FiberWeb India - Bouncer (growth) or yorker (trap)?


(Sravan) #87

I can see that you are spending lot of time getting the information, that in-turn helping me learn a lot how to analyze a company. it’s becoming bilateral discussion in this thread with occasional booked loss messages. :slight_smile:
coming to the BIFR thing, if company is out of BIFR from Oct 2015, how long it can enjoy tax benefits? is there any source of information, where we can find out actual terms of tax benefit provided?


(Left this forum) #88

BIFR was a financial reconstruction board set up under finance ministry earlier. The board was empowered to reconstruct a package for sick company in agreement with key stake holders such as creditors/banks. A reconstruction package included relief from taxes, delay to debt payment or easy structure etc. Every BIFR order is unique as the case requires. So what was BIFR order passed for Fiberweb we can only know by seeing the copy of BIFR order. Despite of BIFR order Income Tax circular 5/2009 empowers IT to seek for specific permissions as I said in earlier post. Infact Income Tax has a record of rejecting relief claims, you can find number of issues if you search IT website.

BIFR can only grant concessions or reliefs till the time net worth become positive. To my interpretation and from Andrew Yule case there shouldn’t be any relief extension post BIFR order.

There is another catch, Income tax calculation is done separately for the purpose of income tax return. of course if you are covered (most listed companies are) under 44AB then you need to have a tax audit report. You can arrive tax amount either by a. maintaining tax books (these days rare, double cost) b. passing adjustment entries to statutory financials and create a tax accounting entity (widely followed). The tax audit report, entries passed for adjustment, tax computation and return is a document not available for public inspection.

This is also called popularly as differential disclosures where one thing is disclosed by company in financials and another in tax return. Institutions put a clause to have access before putting money, hence a lot of time when institution starts selling it may be due to something they have seen in tax report which we may not have access.

Not an easy thing to know tax statement of company, not only this one but all companies. What you can check is tax paid from cash flow and tax provision from PL. But if there is no provision or payment you can triangulate to certain extent by comparing accounting policies for expenses, income, differential depreciation etc. But it’s a lot of work, tried once; result were never encouraging the effort.

Thanks


(Sravan) #89

Wow, you are just wealth of information. thanks for sharing details of BIFR. so the arrangement is not in public domain, then it’s difficult to know.

BTW I found one more article published by same moneylife.

Below was published on 07 July 2017

Gist of it

at 75% capital utilisation and the expansion getting completed in the second half of FY17-18, the management expects a top-line of Rs270 crore for FY17-18, with an expected EBITDA margin of 14-15% or around Rs40.5 crore (up 103% from Rs19.95 crore in FY16-17), and net profit of Rs36.86 crore, up 351.72% from Rs8.06 crore in FY16-17. On the basis of these projected figures, the market-capitalisation-to- sales ratio is 1.64, and the price-to-earnings ratio (P/E) is 12. The promoter shareholding was high, at 59.10%, as on 15 April 2017. The share rose to its 52-week high of Rs389 on 16 May 2017, from its 52-week low of Rs60.50 on 28 June 2016

After 3 months (already you have shared this)

Gist

Samethings what we were discussing all these days,
the company is not paying any taxes
it has repeatedly refused to name the clients
Reducing Promoter Stake
The expenses increased 352% y-o-y from Rs10 crore in the June 2016 quarter to Rs46 crore in the June 2017 quarter
address of the offices of Fiberweb and Kunststoffe are the same
Just scroll up to read :slight_smile:


(Left this forum) #90

I have created another thread named ‘Stock Nightmares- Events to Remember’, where you will find link to Moneylife article. Events after events, years after years I have seen a brouhaha over these articles. But eventually the price fell to 2/3, wealth destroyed by 80-90%, stocks suspended, those who propagate vanished. In fact I have many more stock stories to tell there. I will come back and update.

Question is are they accurate to pin point? Is there an ulterior motive to article? Any of answers we seek will not solve our problems, but look at issues raised and their impact on investment.

