@Donald @ayushmit Thanks for the detailed response. This is especially to be commended, when you are at no obligation to respond. For those raising questions, all I can say is that everyone is entitled for an opinion and time will be the only point which can provide answers to who is right
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Love this statement. Too many people taking VP to be free stock advisory service. Good reply to them.
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What perplexes me is this note on page 60 of the AR of 2014-15:
2.2.9 Forward Contracts
The Company enters into foreign exchange forward
contracts to hedge its exposure to movements in foreign
exchange rates. The company does not use the foreign
exchange forward contracts for trading or speculation
purposes.
Premium or discount arising at the inception of a forward
exchange contract is amortised as expense or income
over the life of the contract. Exchange differences on such
contracts are recognised in the Statement of Profit and
Loss in the reporting period in which the exchange rates
change
My thinking is the company is safeguarding itself by entering into a forward contract to hedge its export receivables. Now a forward contract results in a no gain or loss situation, because it eliminates the risk of forex fluctuation. Then what is the exchange gain of Rs. 10 cr in Other Income on page 75 of the AR? Ayush Mittal has already reported that the Rs. 200 cr is lying in SBI Kochi branch in INR. So can fellow members attanding the AGM ask this question as to what is the source of forex gain, when the entire receivables are hedged.
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My 2 cents:
- TNPL is used to declare its annual results on 1st April every year. It is possible to finalise accounts within three days when a Company works systematically towards it , Lets say from 1st March. Myself has done/seen it so many times.
- Confirmation of balance ( Drs, Crs, Loans & advances,etc) need not be on 31st March and it can be even on 31st December.
- E&Y has been paid Rs 14 lacs as audit fees. This should have been basically done to pacify vendors as US guys are obsessed with the Big 4 and also to derive comfort level and credence. The existing auditor is continued as a question of loyalty and the changeover cannot be abrupt as it amounts to ditching a loyal/personal relationship. Firangis derive comfort from Big 4 and they save their skin also in US if something goes wrong.
- EEFC is treated as a current account and this money is shown as a Current Account in the AR. It is not shown as investment,etc. This might have been done to please SBI which has given term loans to KITEX. It may be a last day balance also as the banks can shore up the deposits. As of now, we dont know whether it is still there and is there any means of finding out unless you know somebody in the Company.
- The period is not 180 days but 9 months and it can be extended by RBI on reasonable grounds.
- A plus rating by ICRA is third in the Grade and is normally given to blue chips in the making.
Accounting, hedging and realisation are three different legs. The gain what yu are seeing is between accounting and realisation.
Financials :
- EBITDA Margin 36%
- EPS FY 16 24.52
- P/e FY 16 32.59 Price 799
- ROE 29%
As per my analysis, I expect the Company to grow at a minimum of 15% and the turnover to touch Rs 1 bio by 2020.
For many of us, we dont dig deep into the Company and prone to making false statements without ascertaining the facts. It is a great investment as of now compared to Just Dial.
If your assessment is proved wrong exit without blinking and for that you should have safety in price or willingness to take the loss.
Read as Rs 1000 crore by 2020 .
I have send a mail to Kitex Guy regarding the confusing 199cr bank ac, which somehow is not earning interest. If there is no issue with Kitex, I should get back a response with required details.
Hi
I am a shareholder of Kitex. My DP
no is XXXXXX (Client id : xxxxxxxx). One concern I had on your AR was that the bank account
number of the bank account in which you have the Rs. 199 Cr. cash shown
on your balance sheet is not given.
I request you to share it for our benefit and tell us the classification - EEFO, current account, forex etc. too.
Thanks
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@subash nayak
Great !
I was thinking today to write mail to kitex.
I too will also put a mail to kitex garments.
I dont know how this requirement of mentioning the account no has cropped up. Somebody has raised this out of ignorance of Schedule VI requirement of Companies Act. I have not noticed any company mentioning the account number. I have reproduced here the Guidance Note for Cash and Bank as per ICAI ( Institute of Chartered Accountants ). That too this money is kept in a current account and may be for a few days. We dont know the facts. If some guys are bent upon making a mountain out of a mole hill, then it is best way to ignore that. But what to do it will unnecessarily panic some new investors. They are missing the trees for the wood. Please note that KITEX has disclosed the Loan a/c number which I would rate as highest form of disclosure.
