Does anyone have an idea what is happening in this scrip. Started falling 10 days ago and continues to fall but with no apparent bad news
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Talwalkars was AA two weeks back. CFO has confidently said that they have paid all the money on time so far and most of the loan is a term loan. However, within 10/12 days, the company gone from AA to D (Default). For both the companies, they could not pay around 3 cr of interest. What has changed in 10 days?
Looks like that has got a hint of it earlier, and who ever got it early, was hammering the stock.
In such situations one will do well to remember some time tested observations -
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There is no such thing as reliable information from a management whose stock price is under severe pressure, especially when 75% of promoter holding is pledged
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Managements will BS till the data calls them out and there is no choice left but to accept the reality
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There is no smoke without a fire in the stock market, especially when a stock hits continuous lower circuits
I am not saying that all these learnings apply to the current situation, please evaluate yourself whether these apply and take a logical decision.
On the business front, it is very clear at least to me that the management hasnāt done much to make this an aspiration lifestyle business at all. Cult (a relative newcomer who did not have half the brand value that Talwalkarās had) has more buzz in any Tier 1 city catchment segment you go to and has launched more relevant offerings over the past 2 years than someone who claims to know and understand the gym business for a long time.
Some concerns over the business decisions, capital structuring activity and the accounting policies have been called out more than 2 years ago on this very thread.
Disclosure: Views strictly personal and observational. Not invested personally nor invested for the customer portfolios I manage
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Anyone studied the latest results? Now the data is out , both companies have posted huge losses all of a sudden owing to sharp fall in revenues in Q1. They havenāt published the presentations and concall data. There was no reason mentioned in the release on why the revenues have nosedived. Looks like numbers up to the end of FY19 were artificially inflated. How can any business undergo this kind of disruption in just one quarter? Cult /competition canāt wipe out your all revenues in just one quarter? right? This must be a continuous disruption but getting recognised in one quarter. The management which came on TV last month openly lied reflecting very poor management quality. Combined PAT for FY19 and book value as of end-FY19 suggests a completely positive picture. Perhaps, those figures are fake.
Any accounting /revenue booking angle which I am missing out here?
Yes, they have always followed a mix of accrual and cash accounting since the beginning - picking whatever suits their interests well. A big red flag right there
Actions inconsistent with common sense - they do a QIP and sit on cash for some time without doing anything. Then suddenly open 20 gyms in Bangalore on a single day, then follow this up with an acquisition of a gym chain in Sri Lanka when India is largely an untapped market. No better way of siphoning off funds from the balance sheet
Then the confusing corporate actions - the lifestyle club in Pune where they invested 50 Cr, then demerger of the business with a much delayed listing. All these are steps to ensure that investors do not have a consistent basis to judge results and also gives scope for some creative recasting of financials - effectively buying 3 years of time.
Not surprised at all, I have been posting on this thread since Dec 2016 calling out these actions, so have many others here who have expressed reservations about the actions and sequence of events. I even had listed this as the type of business I would not invest in for these very reasons - this was part of my intro presentation when Iād gone to the Goa VP annual meet for the first time in 2017
And we yet again have some PE funds getting caught in a sorry story like this one, that is the surprising part when you have investment professionals armed with the best B-school degrees and a CFA to boot who canāt figure out what some part time but street smart retail investors have figured out on this forum years ago.
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Correct. I am still wondering what kind of accounting mix can lead to significant fall in revenues in one quarter. If all cash was booked as revenues upfront earlier, they atleast should have cash on the b/s but they defaulted. And it canāt be competition alone which will take away all business in just one quarter. It canāt be accrual accounting now otherwise they would have used this as an excuse for poor show.
Please see my comments above on Jan 18. Today, their auditor resignedā¦ its all coming out unfortunatelyā¦
https://www.business-standard.com/article/news-cm/talwalkars-slumps-after-auditor-resigns-119082800519_1.html
Disclosure : luckily sold all my holdings at minor profit by end of 2017
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Talwalkar looks to be a classic case of fraud. What is surprising that celeberated investor like Manenkar continues to remain invested.MOFSL has also picked stake recently in a client accoumt.It will be great to know from fellow forum members as to where the red flags were in BS besides the pledging .
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Pro. Mankekar has a track record of such investments. He was also a major investor in Indage Restaurants and leasure Ltd, delisted a few years back and now defunct company.
You can not invest looking at investments of celebrated investors as they also make mistakes. In case of Talwalkars, what I have experienced is lack of āwalk the talkā. For example, in one of the AGM, their CFO said they would eliminate debt in next 1-2 years. In next 6 months, company went on acquisition spree in startups in Bengaluru/Chennai or in Srilanka , thereby adding more debt!
For me, red flags were galore. Reduction of promoter stakes, low dividend payout in-spite of good profits, choreographed Y-o-Y sales and profit growth, managements reluctance to change auditors, too many acquisitions in short period of time, annual asset deletions, dodgy related party transactions (promoter relatives as HiFi franchise owner, corporate HQ on rent from promoter entity etc etc), demergers and name change saga etc. As mentioned on various blogs, all of these may not be red flags on their own but when all of these come together for one company, then caution is warranted.
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How can I sell my existing shares in Talwalkar?