Tag Archives: wipe out

04 – ONCE A DARLING, NOW AN EVIL

Posted on by under Once a darling, now an evil

The fourth part of Series “Once a darling, now an evil”. This series is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the network service company which has an all-time high price of ~Rs.3500 and now last traded price at Rs.1.25. and high of Rs.464 in the year 2010.

GTLL01

On the first instance, this company looks having not a huge problem except debt rising but for understanding it in a better way, we need to go deeper.

GTLL02

If we look at the tax paid in cash flow then that tax outflow is higher than what the company has posted in P&L statement. If we look at the actual PAT and reported PAT then both have a good diversion. This shows that the company has boosted PAT by ~40%+ on an average basis.

GTLL03

Now, if we look at the sales to the related party then that was ~44% and 43% in the FY08 & FY09 respectively. In FY09, ~44% payable was from the related party out of total payables. Company has made ~80%+ investment in its subsidiaries out of investment shown on the balance sheet. In addition, the company has 25+ subsidiaries and few were at Mauritius.

Also, during when the price was traded near too high in the year 2010, the promoter has started putting their stake in a pledge.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

This series contains learning from books –Financial ShenanigansQuality of EarningsThe Financial Numbers GameCreative Cash Flow Reporting

03 – ONCE A DARLING, NOW AN EVIL

Posted on by under Once a darling, now an evil

The third part of Series “Once a darling, now an evil”. This series is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the company which is engaged in providing Services Incidental to Onshore Oil Extraction which has an all-time high price of ~Rs.347 in 2008, ~Rs.308 in 2011 and now last traded price at Rs.0.42.

SterI01

the company having huge sales and profit growth. Might be having something like a turnaround case or some Capex has started giving result.

But as usual, I get suspected on everything so as per habit I go deeper.

SterI02

Wow…. What a wonderful company!!!

Company has taken a borrowing but does not have to pay any interest on it. I like it, I also get such a loan then can achieve many things with it. ?

SterI04

Another point is, the company also need not pay any taxes. Wow… no interest and no tax.

SterI03

Huge diversion between CFO and PAT but yes, positive and when looking at the FCF then its huge negative.

Now, more feather to add into it… need to compare consolidated and standalone balance sheet.

SterI06

SterI05

Here, when we see that company get ~Rs.800+ cr of cash in FY10 but that cash has gone out in FY11. So, where these much of cash gone? When we check the standalone balance sheet then that cash has gone as an investment.

SterI08

If we look at the few of the items of the balance sheet then we realize that the company has given a huge loan and advances to the related parties. Also, huge other receivable, what meant by others?

SterI07

If we go and check a list of subsidiaries and few data then we can come to know that three subsidiaries out of five doing well but those three subsidiaries do not get a good amount of capital compared with the first subsidiary which is operated in Mauritius. This subsidiary does not have any turnover, not make any investment into the assets then why need such huge capital?

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

02 – Once a darling, now an evil

Posted on by under Once a darling, now an evil

The second part of Series “Once a darling, now an evil”. This series is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the agro commodity trading company which has an all-time high price of Rs.5500 and now last traded price at Rs.1.60. and high of Rs.506 and Rs.364 in the year 2008 and 2010.

KGNI 01

What a wonderful company!!!! Look at the fixed assets turnover…

But some interesting data…

KGNI 02

Another interesting data….

KGNI 03

Without a payable and without keeping an inventory, the company has achieved a huge turnover. But only receivables are there….

KGNI 04

(Data of FY07-08) This looks something susceptible…. ~10%+ advances of sales… and that reach to ~71% in FY10. Majority of the companies were investment and finance companies.

One other company which involve in the construction activities, which has an all-time high price of Rs.540 and now last traded price at Rs.0.30.

Sancia Global 01

We can see that the company is into the construction business but the company does not have to keep any of the inventories.

Sancia Global 02

Also, debtor days are growing and CFO is negative though the company has reported net profit. Working capital is responsible for negative CFO.

Sancia Global 03

Advances recoverable is ~45% of balance sheet size in FY2010 and ~43% in FY2009. Also, the company has a contingent liability of ~Rs.725 cr which is ~96% of the entire balance sheet size, 2.27x of sales and 319x of net profit in FY10.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

This series contains learning from books –Financial ShenanigansQuality of EarningsThe Financial Numbers GameCreative Cash Flow Reporting

Once a darling, now an evil

Posted on by under Once a darling, now an evil

I am going to start this new series with all your love and wishes. Series “Once a darling, now an evil” is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth. This series is an extension of my previous series “Numbers tells you everything”, this series I have left in midway due to some technical issues with my database.

I am starting this series with one of the graphic company which has an all-time high price of Rs.2100+ and now traded at Rs.0.25. and high of Rs.13.47 in the year 2007. Due to unavailability of data prior to 2006 and unavailability of the annual report prior to 2010. I have to start showing number analysis from 2006 only.

PEM 01

Wow!!! What a strong cash flow from operating activities!!! From the above data, the company seems strong but….

When we look at the balance sheet with putting P&L with it then….

PEM 02

The company need Rs.193 cr of fixed assets to do a sale of only Rs.97 cr. Sales are just a ~10% of the entire balance sheet size. Debtors of the company were Rs.221 cr and inventory worth of Rs.79 cr compared to the sales of Rs.97 cr in FY06. Debtors were almost 2.28x of sales and inventory was 81% of sales. Look at the below data.

PEM 03

Few more interesting data…

PEM 04

Means when a company sell its services, the company gets payment after 828 days in FY06 and 826 days in FY07. In addition, the company takes 295 days to convert its inventory into the finished products in FY06 and that increase rapidly as COVID-19 has grown.

Now, the question is if a company has higher debtors and inventories then how CFO remains much stronger.

PEM 05

The answer is here. Working capital changes have contributed that boost into the CFO. If we look component of it then debtors have majorly reduced but still in FY07, debtors as a % sales remain as high as earlier due to a sharp fall in the sales.

If we have look at these basic number analyses and not deep crunching then also, we have avoided investment into such company and have saved our wealth. I have not talked about the company’s investment worth of ~Rs.130 cr in its subsidiaries in FY10 and both the subsidiaries are located at Mauritius. Also, ~Rs.134 cr of advances recoverable in FY10. There are many such points but without looking at all such points, we have avoided and saved our wealth.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.