@VIFL
There is a thread, I will keep you guys updated there.
@trinadh
Screener Specter opens when you click on the drawer that appears near the top right of the page while you’re on a company page on Screener. It offers a quick glance at forensic insights, helping you to dig deeper into relevant areas. The extension complements Screener’s data by highlighting potential red flags or areas that may need closer attention.
If you have more questions or need further assistance, feel free to ask!
Below is an interesting case of red flags. You’re welcome to check it out and correct me if I’m wrong somewhere or add to the list of red flags
(Note- This was done through just a cursory glance on the financials and fy24 annual report. So it’s not thorough)
Company name - BLUE CLOUD SOFTECH SOLUTIONS
PE - 137
Market cap- 3526cr
Here we go:
Its a Simple chain of thought
Sudden increase in revenues → negative Operating cash flows last 2 years (so sales are probably fictious) → promoter stake has come down from 55% to 2% in space of 3 years (if sales growth is so fast why is promoter rapidly selling stake → the stake sale has been accompanied with huge rise in share price , from 13 rs to 250rs high… so probably operator driven stock… promoter - operator nexus very likely-> warrants were alloted at very cheap prices and then sold by promoter at inflated prices to retail investors-> so operator drives stock up, promoter dumps stock on dumb retail investors
Also name of company is very fancy…to lure in the unsuspecting public
Company has 1 cr of fixed assets like property and computers (48cr of intangible assets in fixed assets) … doing 500cr sales…highly unlikely
50cr investment as loan given to related party (IT corpz ltd) … quite possibly siphoning of off funds from listed company to unlisted promoter company
Out of 504cr revenue, 186cr is from foreign branch (many times it has happened… where a listed company reports revenue from foreign branch/subsidiary only for that subsidiary to turn out fictious… Brightcom group is an example)
Statutory auditor resigned
No details given in annual report about the number of employees on company books…no details about promoter remuneration. No details of management discussion on industry and company operations.
Subsidiary was bought for 50cr from some parties through share swap arrangements (Did’nt look into it in depth, could be a plethora of red flags in here as well)
Disclaimer: This was just an interesting exercise to perform. waiting to hear you guys’ opinion
Blue Cloud Softech Solutions Ltd has been acquired by ITTB Software Private Limited and Janaki Yarlagadda. Their shareholding pattern has not been be changed from public to promoter category at present.
Sudden increase in revenue will be due to business integration from new promoters.
New promoters infuse capital via warrants or preferential allotment. Sometimes they do rights issue as well.
Previous management and auditors will be replaced by the new promoters which will show that a lot of resignation is happening.
Complete balance sheet can be interpreted only when the new promoters integrate their business with this company completely. Till then it will show that everything is in the subsidiary or group company.
These are normal things to expect in a takeover case.
There is a company called urban enviro waste management which is growing at 50%+cagr, available at 19pe and has positive operating cash flows. I was unable to find any red flags in the company, but there must be something I am missing because I am unable to find the reason why is it trading so cheap compared to its growth. Can some forensic/red flags expert find any red flags or discrepancies which the company may have?
Thank you.
Most of the trade receivables are for a period of less than 6 months.
Its peer Antony waste has 30% of receivables as a percentage of sales. Urban enviro waste has 128cr sales and 34cr receivables which means it has ~26% of receivables as a percentage of sales.
The company is in B2G sector which is known for having high receivables but comparing with other companies its receivables still look healthy and even when most B2G companies have given negative CFO, in H1FY25 its CFO was positive.
Some more points to add
The company doesn’t have significant related party transactions and it is in B2G sector which makes it a bit difficult compared to B2B to show fictitious sales and profits.
I would really appreciate if someone could highlight any red flag or discrepancies which this company or its management might have.
Thank you.
