I have been only focussed on this over the last two days and I am convinced that the Rs. 200 Cr. cash raises several questions.
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In AR FY 15, there is just a row called cash and cash equivalents for Rs 199. Where is this cash ? which branch /
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According to RBI regulations, an exporter has to repatriate the money back to India before 15 months. Surely, some part of this Rs. 200 Cr. consists of money earned in FY 14 and FY 13. Why is it not in a bank in India ? This is inexplicable. So, if they have the Rs. 200 cr. outside, it’s in violation of FEMA or more simply, the RS. 200 Cr. does not exist.
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The biggest dud in the logic is that most exporters convert USD into INR and park it in FD/liquid funds as interest rates in India are at least 6-8%. Even if someone makes 2-3 % losses in forex, it still makes a big difference, If in doubt, go look at all the IT serviecs companies and look at the staggering amount of cash they have in FD. Why would someone let go of a RS. 20 cr. interest income from a Rs. 200 Cr. money is beyond me. It can pay for the entire top management salaries for three years. This is a bummer to me - behavioural economics demands that not even reliance will let go of such an easy income -
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There is no statutory auditor certification on the cash and cahs equivalents. Who has seen it and wheres the bank certificate ?
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the management’s excuse for this Rs. 200 Cr. is that they can play forex/USD interest rate and make gains. If yes, they should be running an investment bank - not a textile company. In any case a 50 bps increase in USD only gives them 0.5 % increaes in yield - why forego 9 % interest here.
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they are borrowing here like greyfool said at 10.5 %. why pay 10.5 % here and get zero interest in the US bank - surely they are pleasing US banks like crazy.
My sense is that kitex is just like another textile company with 20-25% margins and the Rs. 200 Cr. cash is a “phantom” cookie jar. Seems like satyam redux - through a merger with KCL, (so like satyam maytas merger), wipe out the cash and keep the scheme going.
Several indicators like audited numbers in 2 days, an auditorwho audits only them, unfunded gratuity, singular relationship with the auditor and no one else, no clear schedules makes me very very nervous.
Discll: Not Invested - I always thought these numbers look too good to be true. I just dont; trust them.
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