors or companies for change in
auditors. Is it a regulatory pitfall?
MCX India and ITD Cementation are other examples.
57. Foreign parent company
- Focus on unlisted Indian subsidiary
Saint Gobain
Saint-Gobain Sekurit India Ltd.-Listed
Parent company has hardly invested 90 Cr. Of capital
and does a business of around 100 Cr. With marginal
profit.
Saint Gobain Glass India- Unlisted
Invested Rs. 978 Cr. Of capital, having Rs 1210 Cr. Of
sales and Rs 208 Cr. Of profit.
58. Sudden unexplained increase
in expenses
Honeywell Automation
Corporate overhead allocation expenses increased dramatically
by Rs. 38.5 Cr. in one year which is 36.5% of Net Profit of
FY2010.
60. Curious Case of Delisting:
Compact Disc Limited
The promoter of company announce delisting of
its company shares at Rs.75 at that time the CMP was
Rs.48 only.
Promoter holding was only 24.7% and approx 60% was
Retail Public Shareholders.
Promoter showing eager interest to delist and in
between HSBC one of the lender of the company file a
suit against the promoter for stay on delisting.
After that promoter defer the delisting and now the stock
trades at Rs.24 only.
61. Promoter Holding Level
Low promoter holding is not a sign of confidence
Eg:- Temptation Foods. (Only 10.47% stake held by
promoters)
High promoter holding should be considered good
because it ensures minority shareholder’s interest
aligned with the promoter.
Eg:- IFB Industries Ltd.
62. Venky’s India
Venky’s India- Largest player in Indian poultry industry. Currently
stock is trading at the P/E multiple of 10, P/S of 0.17, dividend yield
of >5.
Red Flag:
The total revenue of Venkateshwara Hatcheries (Venky’s unlisted
subsidiary) is almost twice as that of Venky’s.
Also, barring FY10 the
company’s revenue growth
rate is even higher than
that of Venky’s.
65. Buy back of shares where the buy back is in the
company’s interests, for example, buying back share at less than
intrinsic value using surplus cash
Capability in allocation of capital
Managers who stick to doing what the company does best; ‘the best
business returns are usually achieved by companies that are doing
something quite similar today to what they were doing five or ten
years ago.’
Ability and readiness to tackle tough problems as they arise
The use of retained profits to increase company profitability at
beyond market rates
A conservative approach to debt and liquidity
Demonstrated ability to consistently grow company earnings and
rates of return.
66. Managers who pursue company acquisitions for reasons other than
the good of the company – ego trips, the ‘institutional imperative’ of
keeping up with other company acquirers, bad judges (they buy a
toad and think that it will turn into a princess when they kiss it); as
he famously said in 1981, ‘[M]any managerial [princes] remain
serenely confident about the future potency of their kisses – even
after their corporate backyards are knee-deep in unresponsive
toads’.
Managers who pursue growth for growth’s sake, irrespective of the
value of that growth to the company
Managers who expend too much of the company’s worth by issuing
valuable shares to buy overvalued assets or who use debt to do so.
Managers who enrich themselves at company expense by with
extravagant salaries and the abuse of share option arrangements
(Source: www.buffettsecrets.com)
67. o Has management allocated capital properly?
o Investing in the business vs. returning capital to shareholders.
68. Does the management have a determination to continue
to develop products or processes that will still further
increase total sales potentials when the growth
potentials of currently attractive product lines have
largely been exploited.
Does management talk freely to investors about its
affairs when things are going well but "clam up" when
troubles and disappointments occur.
69. Does the company usually find its CEO from inside the
firm? (Outside hires should be watched carefully).
Does the company have a management of
unquestionable integrity?
Does the management team exhibit have original
ideas and employ an entrepreneurial approach to the
business.
70. I don't even want to know what the company is doing.
I don't even want to know who the manager is?
I want to go by the numbers. And i want to diversify a
lot.
71. Check past target accomplishment of management.
Its better off not meeting management. Because they
are great sales people that’s why they got to that
position. They got the knowledge & quality to mesmerize
anyone.
72. CEO’s are not deceitful people, they are high integrity
people but their in-depth knowledge about their company
influence the peoples.
If one wish to meet the management make sure they
don’t get mesmerized by charisma of management.
73. Good management will not always guarantee a good
investment but bad management will always end in
disaster.
Focus on management’s honesty than quality. The point is
to avoid dishonest bosses.
74. Akre evaluates management from two different perspectives:
skill and integrity.
skill without integrity and integrity without skill are equal roads
to ruin.
According to Akre a manager’s skill and intelligence are
easier to identify than a manager’s character and integrity.
Ascertaining management integrity is “the tough question
and the answer which often takes us years to discover.” One
short cut Akre uses is to favor “owner operators,” which refers
to managements that own a lot of company stock. The
thinking is that if management’s financial interests are aligned
with shareholders, they will do right by shareholders
regardless of integrity.
75. Management have the capital allocation skills necessary to invest
corporate money in projects that earn a return above the cost of
capital.
Akre makes sure that management’s compensation is not
excessive.
