8k Miles Software Ltd, Cloud Computing


(Altruist) #882

Point 1 is unlikely to happen. They would say that all subsidiaries are being operated in compliance with local regulations and that unaudited (or locally audited, if required by local law) statements would be attached as applicable.

On a related note, look at TCS’ fully audited report on subsidiary financials. This is the level of transparency and detail that can earn you investors’ trust for a lifetime.

https://www.tcs.com/content/dam/tcs/investor-relations/financial-statements/2017-18/fs/tcs-subsidiary-financials-2017-18.pdf


(udayp) #884

The AGM was eventful with many questions. And I think the management did fairly well with some convincing answers. Some of the main highlights:

  1. They are in the process of making Delloitte the sole auditor for all subsidiaries. They did not commit on the timelines but said that they are undertaking efforts to do at the earliest. Delloitte has already visited some of the subsidiary offices in US and gathered information.
  2. The audited detailed financial reports of all the subsidiaries for FY 2017-2018 will be made accessible in about two weeks.
  3. Hired a investor relations firm to increase investor confidence. This firm will be responsible to interact with institutional investors and also respond to emails from retail investors.
  4. CEO has repeatedly stated that convincing institutional buyers to invest is his top priority.
  5. He will be in India for the next 3-4 weeks meeting analysts and investors.
  6. On the issue of long delay in trade receivables, the company has not written off any revenue in the past five years showing 100% recovery.
  7. Reason given for not paying dividends: As most of the revenue is generated outside India, bringing back that revenue to India has huge tax implications. They are looking at various ways to tackle this problem, including having an entity in Singapore where the tax implications are very low, issuing ADRs and so on.
  8. CEO informed that they will not make any new acquisitions for the next 18 months from internal accruals after completing the acquisition that is in progress. He stressed on the term internal accruals after clarification was sought by investors. They may raise external funds if some compelling acquisition target comes along. They want to improve cash flow substantially.
  9. Did not give very convincing answers on the reason for CFO selling the stake and loaning it back. He said that selling stake and loaning to the company happened at very different times.
  10. Suresh has categorically stated that he has not decreased stake in the past one year.
  11. They have collected all the “rumors” (they call them rumors) that are circulating on social media and will send consolidated responses to the exchanges. They are formalizing the responses with their accounting and legal teams.

These are the important points that I remember off the top of my head. I’ll add more if I remember.


(Manojlion) #885

Many thanks for the update Uday :slight_smile: Shows the company in positive light.
Points 1 and 2 are huge plusses
Point 7 Was there any update ,if the company would do “share Buyback” as they cannot pay dividents due to reason mentioned

Was there any clarification about Mr Ramani coming back to stake as CFO. I hope he does not make a comeback ,as I believe,there are more doubts about him rather than anyone else in the company?

Will be awaiting the Concall Transcript

PS: I dearly hoped that the AGM would not go well and I can sell my shares.But this AGM again gives me hope


(Funda_Buffett) #886

Things said at AGM:
1- addressing the issue regarding investor communication by appointing adfactor as the IR

2- 8K media allegations are baseless & CFO has stepped down to focus on legal action on the accusations

3- US subsidiary is audited by another auditor and they are planning to bring Deloitte for the audit of all its entities

4- Has won many new clients and are making significant development in exploring different geographies. (For ex- They have set up a office in Singapore for the same)

5- They will be addressing to all the rumors very soon in an appropriate manner and are very much aware of the accusations made on them.

6- Will be uploading US subsidiary financials in next 2 weeks.

My take- Did all my queries were satisfactorily answered? NO ! But next one month will be crucial to see as to what kind of communication is management putting forward to address the issues.


(Manojlion) #889

Were there any questions pointed at the Auditor Deloitte? Just asking this to know the confidence level of Deloitte on this company
I hope there was some representative of DSP Black rock.Were there any questions from them?


(Funda_Buffett) #890

DSP -I don’t know ! But the auditors were present and no questions were directed towards them apart from the fact that the investors in general wish to see them auditing the subsidiaries as well.


(Praveen Ravindran) #891

(esoteric) #892

“At today’s annual general meeting, which was barred for the media, the CMD & CEO, Suresh Venkatachari, had a tough time convincing shareholders about various allegations against the company.”
Shoot the messenger.All your problems will get solved.


(jaman) #893

In my opinion, resignation of Mr. S. R. Ramani, CFO of 8k miles, is very positive sign for the company as his activity in the market and other financial activities of the company lead to such down fall of the price. Further, It is not desired that he is again buying back his shares in this company as this may make investors again suspicious about the activity of the company; the unsecured loan of Rs. 37.50 crores from him may also be repaid as soon as possible. Gradually bringing back the confidence of investors may be one of the top most priority.

As the company is doing very well under the CEO Mr.Suresh Venkatachari, the new CFO should very cautious about all the financial transactions of the company and everything should be in black and white.


(Silmaril) #894

Once the subsidaries accounts are disclosed, questions about revenue being fabricated will reduce, once they are audited by deloitte hopefully all those questions will permenantly stop.

Im actually expecting the price to start its recovery from monday and am planning to add more to my existing holding.


