Hi all,
The quarterly call or the conf call we requested is nearing, sharing my remaining questions/concerns here. I have sent it across to the IR, will update here if I get any response. Otherwise, will want to get these clarifiied on the call.
If any of you have any inputs, please feel free to add.
1. The above table shows the fixed assets (property, plant, machinery) and capex data as per statements.
a. During 2018 to 2022, there was a capex of 27.5 Cr but gross block addition was only 19.4 Cr. There were no intangible assets added too. What was the extra 8Cr capex spent for?
b. Also, heavy capex of 27.5Cr has been spent for plants - I suppose it was for the Bhiwadi and Ahmedabad manufacturing plants/lab - which is sufficient for future growth, as per your recent interview. Then what was the need for the preferential issue of 31.4Cr in 2022? What will this capital be used for? As per the IR company Kirin, this amount is used to expand R&D team and so on, however why such a big amount for R&D team? If it is for any other purposes, please elaborate.
2. Shethvinod has the same directors - Amit Vinod Sheth and Deepali Amit and Vinod Tarachand Sheth (Who i assume is Mr. Amit’s father) - then why keep it as a related entity, why not merge or bring under Focus as a subsidiary?
3. With reference to Sethvinod financial statements pasted above (got from Tofler.in):
a. Looking at Shethvinod financial statements, I see there is a Net Profit of amounts like 1Cr, 2.4Cr etc. Had Shethvinod been inhouse manufacturing unit, Focus Lighting would not have spent this amount. Similarly, there is a selling/distribution expense and other misc expenses like Auditing fees, which would not be needed also. How can you then say this arrangement is in the best interest of Focus lighting company and the shareholders?
b. There is long term debt in Shethvinod balance sheet, does Focus Lighting have any relation with this debt?
c. Also, had Shethvinod an inhouse manufacturing facility, its assets and liabilities will be on Focus Lighting’s balance sheet, which will be different from the current state. Is this in the best interest of Focus Lighting share holders? (For example, more property/plants will increase fixed assets, debt of Shethvinod will be in Focus’ balance sheet, which then cant say a company without debt and so on).
Screenshot of Other expenses from 2020 report of Shethvinod:
4. Related Party Transactions:
a. Why is there a sales transaction with Shethvinod. It is the manufacturing unit for Focus, why would Focus sell anything to Shethvinod?
b. When a sale transaction through Shethvinod is recorded, how does the auditor verify if it is a legit sale to an end customer, considering that Shethvinod is not audited as it is not a subsidiary? (In the case of direct sale or sale via a subsidiary, there will be invoices from end customers which the auditors can verify.)
c. There are substantial amounts of loan given to associate entities like Arion, Shri Jay Exim, Opti innovation. Even though going by your previous response that this was given to help with their capital needs, why is Focus Lighting obligated to do this with an associate company? In what way these companies help or add value to Focus lighting that necessitates this hand holding? Why is this in the best interest of Focus Lighting and its shareholders?
Disc: Not invested