Akre looks for management that is in the hands of the founding
entrepreneur, because he finds entrepreneurs to be people with
passion and pride in having creating a business, rather than just a
business suit collecting a paycheck.
76. Is management putting the money back into the business through
R&D, marketing, cost reduction, distribution, etc.
If management making acquisitions, the acquisitions should be
synergistic and the manager should not pay too high a price for
them.
Is management paying down debt or letting it accumulate.
Is management paying a dividend.
77. For any unanswered questions
You can reach me on :
ASHISHKILA @GMAIL.COM
+91-9999751327
Perfect Research
T-24A Green Park Extn.
New Delhi – 16
Blog: http://perfectresearch.blogspot.in
Twitter: @ashishkila
Hinweis der Redaktion
Executive compensation is used to motivate management. Components of executive compensation such as bonus and stock options are given to CEOs based on criteria dependent on income, share prices, revenue growth etc. These criteria can cause management to use aggressive accounting choices so that they reach the goals needed to get the bonus or vesting of stock options.
Source: http://www.powershow.com/view/1fa22c-YWI4M/Financial_Shenanigans_powerpoint_ppt_presentation Further Reading: Recording revenue too soon Shipping goods before sale is finalized Recording revenue when important uncertainties exist Recording revenue when future services are still due 2. Recording Bogus Revenue Recording income in exchange for similar assets Recording refunds from suppliers as revenue Using bogus estimates on interim financial reports 3. Boosting Income with One-time gains Boosting profits by selling undervalued assets Boosting profits by retiring debt Failing to segregate non-recurring activities 4. Shifting Current Expenses to Later Period Improperly capitalizing costs Depreciating or amortizing costs too slowly Failing to write off worthless assets 5. Failing to disclose all liabilities Reporting revenue when cash is received in advance of providing services Failing to accrue expected or contingent liabilities Failing to disclose all material commitments and contingencies Engaging in transactions to keep debt off books 6. Shifting Current Income to Later Period Creating reserves and releasing them into income in a later period 7. Shifting Future Expenses to Current Period Accelerating discretionary into the current period Writing off future years’ depreciation and amortization during the current year
http://www.siliconindia.com/shownews/10_Highest_Paid_CEOs_in_India-nid-97153-cid-3.html http://beta.bseindia.com/bseplus/StockReach/StockQuote/Equity/Sun%20Tv%20Network%20Ltd/SUNTV/532733/BroadcastingCableTV SunTV have Remuneration committee.
BGR Energy Systems- NO remuneration committee http://beta.bseindia.com/bseplus/StockReach/StockQuote/Equity/Bgr%20Energy%20Systems%20Ltd/BGRENERGY/532930/HeavyElectricalEquipment JSPL’s : Net profit is Rs. 4002 Cr. In FY-12. According to SES, Naveen Jindal decides his own remuneration and receives 92% of all the payments made to the entire board. His salary is around 25 times the pay of the next highest paid director, Vikrant Gujral. No Remuneration Panel at JSPL also.
POLARIS Financial Technologies:- Mr Jain did not take home any salary, bonus or commission for financial year 2010-11 and will continue to do so for the next five years. He, however, will get perks of a value not exceeding Rs 20 lakh a year. During the year Mr. Arun Jain, Chairman & Managing Director informed the Board about his decision not to draw remuneration from the Company, (salary & bonus) except certain essential perquisites. Accordingly the Board considered Mr. Arun Jain’s decision and taken on record the salary, allowances, perquisites, etc paid upto August 2010. Further the Board requested Mr. Arun Jain to accept a salary of Rs.101/‐ per month and other perquisites till the conclusion of current tenure as on May 31, 2011 (within the overall limit approved by the Shareholders).
Price Sensitive Information:- the consolidated trial balance of JAL for the quarter ended September 30, 2008 was available on October 12, 2008 and the company's board approved the consolidated quarterly results on October 21, 2008 as well as declared interim dividend of 15%. SOURCE: http://articles.economictimes.indiatimes.com/2012-01-06/news/30597824_1_unpublished-price-sensitive-information-trading-window-sebi-order Shares of the company, valued at USD 2.2 billion, closed down 4.6% on Friday (Jan 06,2012) in a flat Mumbai market.
SEBI's investigation shows that between 20th and 31st March 2008 � two Ranbaxy subsidiaries Solus & Rexcel obtained board approval for their subsidiary Solrex to purchase Orchid Chemicals shares. The plan was for Solrex to purchase Orchid shares starting 31st March, 2008 in order to make a strategic investment of of upto 200 crore rupees and less than 15%. Four days before Solrex embarked on its shopping spree, Bala Kaul purchased 50,000 shares of Orchid chemicals and sold them two weeks later for a Rs 43 lakh profit.
(Source: watchoutinvestor) Directors: Balmukund Jindal, Babulal Jindal and Ramesh Chand Jindal . In the current years now directors are disclosing their relationship with Vikas Chemi Gums. Though amount of transaction is not very significant.
Source Link: http://www.theequitydesk.com/forum/forum_posts.asp?TID=535&PID=186298 Usually, goodwill is tested for impairment annually and impairment loss is recognized in the P&L account as a part of continuing operations.
