Appreciation of capital is good but protection of capital is equally important.
Young gullible investors who just learn about terms like p/e or other ratios will find lot of companies that seem to trade at cheap valuations and misunderstand them as value buys.
In my limited experience, Indian stock market is as much treasure hunt as surviving a minesweeper.
I am trying to make a list of fraud companies and the symptoms through which the fraud is identified. A new investor after one-two instances of fraud grows skepticism on the market and maintains the opinion through his life avoiding stock market which is not healthy. They stick to known forms of investment like bank fd, real estate land etc., This compilation is for them.
8K Miles
- For beginners, this stock looks very attractive at a 1.73 PE.
- You google for them and they look credible and time to time AWS keeps awarding them the “best partner” award
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Red Flags
– Company shows aggressive acquisition led growth
– Forging a Auditor partner’s signature to transfer money to overseas
Manpasand Beverages
- Very attractive YoY growth & capture of market share
- curious case of manpasand beverages by 2point2capital
- MD, CEO arrested in fraud
Vakrangee
- A company that manages aadhar centers is valued at 50,000+ cr
- Once disclosure norms became strict and the promoters are asked to notify the exchanges about the acquisition / disposal of shares from promoter group, a new strategy emerged. Wolf in the skin of sheep - 1) They float countless companies which hold the stock and are not listed as promoter group entities. 2) Company keep reporting stellar numbers QoQ & these wolf entites keep selling as price goes higher and higher. A bit similar to [monkey seller joke] 3) Once the game is over, they stop reporting the stellar profits. (http://www.clickhere.gr/content/jokesdtlen.asp?jokesen_id=363)
- Phenomenal revenue and profit growth rates and they keep posting addresses of newly added kendras too
- Sebi gives clean chit to Vakrangee
- https://economictimes.indiatimes.com/markets/stocks/news/vakrangee-m-cap-at-rs-50000-crore-from-rs-50-crore-in-2009/articleshow/62613052.cms
Byke Hospitality
- Business model is asset light hotels by leasing hotels and renting it out.
- Sebi investingation of self trades
Satyam
- Once touted as the poster boy of Indian IT after biggies like TCS, Infosys
- Promoters had real estate investments which went into loss. To bridge the gap, promoter proposed merging the real estate company with
- Promoter steadily started reducing the stake from 25.6% -> 8.79%
- One day, promoter comes out and announced the whole fraud affair of over-stating the financials over several years
- As they had a tangible business, eventually the company got merged with Mahindra and it is still a formidable player in Indian IT.
Pincon spirits
- Business: Makes Alchohol beverages and the story was that they are looking to expand into karnataka.
- https://www.sebi.gov.in/enforcement/orders/may-2018/confirmatory-order-in-the-matter-of-pincon-spirit-limited_38952.html
@fellow boarders: Please share feedback and add other instances for the benefit of young investors.