Either one is benefitted by management in terms of salary, perks, incentives so that it does not matter whatever red flags are there. Or you make money by a good company at good valuation. My wisdom says I will avoid uncertainty, when there are so many good companies available why bother except learning trickeries if any from any company.

By the way when another board (actually it’s a fish market) pops with noises one should become extremely alert.

That’s what my submission is!


(Left this forum) #91

Quite strange but this company has been marred by controversies. While I was talking to a friend yesterday (we did LLB together) on corporate ethics I happen to mention Fiberweb. And his reaction was oh you are talking about PVD Plast Mould (previous name). I said why what happened? He told me go to case mine, you will find cases where even judge has slammed including federal court in USA (NC).

Here is the link:

https://www.casemine.com/judgement/us/5914b9dcadd7b0493478da9d

Now watch the judge order with discussions, how many time company refused to provide information on vague grounds. If this they can do it a court, I leave the judgment to you.

  • PVD refused to produce documents relating, inter alia, to its damages.
  • PGI and Bonlam sent a consultation letter dated September 9, 1999, specifically requesting documents on PVD’s financial condition and on its relationship with prior customers and explaining these documents’ significance to merits of the lawsuit. Because PVD had not produced any documents relating to these areas, PGI and Bonlam filed its first Motion to Compel on December 7, 1999, complaining that responsive documents had been admitted and referenced in PVD’s discovery responses but not produced.
  • On January 3, 2000, PVD produced more documents that proved to be inadequate but made no representation about other documents.
  • During that deposition, PGI and Bonlam elicited admissions about documents regarding accounts, loans, minutes, and bank statements that had not been produced because according to PVD’s Chairman, “[i]t’s a privileged document which we would not like to show. . . .”
  • Although at the end of this trip to India PVD’s counsel searched PVD’s corporate offices and found additional, responsive documents and produced them, this production was still inadequate given the deposition testimony by PVD’s officers.
  • At the May 10, 2000, status conference, Magistrate Judge Carr granted PGI’s and Bonlam’s second Motion to Compel, clearly warning PVD again that "[i]f you’ve got [responsive documents], produce them; if you don’t have them, give him a statement that you don’t have them, and that’s the end of it.
  • Magistrate Judge Carr filed a R R on October 13, 2000, recommending this action be dismissed and the requested fees and costs be awarded to PGI and Bonlam. This court held a hearing on December 20, 2000, to receive further evidence and arguments on the Motion for Sanctions. At this hearing, Counsel for PVD requested a future evidentiary hearing for PVD to demonstrate its good faith. The request was denied. See infra Part II.C.1. This court has also reviewed de novo the entire record, and PGI’s and Bonlam’s Motion for Sanctions is granted; PVD’s claims against PGI and Bonlam are dismissed with prejudice; and attorneys fees and costs are awarded to PGI and Bonlam.
  • Predictably as PVD continued its noncompliance with discovery orders, Magistrate Judge Carr gave PVD clear warnings at several successive status conferences that he would entertain a motion for sanctions, including striking the complaint. One glaring example was at the May 10, 2000, status conference Magistrate Judge Carr, addressing counsel for PVD, stated: “Then tell [your client] to produce [the litigation documents] or they will be sanctioned.”
  • PVD has shown a pattern of indifference and disrespect for orders of the court and the Federal Rules on Civil Procedure. Rule 37(a)(3) states that “an evasive or incomplete disclosure, answer, or response is to be treated as a failure to disclose, answer, or respond.”
  • This excuse of cultural, linguistic, and legal differences is not wholly without merit, and the court recognizes India is not equivalent to the United States, particularly in civil litigation. However, our legal systems have a common origin, and similarities are not lacking between the India Code of Civil Procedure and our Federal Rules of Civil Procedure and between our corporate laws.

See the level of unwelcome statements used by a Judge. Well well, I really wish best of luck guys; you may need it.


(Sravan) #92

thanks for digging up this old case, but what is this case is all about?
I don’t understand 90% of the law terms used.
somewhere it has mention of loans with banks.
somewhere court asks for client details.
what PVD has claimed against PGI and Bonlam?
I can see PVD lost the case, but what was the claim?