The company has been consistently profitable and has good free cash flows. The top line has increased with a CAGR of 13% for the last five years whereas the Net profit has increased by 5% CAGR over the same period. Investment=140 cr. Cash=4 Cr. Total Debt=1.52 No. of share=0.45 Net Cash=144 - 1.52 =142.48
http://investingvalues.blogspot.in/ NOTE: Doesnot find its financials good enough to say that it was attractive at any time
Lifestyle can be viewed as a unique pattern of living which influences and reflected by one’s thought process which ultimately affects decision taking habits. It is happier to be sometimes cheated….than not to trust.
Escotrac and EFILL are considered as joint ventures by EL, but are actually subsidiaries that are funded by EL. So, EL indirectly owns 19.33% of its own shares. EL holds 49.81% in both the companies. Also, EFILL and Estrotrac hold 49.81% in each other. So, in total, directly or indirectly, EL holds 99.62% in both the companies. Also, EL holds 9.49% in Escorts Finance Limited before this scheme of arrangement; hence post the amalgamation of EFILL and Estrotrac, EL will effectively hold 67.87% in Escorts Finance Limited (EFL). All shares held by EFILL and Estrotrac in EL and Escorts Finance will be transferred to Board of Trustees of the EFILL Benefit Trust and the Escotrac Benefit Trust. Upon the amalgamation, both these trusts will merge into the Escorts Benefit & Welfare Trust. As at 31 st March 2012, the promoters held 27.67% stake in Escorts Limited. Valuation multiple for ECEL is far higher than the valuation multiple of Escorts itself, thus enhancing the value controlled by Escorts promoters and the trusts by over Rs69 crore.
valuation arrived for all the three companies is 3.7 times its adjusted net worth for fiscal 2011, a premium of 30% to Akzo India. http://articles.economictimes.indiatimes.com/2012-01-11/news/30616009_1_unlisted-firms-unlisted-companies-akzonobel Institutional investors – ICICI Prudential Life, LIC, New India Assurance, Oriental Insurance, GIC, UTI, Bajaj Allianz, SBI Mutual etc. This is another example like Escorts Limited where through restructuring, promoters conspired to increase their effective holding http://articles.economictimes.indiatimes.com/2012-02-11/news/31050042_1_voting-shareholders-uti
The only confusion I have regarding this case of Falcon is according to an announcement dated on 26 th april 2012 allotment of shares took place but why it is not showing its effect in June 2012 share holding pattern.
Why anybody would give interest free loan? Perhaps to gain long term benefit in terms of conversion to share Are these 'outside parties' really 'outside' parties? There is some understanding between promoters and the allotees. Promoters couldnot allot shares to himself on conversion because that would lead to minimum public shareholding as well as open offer problems, since the promoters already hold 72%. Why three outside parties? This massive dilution of shares can be divided among 3 of them, so that any one of them does not acquire more than 25%. Future Delisting became easy for promoters now if these three is somehow related to promoters.
According to market regulator Securities and Exchange Board of India, promoters have to disclose details of pledged shares if the same exceeds 25,000 shares in a quarter or 1 per cent of the total shareholding or voting rights of the company, whichever is lower.
Pledged shares are “a concern more in bear market rather than a bull market,” said Pankaj Agarwal, an analyst at Mumbai-based Ambit Capital.
Halonix was supposed to buy Luxlite and Trifa, two group companies of distributors in Europe. That has been cancelled. Halonix has paid them unknown sums of money (no one is revealing how much) and guaranteed about 2.7 million euro for their working capital. (about Rs. 15 cr.) Now they are hoping to get it back. (See Director’s report-2011).
Promoters are known for their ingenuity in taking out money from their companies. Through the formal route, there are few ways in which this money can be withdrawn. One such move that is increasingly being used is charging ‘royalty’ for use of the promoters’ name. Promoters believe their names have an intrinsic value. But there are some brands which can harvest it, and some which can't. https://www.sptulsian.com/article/69236
Clearly the acquisitions haven’t been beneficial. As owner of Deccan Chargers, Reddy clearly did love his team but the team ended at the bottom of the rankings in the last season. The company’s dire financial situation has reportedly forced him t o put Decaan chargers for sale, with no clear takers for the franchise. Its book store chain Odyssey has been a drag on its balance-sheet while it has now ventured into aviation with Aviotech, a chartered flight service.
However, complaints began to surface later, especially after Triveni Engineering announced a public issue. As of November 5, 2005, the company received 404 complaints relating to the scheme. Some shareholders said they had not received the intimation of the scheme, and as such they could not opt for non-conversion.
Red Flags of the deal in detail: the purchase of property and infrastructure assets was completely unrelated to the current business operations; the board unanimously approved the deal without shareholder approval, even though it was a RPT the company, which was very evasive on the conference call after the announcement, did not even release the name of the adviser to the deal.
A change in auditors can be the result of either a dismissal by the company or the auditor’s resignation. This could be in context of grave financial circumstances.
Therefore even with tremendous opportunities to grow in India and overseas, it is highly uncertain how much growth will come in the listed company and what margin growth can be expected.
