At times, even good reporter make some error. While concern of Moneylife of high growth of promoter salary is valid, in my opinion, the promoter has another infinte way to get money from business and salary is the most honest way the promoter can take money, as any money as salary would attract 33% pay (with promoter getting into higher tax bracket). So, level of salary growth is debatable, but I personally like when promoter take salary as same is subject to higher income tax at promoter end and also give genuineness of earning of business.
Secondly, whole argument about favourable terms to promoters by the company, turns 180 degree when actually it is loan extended by the promoter to Premco. So in a way, Premco has gain by favourable terms from promoter, but no way one can consider that promoter has gain from company. It is actually Premco which has taken loan from promoter and paid interest to the promoter. The valid concern on this point shall be why shall company pay interest on loan to promoter when It has larege investment in Mutual funds, which I had presonally raised in 2016 AGM. Please refer to my note about AGM on same thread. Vinay has clarify the point in detail in discussion.
I have put forward my comments even on Moneylife thread about some error at their end. Find enclosed link for same.
Not sure whether all members would be able to view the link and comment, as I am subscriber to the magazine, I am representing my comments on this article on moneylife magazine website. Other members may give their view, particularly in case of any factual error.
“Comment 1: Please check the content. I believe, these are loan given by director to the company. The word is loan taken from the company perspective. While point on Director remuneration is valid, still same is subject to tax and shall be link to profit.
Comment 2: In August 2015, the company management was specifically asked about loan taken from promoter group and they give explanation that same was done to provide working capital to fulfill the large order reeived by the company during FY15. During FY16 also promoter extended loan to the company and interest is actually paid by the company to promoter and not received by the company as suggested in Article in my opinion. I hold this stock and has attended past two AGM. I would request you to check and confirm.
Comment 3: Refer to Note 22 (Other income schedule) in Annual report of FY16. Total interest income earned is Rs 4.35 Lakhs during FY16 and Rs 2.76 lakhs during FY15. While the interest paid figure in above article is Rs 67.44 Lakhs. So if the related party paid Rs 67.44 Lakhs as interest on loan taken from the company, how come Interest income is only 4 Lakhs? Interest cost for the company is around Rs 85.64 Lakhs during FY16 (Note 26 in FY16 AR) which is higher than Rs 67.44 Lakhs interest paid to related party.”
Disclosure: I hold share of the company and hence my view may be biased. An investor shall do its own due diligence before investing in the company.