(ninjasoar) #93

Hello Sir. You have brought up some valid concerns of which I have written to the company. Still awaiting reply.

I’m new to markets, I just wish to understand the numbers. On Friday FWB bled 10%, 1,45,000 shares sold to the panic moneylife created. Out of which 1,00,000 were accumulated. This accumulation is nothing new and has been going on for past few months. I have been tracking this for over a year now. Stock has been beating expectations from quarter to quarter. Results are great, still the stock doesn’t rally even on result days.

There is talk around the buyers about bears running this stock and a few powerful wealthy individuals accumulating huge quantities.

Can we verify this using publicly available data?


(Left this forum) #94

You are right, no point in to fret over shake ups in price. Even best companies go through shakeout mechanism. In fact I consider a shakeout healthy within consolidation base. But what we should not ignore business valuation behind a price, corporate governance the least to say. Speculation alone can not drive price as one point of time speculators will move for better avenue.

Accumulation occurs when price breaks out with big volume, followed by minor correction with lower volume. Big breakdowns with high volume is a big red flag or warning. When an initiative buyer redesigns it’s forecasts they start buying in trenches. The price and volume picks up with buying only to contract in subsequent days. The retailers will book profit and again it breaks out when next initiative buyers joins.

Talk about buyers and HNI are all insider information. There can not be any publicly available data. Other way these information are punishable offence.

Personally I do not subscribe to growth story from financial numbers. I had 30 minutes look on last month on Annual Report. I could gather 4/5 flags. For your benefit I am putting them here.

Widening gap of debtors to sales

Debtors to sales has moved from 4.28% to 12.91% in a matter of 2 years. It is a 3 fold increase. The classic good old red flag.

Extraordinary cash balance

From 5.84% of revenue in a matter of 2 years now its 20.49% cash in hand. That’s just staggering, Satyam had the same issue. Why some one would be keeping so much money in current account? Excess cash if not suspicious it will impact ROA, increase cost of capital. Satyam wanted to have cash as it can give them flexibility in working their way out of problem of failure if not assessed. More so when cash is not getting any interest income, it destroys business value. I would love to have counter arguments here.

Rule book inventory

Inventory has been around 10% , no change. Cost of material consumption increased from 52 to 67%. Within closing inventory its raw material value is higher than finished goods. In fact stores and spares is equal to finished goods inventory. I am clueless here, what is that getting traded, raw material or finished goods? Some one who trades should have finished goods higher. If you are a manufacturer what explains this big rise in raw material cost percentage? Where is cost auditor, are you exempted?

Conjunction: big increase in cash, debtors while inventory remain same. You don’t keep inventory as required (inventory goes through physical verification, it’s tangible), difficult to understand massive surge only in cash and debtors which are more third party balances controls. Auditors understand the meaning of third party confirmation, difficult to perform a substantive testing.

Export revenue

A company claims to be 100% EOU, yet it does not provide break up between DTA and export sales. If I see director report it states 45 Cr earned in forex (down from previous year actually), that’s roughly around 40-42% of revenue. Auditor makes it a point (notes to account)’ The audited statement of accounts of USA Branch have not been received till the date of signing the Audit

Report of the company. All original documents are lying with US office. We have verified the same on the basis of Xerox/scanned copy. The Value of total transactions is Rs.1,65,52,498/- as against total turnover of Rs 105,70,12,327/-, i.e. 1.56 % which is insignificant, from the materiality point of view.’

If USA is your major destination and you are not raising invoices from USA branch. Forex is not to the tune of 45% even. I do not see either any indirect tax claim (like any 100% EOU). The business model requires more than superior intelligence for normal guys like me.

There are hundreds of red flags floating in forum now. You take your call basis on your satisfaction.


(jayesh265) #95

Hi @The_Confused_Consult and @phreakv6,

I would like to thank you for the concerned raised by you in this thread. Specially, after going through the first post of @The_Confused_Consult, I re-evaluated​ my assessment of the company and as a result, I sold my tracking quantity also. Happy that booked some profit on time.

