Forensics and the art of triangulation

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Hi All. Some very useful posts.

I was recently looking at, the listed matchmaking portal and came across an interesting observation on company’s revenues.

The company primarily earns from subscription services purchased by members looking to benefit from the additional features that are available on the portal, not available to free account users, that can help them find a life partner. Below is some data highlighting the revenue, and customer details –

Particulars 2015 2016 2017 2018 2019
Paid subscribers 647,000 678,000 702,000 745,000 731,000
Portal Billings(in crores) 237 260 285 327 343
Avg. fee / subscriber(INR) 3,657 3,830 4,066 4,386 4,688
Gross Up Service Tax 4,316 4,520 4,798 5,175 5,532
increase by 5% 6% 8% 7%

While Average fee per subscriber has been as per accounts, I have grossed it up with Service Tax so that it can be compared with the rate card.

Company offers various packages to the users starting from ‘Classic ‘ to ‘Advantage’, with rates charged as follows (as of Dec 2019) –


As can be seen from above, revenue per subscriber hovers closes to the most basic package ‘Classic’ for 3 months. This is questionable since company has a range of packages that ought to have paying subscribers too and average revenue per subscriber should not be at the lowest level. This is considering that the company also has platforms like ‘Elite Matrimony’ which charge as follows –


There could be 3 possible reasons for the above –

  1. A very large number of subscribers are simply opting for the cheapest package and are not renewing.

  2. Company is engaging in giving large discounts to customers the customers on the mentioned rates. I had called an agent on the portal to bargain, but got no discounts.

  3. is overstating the number of its paid subscribers.

With all the 3 reasons negatives for a business, and even a possibility of the third point existing, I abandoned the idea. I have written to the company seeking a clarification, but have got no response yet.

Do you guys think there is something amiss here?


This is from Matrimony’s Q3 concall (earlier this month).

The MD is quite forthcoming about the discounting.

No comment on the other two possibilities though.

Disc: Invested in Matrimony; views biased.


Investor has to sue Oneself for greed. A Google search would have shown that CG power has always had red flags in past.

i was searching for PG ELECTROPLAST and found this.
i found it very much strange. in india any one can run away so easily by doing wrong. sebi just collected total penalty of 5 cr. from 100 entity involved including promoters.

disc: found chart very intersting and had purchased token quantity but sold of immidietly after reading this report.


hi Rezang

thanks for pointing out the transcript.

yes, heavy discounting could be most probable. however, its discomforting to see the numbers of subscribers and average fee move this steadily without variance despite such competitive intensity.

also, had seen something similar in numbers for this company called infibeam too.
i could be completely wrong and maybe looking too much at this data point.



The latest in the list of large corporate frauds is Luckin Coffee (thanks for sharing it @Mantri).

A detailed read (link)


Thankyou sir for starting this great thread.

I have one question
I have seen many interviews of top investors. Some of the investors claim to find fault in depreciation/amortization rates to check for faults.

Can you explain to novice investors like us that how depreciation rates are important and how can we check accounting fraud with that

Thanks in advance

  1. The first thing to check while looking into the amount of depreciation of company is to read the depreciation policy of the company(specifically to check which method is used by them, straight line or written down value method) and then check the same thing for its competitor, if both the companies use a different method of depreciation, the same can be checked with the management of the company on why they are using a different method.

  2. The second step should be to go through past annual reports of a company and check if they have a history of changing the method of depreciation frequently which might show a wrong picture of their earnings.

  3. Also after certain changes in companies act, it has become difficult to match the exact figures of depreciation, however, we can get some sense on if the company is recording it correctly.

  4. This can be done with the help of peer group analysis, for this, we need to find other companies which are in the same sector, the same line of business along with the same scale of operations.

  5. In such companies as the scale and line of business is same, in most cases, assets of peers will be similar(in terms of size and type) to the company which we might be looking into.

  6. Once we find a peer for the company which we are analysing, we should compare the depreciation expense as % of the total revenue for both the companies, and if the difference is substantial (> 3%), there might be something wrong in either of the company.

  7. Also, one other thing to look for is to compare the depreciation with the type of asset which the company has – suppose XYZ company has total fixed assets of Rs. 1000 and its breakup is building worth Rs.400, Plant and machinery worth Rs. 600. So in a way building forms 40% of total fixed assets while the rest 60% is plant and machinery.

  8. Usually, plant and machinery have higher depreciation rates as compared to a building. So suppose depreciation rate on building(Depreciation expense/gross block) is 11% and for Plant is 15% so the weighted average depreciation comes to be around 14%.

  9. Now suppose after 2-3 years, the total fixed assets of the company grow to Rs. 2000 and the breakup is like buildings worth Rs. 600 and plant and machinery worth Rs. 1400(30:70) and the depreciation rates remain unchanged or if it reduces even when the asset having a higher rate of depreciation growing, then it might be a red flag.

  10. We can also look into the year on year change in depreciation expense of the company and compare the same with its peers, any significant difference might be a red flag.

Hope this answers your doubt.



Most books on Accounting & Finance are American books. So I had a few questions about difference between the American System & Indian one.