(Manojlion) #895

I would start adding more only the financial statements of all subsidiaries are disclosed and audited by Deloitte.Fingers crossed bro


(esoteric) #896

Comments by CARE Ratings vide their report dt28 Sep’18.
All instruments outlook Revised to Negative

The negative outlook reflects the likelihood of material misstatement in the consolidated financials of 8K miles as highlighted by the statutory auditors of the company in FY18 Annual report. The auditors has expressed qualified opinion in terms of material weakness identified in the company’s internal financial controls over financial reporting as at March 31 2018 with regard to adequacy and operating effectiveness of the management’s oversight and review of financial information and book closing procedures at the subsidiaries.
Rating Rationale
The revision in ratings assigned to the bank facilities and instrument of 8K Miles Software Services Limited (8K Miles) takes cognizance of resignation of statutory auditors of “8K Miles Media Private Limited” which is a related party to 8K miles having two common promoter directors. The previous auditor “M/s. GHG Associates” have accused the management of 8K Miles Media Private Limited of misusing the firm’s letter head, seal and the signature of the firm’s partner in 9 outward direct investment (ODI) certificates submitted by the company to the bank to transfer the funds equivalent to Rs.46.12 crore overseas to M/s 8K miles Media Holdings Inc. on various dates during the period June 21 2017 to March 28 2018. Further, there is a sharp decline in the share price of 8K Miles during the period June 2018-September 26 2018.

Looks certainly headed to SEBI.


(Silmaril) #897

Page 135 of AR
“We have considered the material weakness identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated Ind AS financial statements of the Company for the year ended 31 March 2018, and the material weakness does not affect our opinion on the said consolidated Ind AS financial statements of the Company.”

If it had to go to SEBI it would have gone by now, 5 month on…


(esoteric) #898

Yes.The technically correct insofar as 2018 is concerned. He is not expressing any opinion of earlier years though he has rectified asset clasification substantially in 2016 and 2017.The AR of 2017-18 has the rectified balance sheet of 2016,2017 and 2018 called it “inadvertent” error.That is a mild term.He did not go into P&L of earlier years for any change there will attract retribution from CLB and SEBI.If the CFO, accountant, auditor, audit committee and Board did not know of these errors , What were they doing ?If the person inadvertently classified a goodwill as intangible or tangible asset, what was his competency or incompetency in classifying a revenue exp as an asset, or a liability as an income.


(Silmaril) #899

The reclassification of the inadvertly classified amounts mentioned on AR page 187 do not have a material impact on the P&L as they are reserve/equity reclassifications. If you believe they have an impact on the P&L, please articulate the impact and educate us.

Further these are not gross violations of the listing obligations or accounting standards and hence SEBI or CLB will not waste their time on this. If they were cognizable violations in any manner, Deloitte had an obligation to report it, and Deloitte has signed off on them without specific opinion or modification.

The CFO has resigned for his incompetence and I don’t think there is any further need to catastrophize…


(Gaurav Agarwal) #901

Unsecured loan should not be returned to Mr. Ramani instead in case of any problem in recovering outstanding from 8K Miles Media, it should be adjusted against that money.

We should remember that subsidiary are audited in USA. USA regulators IRS, FBI take forging of accounts very very seriously. I think investors should keep in mind that subsidiary of 8K Miles are in US and not some unregulated tax haven.


(Praveen Ravindran) #902

Yes. True. Hope all of their subsidiaries are audited by Deloitte sooner. Did they say yesterday that the consolidated results would be announced in two weeks?


(phreak) #903

I have couple of basic questions.

  1. Can an Indian auditor audit accounts of a US based subsidiary? I mean in a legal sense. Has there been a precedent?

  2. What if the subsidiary is not breaking any US law and their tax statements there are real but the numbers reported here aren’t?


(esoteric) #904

Siddharthadhamankar

You re-read the last three lines of my previous posting.
Page 187

First aspect
If errors are inadvertent they affect all accounts.If errors are only by design, they relate to reserve/equity.Deloitte has only highlighted errors relating to B/S and not that errors are only limited to B/S
Now the more important questions. Deloitte has redrawn the balance sheet of 2106/2017 and 2018.They are auditors for the Indian listed entity.All errors in accounts amended by them relate to US co.USA based cos can only be audited by CPA’s in US. How did Deloitte make the changes in consolidated accounts.
Were the amendments also made in the US subsidiary books by the auditor there or only were made in the Indian books. This will be known when subsidiary accounts are released for last three yearsDid the subsidiary auditor disallow them to alter the P&L?
The US subsidiary is a pvt unlisted co and has no borrowings or listed to be governed by SEC.The audit is limited to tax compliance and audit of pvt cos is lax.The US auditor has fulfilled his duty when he obtains a “management Representation” owning responsibility for adhering to all laws, standards, practices…And pvt co. limits his responsibility.
Second aspect
The Indian auditor goes by the US auditor and has no say in anything.Even a grave doubt can be overridden by a management assurance.
Third aspect
Now Haresh has resigned as auditor of 8K media and made serious allegations of forgery.He was also auditor of 8k miles.As they move to civil and criminal courts serious charges and countercharges are going to be thrown.What incendiary evidence the previous auditor possess we do not know.If Deloitte has made changes to accounts during the previous auditors term, he will have his own version.

There is nothing more to catestrophise the CFO.That is already done .Now the skeletons need to be hidden safely.

The SEBI action will begin now for apart from CFO selling his shares, charges of forgery in associate co, changes in previous years accounts by Deloitte,downgrading by rating agencies have all happened in the last two weeks.
The drama will unfold now.You can bury your heads in sand like a ostrich and ignore the problem or be alive to what is yet to unfold.


(esoteric) #905

#phreakv6
They cannot.The US subsidiary is a unlisted, pvt company without borrowings and caters only to tax laws. So as long as the co pays tax more than what it earns the US revenue dept is more than happy.