ValuePickr Forum

Investing Basics - Feel free to ask the most basic questions

One of the many reasons due to which company wont be able to pay you bonus shares is when you don’t pay your annual demat account charges and your account becomes inactive/dormant, and it stay like that for 7 years, no one claims then it is construed for obvious reasons person doesn’t exist and shares goes to IEPF.

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What can be done with shares of company which has not been traded in or are de-listed from stock exchanges for years? Those shares just show up in the demat account for no reason.

How can one get rid of such shares?

https://www.screener.in/company/VEDL/consolidated/#cash-flow

It shows dividend paid Rs. 16812 crores for Mar 2018

However, if you check the P&L https://www.screener.in/company/VEDL/consolidated/#profit-loss

Dividend = 76% = 76% of 10,342 net profit = 7859.92

How come the mismatch?

I find exactly the same numbers in their annual report - so it’s not a screener mistake.

Check the effective date of the dividend even though dividend declared on 30/03/2017 it was paid in April 2017, so cash flow of 2018 covers this outflow including dividend paid in march 2018. Sum it up and add dividend distribution tax u will get the number.

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Thank you very much.

Question on different topic.

How are a company’s reserves (accumulated retained earnings) typically kept? I mean, do company’s keep it in a bank as fixed deposit? Or invest it etc? Do the cash and cash equivalents shown in the balance sheet include the company’s reserves? If the reserves are stored in an FD, then does the interest received from reserves shown in the interest income part of other income in the P & L statement?

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Reserves are part of Shareholders Equity. Hence it is ownership. It is not an asset. The shareholders equity as well as debt which is seen on the Liability side of a balance sheet are deployed as various assets that you see on the Asset side of a balance sheet.
The share capital and reserves is the ownership (book value) of the business.

Interest and dividends received on bank balances and other liquid assets are shown in other income heads in p and l a/c

If I understand you correctly, reserves are not actually money kept somewhere. They may be already used up. Just that every year, [net profit - dividend] is calculated and added to reserves. It’s not an actual transaction happening. If company has a 1000 crore reserves, it’s not actually money which they have which they can use in the future - it’s just an on paper figure most of which is already used up. Is this correct?

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Yes… the reserves are nothing but an account of accumulated profits. Out of the profits part is distributed as dividends. The rest is deployed for capex or working capital or investment. This part which is not distributed gets accumulated and shown as reserves which are due to shareholders.

Thank you very much.

Sometimes, I see company giving dividend more than it’s net profit. In such cases, I see that the reserves have gone down. But where does that money actually come from? Do they take a loan to give out dividends?

For e.g. see Maithan Alloys 2009
https://www.screener.in/company/MAITHANALL/consolidated/#profit-loss

If you see dividend is 883% of the net profit after tax. i.e. they paid out nearly 9x their profits as dividend. Where does this money come from?

You are right. If Dividend paid is more than profits, the reserves will reduce. In such a case the company can use the cash that it already has for pay out or it may generate cash by selling some investments and pay dividends or sometimes companies can borrow and pay dividends.
Most of the times payment of dividend higher than profits would be to return cash that is on the balance sheet which the management does not see any need for use in future or it could be when the company would like to maintain the dividend payments even they have a one off bad performance.

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How to calculate float of a general insurer from it’s balance sheet ? I heard we can calculate it by taking investments on account of policy holders from the balance sheet. Is this correct ?

I suggest you to carefully read this pdf.

insurance-and-float2.pdf (1.7 MB)

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I understand what is working capital. However, I don’t understand why it’s given so much importance while analysing a stock. What kind of info can one get from Working Capital numbers? What good signs or bad signs should one look for?

I am looking at Yes Bank’s Income Statement in Morningstar

https://financials.morningstar.com/income-statement/is.html?t=0P0000AGMN&culture=en&platform=sal

There is a row “Income (loss) from cont ops before taxes”. The numbers on that row are just the same as the numbers in the row “Total net revenue” except in negative? Can someone explain this?

In the same page, there is also 2 rows for “Other Expenses”. One labelled “Other Expenses” & the other labelled “Other income (expense)”. Again, this is confusing.

Hi,

I am looking into invest in ETF’s as I don’t have much knowledge on stock picks. I am planning to invest monthly 10,000 rupees and buy these ETF’s. I am looking at NIFTYBEES and JUNIORBEES as a way to participate passively in the market. I understand that this ETF represents NIFTY50 and NIFTY NEXT 50.

Please let me know, if these ETF’s are good to go or any other better etf’s available.

Appreciate in Advance.

I think in India ETF’s are still no that liquid…Better to invest in Index funds…both serve the same purpose

To understand this old comment by Mantri, I am trying to calculate net current assets

Based on the sales figures, I figured out that the years he is talking about is 2009 to 2014.

Now from here http://financials.morningstar.com/balance-sheet/bs.html?t=VAKRANGEE&region=ind&culture=en-US&platform=sal

2009
Total current assets: 72.8 crores (divide by 10 morningstar figures - they are in millions)
Total current liabilities: 15.4 crores

Net Current Assets: 72.8 - 15.4 = 57.4 crores (this sort of matches with the 55 crores he mentions)

But

2014

Total current assets: 1167 crores
Total current liabilities: 784.4 crores

Net current assets: 1167 - 784.4 = 382.6 crores.

Now this figure of 382.6 crores doesn’t match with the 750 crores he has written. So what am I missing. Did I calculate something wrong?

I also compared my calculation for multiple years with the “Working Capital” which is there the excel sheet exported from Screener.in & it doesn’t match! So I am doing something wrong here.

Where can I find historical P/E values of a particular stock. For e.g if I need to find what was the highest P/E & the lowest P/E it has traded at in the last 5 years - where can I get this info?

http://www.ratestar.in/

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