I was trying to understand how cash from business get dis-appear with nexus of Auditor and promoter. Came across an Indore based Pharmaceutical company, which did IPO in August 2007 at premium of Rs 65 per share. While I have no information, I believe the company utilised fund to set up a new pharmaceutical plant.
I have tried to read annual reports over years to understand how cash has been utilised by the company.
AR FY2015
As on 31 March 2015, the company sold its unit II for Rs 62.46 Cr consideration as appear in Consolidated cashflow for FY2015
Of Rs 62 Cr received, Rs 10 were utilised for purchase of long term investment balance amount resulted in increase in Bank balance as can be seen from cashflow statement.
The investment was in a subsidiary company in form of NCD
AR FY2016
Now FY2016 balance sheet consolidated cashflow shown some interesting development.
We find that nearly Rs 2 Cr has been utlised for Long term investment purchase and Rs 10 Cr has been utilised for purchase of tangible assets. Further Rs 22 Cr has been utilised due to increase in Current loans.
Short term loan details provided in Balance sheet are as under:
So Rs 10 Cr for Advance for purchase of goods and service and Rs 9 Cr for Capital goods.
Further Rs 6.74 Cr utilised by company to give Inter-corporate deposits to group companies.
Investment of Rs 4 Cr was made in Related parties as per annual report
Fixed assets schedule provide information about addition in assets which completely contradict Cashlfow statement. While cashflow statement state that there has been purchase of Tangible assets, Fixed assets schedule indicate there was Good (intagible) addition in the gross block during FY16.
So subsidiary of company acquired another company at value which provided for Rs 10 Cr good will in Consolidated financials.
AR FY2017
Apparently in cashflow, I did not find any major capex or loan during FY17. However Rs 4.9 Cr has been invested by the company.
Details of investment provide that these are same companies in which company already invested in FY16
What is interesting is that company continue to extend ICDs to related parties.
Also, while Advance for capital good decline for Rs 9 Cr to Rs 5 Cr, We find gross fixed assets addition being only Rs 0.60 Cr. Also, while FY16 Advance for good was Rs 10.15 Cr, same figure in FY17 gets revised to Rs 1.14 Cr. !!!
This is just amazing,
To sum up in my understanding (which may be wrong as I am not accounting experts)
~Rs 60 Cr received by the company has been utilised as under:
- Investment subsidiary Rs 10 NCD in FY15
- Investment by same subsidiary in another company by way of goodwill Rs 10 Cr in FY16
- Investment in related companies by way of ICD (of course these amount can be received back by company but in my simplification, this is cash outflow by the company which would be writted off after some time) Rs 7 Cr over FY16/FY17
- Advance for Capital goods Rs 4 Cr (Difference between Rs 9 Cr in FY16 which got reduced to Rs 5 Cr in FY17. It might has been refunded but in my understanding this amount is wirte off.
- Advance for goods and Services Rs 9 Cr (Difference between FY16 AR figure and restated in FY17 annual report)
Above total add up Rs 40 Cr and balance approximately Rs 20 Cr remain as Bank balance as on 31 March 2017 as per Cashflow statement.
This is my understanding and there could be justification for reclassification and actual repayment. However, by oversimplification, I attempt to understand how cash gets systematically depleted from balance sheet of company without giving providing any benefit to minority shareholder (assuming my oversimplication and understanding is correct).
Please let me know my blind spot and biases which I believe there are many.
I am not mentioning name of company as same being listed, however, curious minds can work with name of related parties which are shared in above message. 
Thanks for patience reading.
