You may want to read again as 1b might be the ebidta from 35k cr investment planned in RIL-BP JV.
Rgds
RR
A terrific watch. Well worth the 2 hrs. Mr. Maran, one of the founders of Unifi Capital, a leading PMS fund with AUM of 4000 Cr uses numbers to demolish a number of commonly held myths around the economy and Indian corporate sector.
P.S: It might be more time efficient to watch the video at 1.25x of normal speed 
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Good article, but I disagree with the author that this constitutes a fraud. This is how FIFO / LIFO works and it is upto the analyst to see through it when he analyses a company. I could not see what was fraudulent in it. Or have I missed something?
I guess the fraud is in accumulating inventories unnecessarily to inflate earnings & resulting in inflated share price, and boosting about the same, ignoring analyst questions regarding FCF.
I agree that it is a pretty basic shenanigan, which can be caught by analyzing the Financial Reports carefully. This why the author has mentioned that:
Read financial statements carefully. No, it’s not always fun. But if you are going to be a serious investor and think that you are too busy to carefully read the footnotes, watch out. You might be setting yourself up for a big loss. If it turns out that you could have caught it by studying the financials carefully, you will have nobody but yourself to blame.
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Very nice article . Informative
This Moneylife report does a great job on reporting the reality facing India’s largest, most influential and the most feared firm - Reliance Industries Limited
The report is based on an absolutely terrific analysis done by a Credit Suisse analyst on RIL, which I happened to read as well, thanks to a friend who shared it.
In a nutshell the report says that (forget the Target Price etc) RIL has a ₹ 450,000 cr net debt ($ 65 billion), also including its increasing funding of working capital by suppliers and customers that is unlikely to sustain in this industry. It has been not generating any free cash for the past 6 odd years. Interest that is tucked under capitalisation adds to the pain not seen by a straight reading of the PnL, Jio has an intangible assets, including under development of ~ ₹ 84,000 cr, which normally should taken to the PnL, depreciation is lowered because of changed lives for PPE to upto 40 years.
Besides 45% of their debt is in foreign currency and an increasing part of its revenue is ₹, making it adverse if $ strengthens vs ₹.
The report also concluded that even to have a RoCE of 9%, Jio would need 500 million users spending more than now!
Finally, even as RIL makes it appear that Aramco is a done deal, Aramco CFO says it is at a ‘very very very early stage’. Reports from the analyst meet of RIL indicate that management appeared stressed, ridiculed analysts including from CS, and asked the latter not to include non-headline debt as debt.
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It is a fashion these days to cast doubt on any company or any deal. We should understand that the sentiments are already very low in the economy and such kind of articles will do more harm then good.
In my opinion the RIL has generated jobs , created wealth & infrastructure and is an important part of Indian economy.
Discl: Neither invested in RIL nor any plans.
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Good companies like Tcs infy cipla they too have done many a good thing in the past, sans all the hype and hoopla.
I, for one, get a little suspicious when a management does loud advertising.
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I believe inventory needs to be reported at lower of cost or market value. You hence cant make up profit by increasing inventory. Usually if the auditor has done his work, he will rely on count of finished inventory and arrive at cost of making that inventory and that should be shown in the p&l account
A lot of things can go wrong here, inventory could be overcounted, auditor might not do his job properly but just having a higher inventory is not fraud
PSH-2019-Interim-Financial-Statements.pdf (251.8 KB)
Bill Ackman’s Berkshire Hathaway investment thesis (page 10)
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An imaginary conversation between entity A, which has the strongest reputation and a creditor C.
A: I need ‘X’ amount at ‘y’ rate because of my strong cash flows
C: OK, here you go
A: I need some more at lower rate because of my cash flows
C: OK, you certainly have built a strong reputation. Here you go.
A: I need some more at a lower rate because of my reputation
C: Er…debt is rising, cash flow is reducing
A: I am A…I have reputation
C: OK
A: I need some more now
C: Debt has risen even more, and you are not even generating cash
A: I have reputation
C: But now you are not generating any free cash for 6 years
A: I have always been credit worthy for 40 years. I have reputation.
C: Sorry but I am worried about cash flows
A: Why? I have reputation.
C: Yes, but I need to be repaid in cash not in reputation.
Nett, reputation is an outcome of cash flow generation not the other way round.
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If any company is making such mega investment how you can expect free cash flows… Jio is a disruption which has uprooted all the existing players which were there in the industry for last more then 2 decades.
I do not know whether what they have done is it is ethically right or not but it is commendable to capture such large market share in such a short period.
Thanks @diffsoft that’s really wonderful one can immediately connect the SIGNAL … to whom you are hinting.I totally agree with you .Jio would be good for Ecosystem or Not . How long it’s supirior network long Last .The high Depriciation of Components and ongoing maintenance cost of the network will Hammer the company along with the burden of debt will not let sustain this Model of business .Badey Bhaiya will lost the support once there is change in politics or policies. How delegent steps JIo take to verify the customer it is questionable practices if you compare with BSNL . It can cause a threat to national security . Why Americans or Israelis don’t let monopolies on the communications but the current govt’s policy of killing PSU is not viable . But I am sure NOW or Later the greatest minds of policy maker will formulate the plan . I have seen and some of you might observed the in your neighbourhood how they erected poles and instantly installed the cables . Too many variables and too big size . Will this sustainable on long terms is questionable.
Vodaphone on the other hand have worked in many countries. It will be interesting to see at least a couple of years how this unfold I will be better off to lose the initial points of rally ( of any )
Regards
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The seventeenth C.D. Deshmukh Memorial Lecture Delivered by Mr. Agustín Carstens, General Manager, Bank for International Settlements (BIS)
Mumbai, April 25, 2019
Central Banking and Innovation: Partners in the Quest for Financial Inclusion
RUCHIR SHARMA talking on global slowdown.
Another article.
With negative interests in most developed economies (EU + JAPAN) and dwindling population, where is the growth going to come from?.
The demand in CHINA also will decrease.
The commodities such as steel and metals may not have much demand except lithium.
With increased EV, oil prices may be stable or decrease.