I always try to keep my senses open and don’t hesitate to take action on time. I also try to never fall in love with the stocks I own.

Anyway, apart from the concerned raised here, I was not comfortable with too good results of this company.

I have a request for @The_Confused_Consult, if possible, could you please check Bhansali Engineer… which is also coming out with superb results quarter after quarter…

Regards,


(Left this forum) #96

I guess the BEPL thread is active in valuepickr with lots of ‘both side’ opinion. Let me know if you have specific doubt in that thread, we can always look into together.

Let us not shy away from growth because that is what we are looking for i.e. acceleration in revenue, margin and EPS. Neither manipulation destroys always shareholders. Some times promoter use creative accounting practices for a favorable loan or winning contract. Reliance is flag bearer of such example I guess. But there are few who manipulates with an intention to dupe shareholders. Those are the ones we need to be scared off.

Please continue to follow open minded approach, it will always allow you to jump from derelict ship which may sink anytime.


(ninjasoar) #97

Finally, Pravin Sheth comes out to clear the baseless allegations on Tax exemptions for this year, disclosure of US clients, kunststoffe issue and creative financial reporting matters. Also fiberweb has sent out first samples from their new melt-blown line to the US and the newly installed line is now ready for production.

Please read the update here:http://www.bseindia.com/xml-data/corpfiling/AttachLive/77d19b71-6850-4b99-896e-9d9aa9ace10e.pdf


(Sravan) #98

I was just about to post the same…
retailers are just shaken and stirred…
I would just repost
"A multi-baggers journey is filled with the corpses of highly intelligent articulate naysayers." - @iancassel


(ninjasoar) #99

Yes. These events have not changed my conviction in Fiberweb or it’s promoters. It has hugely reduced my trust on news publications now, not just moneylife, moneycontrol too. Important lesson learnt here, trust your own research and don’t buy into manias and panics. In a market there are bull and there are bears, there are biases but you should listen to yourself and trust your instinct. Enjoy the rally now, those who are still holding after the hurricane. Like they say, the storm always passes


(Left this forum) #100

I got couple of mails in my email id asking me whether to rely on a particular submission by this company today morning. Let me clarify, I am not invested. Neither asking anyone to invest, shared my views earlier. Going forward when I have time will share for sure. But I am afraid I am tired for selective replies circling around few questions. So going forward I would not like to spend time on this company. For now:

The clarification submitted is amateurish, does not address any issues whether it’s cash balance, promoter selling or even holes in many account. Even export does not match their own numbers. No point in repeating them, our job is to make people aware of certain views. That’s done, people should understand consequence and impact on their decision making.

Now come back to reply:

  1. Customer name is protected by NDA. Very difficult to assume this even. NDA restricts propriety information and trade secret. Name is not covered by NDA. Court ruling is there, customer list is not a trade secret. By the way in past US high court slammed the company for same reason i.e. not providing information. People should be intelligent enough to understand this.
  2. BIFR did not have authority to exempt anyone from MAT or Income tax payable. It is income tax department only can exempt even for sick companies. I have posted earlier how high court struck down the BIFR arbitrary power.
  3. Company says 48 Crore loss, a company can carry forward loss for 4 years. I don’t see any major loss in any annual reports available on BSE website. You are saying your income tax returns are way off than profit and loss account. That itself is a mega red flag.
  4. 15 lacs shares have been distributed by promoters, you hold common office and directorship. Yet we are told to believe they are different. Strange!
  5. Kunstsoffe and Fiberweb are different entity because it was/is managed by the lady. The lady is 31/32 year old, company was incorporated in 1985. Are you saying 8 year old girl was independently managing? Again same share holder, same director. Wonderful analogy, what is there to triangulate here?

Rest all not worth answering as my observations are pointed out again and again above. There is no specific reply to most of questions, neither I am expecting.

I am sure mature people can take mature calls. Valuepickr standing today with high standards, they do not have to be told same stories again and again. Let’s move on guys and spend better time somewhere.


