- During FY20, the company merged its sister entities. This led to goodwill of around 2000 crores. Depreciation on same around 200 crores. (Approximate figures)
- Is Valuation Justified? PAT of 130 crores, Valuation of 2200 crores. Looks justified given the chemical cycle of 2020, 40% margin business, 15x is good given the growth potential as capacity utilisation during that time was only 40%.
-In FY21, there was change in law regarding goodwill. Depreciation on goodwill on merger disallowed.
-This led to dispute and case is still pending
-The tax treatment for FY20 is done as per the original law which allowed depreciation/amortization on goodwill on merger.
-Since the search has been ongoing since FY24. The company has created provision for tax on same in books, except for interest and penalty. Provision as per September balance sheet is Rs. 114 crores.
Letās see where this settles.
Disclosure: Invested.
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Guys, request you all to please not litter the thread with posts that add very little value. Please put in some effort before making a post - consider it as a small gesture towards others in the forum. Littering online is as bad as littering in a physical public space. Places that are littered tend to attract more, just as in the physical world.
What affects the long term value of a company is the cash flows you expect the company to make, discounted back to the present day and the large component of terminal value (If interested, please check my notes from Damodaranās little book on valuation). So the growth, discount rate, longevity etc. are what decide long-term value - its not one-offs and its never one-offs, unless the one-off cripples the firm debilitatingly to the point of no recovery.
In this case, BJ has already provided for 120 Cr (it has already hit the PnL in past years and the provision is part of the BS) and only ~70 Cr has to be accounted for which will likely occur over time based on when the case is heard. BJ is debt-free with healthy cash flows and great growth and if triple combo works out, even longevity till 2036 (for the BA business that is). None of these have changed that its worth making numerous posts.
If its still not clear, invert it - if a company with 14k Cr mcap has a one time āOther incomeā of 190 Cr, how does it affect its long-term value? It should barely move the needle upward (practically though, there are always uninformed price-setters who project a one-off and push the price up but it reverts back eventually). Why should a one-off the other way around be treated any different?
Disc: Invested
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Could you clarify this if you can?
The tax liability in the profit and loss account is broken down as
Current tax liability 177
Deferred 8
Wouldnāt the classification in the profit and loss account for 114crore be for deferred tax liability
I think it depends on when the September quarter tax liability is payable as the tax for September is roughly 117
If September tax liability was paid before the date of September balance sheet than the entire liability in the balance is accrued for goodwill tax
However if the September taxes are not paid, then there probably is still a shortage of provisions
I do understand management guidelines that the demand from taxes are provisioned but I canāt get the figures to tie up
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