  1. In the US, one is allowed to use different methods of depreciation in the Accounting statement as compared to the tax returns. Let’s say a company buys a capital asset, in the Accounting Statement, it may use straight line depreciation, while in it’s Tax returns, it may depreciate the same asset using Accelerated Depreciation. Is such a practice allowed in India also?

  2. In the US, Goodwill can neither be amortized in the accounting statement nor in the Tax returns. What is the case in India?

  3. Like, intangibles of both types (in house created intangibles & acquired intangibles) - can these be amortized in the Accounting statement and/or Tax returns in India?

Answer to your to point no 1is yes.

Good reply by Deep, but allow me to add a couple of more points on this topic @preetkaran:

  1. The Cash Flow Statement has Fixed Assets Purchased, which comprises of maintenance capex and expansion capex. Maintenance capex is linear, rising steadily over the years. Expansion capex is lumpy, with large outflows once in a few years, and nothing at other times. Using this, as well as information available elsewhere such as annual reports, management calls etc., estimate the level of maintenance capex for the company. Now compare maintenance capex with book depreciation. If maintenance capex is significantly higher than depreciation, profits & EPS are overstated to that extent. Factor this into your valuation (though accounting wise company has done nothing wrong).

  2. Usually due to sheer inflation and cost escalation over long periods of time, replacement cost of assets trend higher over a period of time. But book value of fixed assets (Net Fixed Assets) trend lower as depreciation is deducted from Gross Block every year. All Fixed Asset based ratios (e.g. Asset Turnover Ratio) therefore should be taken with a pinch of salt. An old rusty plant that is almost to the end of its life and due for replacement will appear more productive than a brand new factory, though it is the latter which will provide more free cash flows in future years. Or comparing ATRs of two companies give a misleading picture if the age of their plants is different.


@Chandragupta @Deep2104
Thank you for such comprehensive answer

Hi ,

Can you please start a separate thread for this?

I am going to start this new series with all your love and wishes. Series “Once a darling, now an evil” is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the company which is engaged in providing Services Incidental to Onshore Oil Extraction which has an all-time high price of ~Rs.347 in 2008, ~Rs.308 in 2011 and now last traded price at Rs.0.42.


the company having huge sales and profit growth. Might be having something like a turnaround case or some Capex has started giving result.
But as usual, I get suspected on everything so as per habit I go deeper.


Wow…. What a wonderful company!!!

Company has taken a borrowing but does not have to pay any interest on it. I like it, I also get such a loan then can achieve many things with it. :wink:

Another point is, the company also need not pay any taxes. Wow… no interest and no tax.


Huge diversion between CFO and PAT but yes, positive and when looking at the FCF then its huge negative.

Now, more feather to add into it… need to compare consolidated and standalone balance sheet.

Here, when we see that company get ~Rs.800+ cr of cash in FY10 but that cash has gone out in FY11. So, where these much of cash gone? When we check the standalone balance sheet then that cash has gone as an investment.

If we look at the few of the items of the balance sheet then we realize that the company has given a huge loan and advances to the related parties. Also, huge other receivable, what meant by others?

If we go and check a list of subsidiaries and few data then we can come to know that three subsidiaries out of five doing well but those three subsidiaries do not get a good amount of capital compared with the first subsidiary which is operated in Mauritius. This subsidiary does not have any turnover, not make any investment into the assets then why need such huge capital?

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.


please tell the name of the company also, so that i can go and take these data and learn.

This is very good analysis. Thank you for posting it

I have few querries about balance sheet of Paushak limited.

It is from Alembic group company.

1…Investment in their own group of company

Its ok that they (paushak)had invested in promoter’s group company but how their invested amount grows year on year on balance sheet

A—value of nirayu increases from 98.47 lkhs (2018) to 1615.23lkhs(2019)

B—Value of Shreno ltd increases from 460.82 lkhs(2018) to 5052.56lkhs(2019)

2……Why paushak’s cummulative cfo (10 years)is not matching with cummulative pat(10 years)

Cummulative pat=126 cr
Cummulative cfo=90cr

3……Receivable% is incresing in last few years
(In 2019 annual report
During the year, the Company has made changes in its Policy for receivables, payables and working
capital which resulted in lower Receivable days and higher current ratio.)

I am missing something or there is any red flag??

Seniors kindly give your opinion

I am starting this part with one of the agro commodity trading company which has an all-time high price of Rs.5500 and now last traded price at Rs.1.60. and high of Rs.506 and 364 in the year 2008 and 2010.
What a wonderful company!!! Look at the fixed assets turnover…

But some interesting data…
Another interesting data….
Without a payable and without keeping an inventory, company has achieved huge turnover. But only receivables are there….
(Data of FY07-08) This looks something susceptible…. ~10%+ advances of sales… and that reach to ~71% in FY10. Majority of the companies were investment and finance companies.

One other company which involve into the construction activities, which has an all-time high price of Rs.540 and now last traded price at Rs.0.30.
We can see that company is into the construction business but company does not have to keep any of the inventories.
Also, debtor days are growing and CFO is negative though company has reported net profit. Working capital is responsible for the negative CFO.
Advances recoverable is ~45% of balance sheet size in FY2010 and ~43% in FY2009. Also, company has contingent liability of ~Rs.725 cr which is ~96% of entire balance sheet size, 2.27x of sales and 319x of net profit in FY10.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.