(aditya modi) #101

Company says 48 Crore loss, a company can carry forward loss for 4 years.
Kunstsoffe and Fiberweb are different entity because it was/is managed by the lady. The lady is 31/32 year old, company was incorporated in 1985.

Such attention to details is warranted for entering less researched stocks…
For the other lot-perhaps such errors may come to surface as a rarity…


(StockDoc) #102

While I agree with most of the points you’ve mentioned right through the thread, I don’t think what you’re saying on name restrictions because of NDAs signed is entirely true.

I have a close friend who is a promoter of a publicly listed company and they have contracts with several large clients who’ve signed contracts with them restricting them from disclosing their names publicly. It’s definitely a practice that’s fairly common within the industry because clients might not want to disclose where they source their products from. Though, this could also mean that the company is using this ploy to avoid disclosing company names if they don’t have any of the big names they claim to have. Again, not making a case for either, but what I’m saying is you can’t rule out the former because it’s regular practice.

Disclosure: Had invested into the company about a month ago, but exited about 2 weeks ago because of the immaturity of the management. Currently watching how the story plays out on the sidelines.


(Left this forum) #103

NDA’s are designed for confidential information. When a dispute arise over customer list only court goes into merit of the case to identify reasons behind why it should be confidential. A number of cases it has been struck down by courts.

I concede number of cases where customer list is protected as a practice . As mostly it comes with price data, other sensitive information. But please do read in conjunction, if a judiciary slammed company previously for not disclosing information. Where is the jurisprudence then?


(Kumar Saurabh) #104

If you are listed and you can’t share your client list , I am happy to pass even if it becomes 1000 bagger. Anyway, read the holygrails of financial juggalary and I think this script won’t need further discussion. So, I won’t repeat what all has been beautifully highlighted by many here. Fact is glass half full or empty , both sides, they will always have points to counter . The point to note is how many accounting risks one is justifying . If the list is too long, the price one ends paying is too high. Have learnt it hard way in last 10 years ,losing money with similar companies . So, I would pray that no one goes through the same experience . However, nothing beats own experience .


(VK) #105

Excellent points but consider the following:

  1. There are many companies that resist sharing client information. Many IT companies do not share their top 5/10 client list or new accounts won. So, its harsh to expect this company will let their client list public.
  2. I agree that there is a requirement of approval from CBDT to benefit from BIFR. I hope the management has take it to safeguard itself against future obligations and penalties.
  3. Looking at Screener and adding reported PAT from years 2005 to 2016 gave me a loss of Rs. 48 Crs. [0.27-2.98-51.17+34.45+0.41-38.84+2.55-0.91-0.74+2.03+7.1 = 47.83]. While the contention in point 2 is valid but not the one about accumulated losses
  4. “Arms length transaction” especially in the world where “money begets money only if company is hot and in a hot sector” is the only way out through friends and family. Having said that, I hope and pray that these F&F are not colluding to swindle the investors’ hard earned money
  5. The update said the lady in question was managing prior to marriage. This means her age could have been 30/28/25 etc.

I agree that there have been too many red flags raised and hope that the management would take all into consideration and provide clarifications on the same before price spirals downwards.

Disclosure: Always interested at a price


(Left this forum) #106

Appreciate your time for replying. You may consider below:

  1. Its our money, we need to be diligent where we are putting. I think we are very candid here for a company which has given a rap in knuckles by a court.
  2. Noted, even I hope so.
  3. The clarification talks about carried forward loss from Income Tax assessment not profit & loss account as per books. Losses in IT can be carried forward for 8/4 years (business/speculation). if you add last 8 years even book P/L as per your numbers here is it is positive 6.5 Cr. There is a difference of 54 Crores with IT books. If you have assessment year wise details please provide. Being a normal guy I dont have access to differential disclosure.
  4. Yes sir, I am also praying with you.
  5. The clarification speaks about how two different entities are different. Both company formed at same office, same director, common shareholdings 32 years back. One person joined one company long after turn out to be relative under definition companies act. No change in shareholding, common directors etc. How swallow that argument is for independence.