A.Cash and Bank Balances
Classified as
(a)Bank Balances:
(I) with scheduled banks
â˘Current account
â˘Call account
â˘Deposit account
(II) With others (with names)
â˘Current Account
â˘Call account
â˘Deposit account
(b) Cash On Hand
B.Cash and Cash Equivalents
(a)Balances with Banks
â˘Unpaid Dividend
â˘Margin Money
â˘Bank deposits with more than 12 months maturityCheques,
(b) Drafts on hand
ŠCash-on-Hand
(d)Others (Specify)
Note: The name of the bankers other than scheduled banks and maximum amount outstanding at any time during the year from each such banker.
The nature of the interest, if any, of any director or his relative in each
of the bankers (other than Scheduled Banks).
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We are investors in companies like Infosys, WIPRO from 1990. Infosys is known for decades for its highest form disclosure in its AR. I suggest you read Page No 105 of Infosys 2014-15 AR. It is keeping Rs 715 crore ( Rs 1082 crore PY) in current accounts. Does it mean Infosys is losing 20% interest and pleasing all the banks in the list. Where is the account no mentioned there? Infosys AR is the bible for every accounting/finance person. Guys just make an issue without any understanding how the accounting is done and how accounts are finalised.
As per my analysis, KITEX is a great investment as of now and I dont change my view unless they do something stupid in the coming days. It is very difficult to penetrate US markets and once you are successful, you stay there unless you do something like Satyam. There are immense examples of this stability in Pharma and IT. Satyam issue is known years before the collapse when they diversified into infrastructure and hobnobbed with politicians to get contracts for Maytra. Both are non-existent now. Ranbaxy also is known in advance when their executives carried tablets bought from US to India in suit cases and then re exported. It is non existent now.
Anyway, we need to be alert whether KITEX or some other company can do this and if so get out even without blinking. As of now, there are no indications and management appears to be honest.
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Satyam, you could have figured out something cooking as they had 130 subsidiaries, it was very difficult to know if the revenue generated was for real. In case of kitex, business is very clear, you know what are products and their revenue genuineness.
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@sethufan : Request you not to get un-necesarily aggressive. Lets respect difference of opinion. Your posts appear very loud and offensive even for someone like me who likes and believes in Kitex Management.
@varadharajanr Lets not make un-substantiated claims of smelling something fishy. In my experience, we should give benefit of doubt to management unless proven guilty. Except the 200 crores in Current Account, we dont have anything else to doubnt management.
Also when dealing with frauds or doing forensic, always think like a crook. Would a crook do something so blatant which can be caught by anyone and everyone. If Kitex management really wanted to massage profits and margins, they would have kept 200 crores under Receivables/CWIP (which are areas hard to audit/question) and not under Cash in Bank where everyone can see and question.
I am not defending the management, but just trying to say that every crook has two traits
a. He wont do fraud of small sum (small for his size)
b. He will try to cover up the fraud so that naked eye cannot catch it
âInvertâŚAlways Invertâ
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Does anyone have access to KCL (the unlisted entity) balance sheet? Does it have loans from the same State Bank as KGL? What is the collateral and interest rate of KCL? Is the KGL cash being used to benefit KCL?
Discl : Not invested (past & current)
@Bomi,
FY13 Balancesheet was already discussed in Past on the thread. To an extent it would give some idea. Can check thread somewhere around August 2014 to get more information same.
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Not sure whether this is discussed before. When Kitex is well discovered and people are projecting it as next Page, can somebody please provide details on why Indian mutual fund houses have not taken any position in Kitex. Together they hold only 426 shares (worth only ~ 3 lakhs). Is this because of the accounting issues that @varadharajanr has highlighted? or any other limitations?
http://www.moneycontrol.com/mf/user_scheme/mfholddetail_sec.php?sc_did=KG01
Disc: Exited completely.
Whipsaw,
Hereâs some old-fashioned wisdom from Peter Lynch:
Excerpts from âOne Up on The Wall Streetâ:
âUnder a current system, a stock isnât truly attractive until a large number of institutions have recognised its suitability and an equal number of respected Wall Street analysts (the researchers who track the various industries and companies) have put it on the recommended list. With so many people waiting for others to make a first move, itâs amazing that anything gets boughtâ.
My experience is multi bagger return comes from discovering the stock very early and then rerating few years down the line. Once stock is well discovered, it goes from multi bagger to compounder.
So it might not be such a bad thing that FIIs. DIIs havenât found a stock.
Food for thought!
Thanks,
Rupesh
P. S. I donât follow Kitex Garments, neither am I invested.
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Good observation. although i dont give much importance to mf sell/buy, this one took me surprise. because usually you dont see this (0 or negligible dii holding) for companies with market cap of around 4k crore.
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This article has some good food for thought. Though not directly related to Kitex or Avanti story. It can make us think of some advantages Kitex might have due to itâs well provided manufacturing facilities.
@whipsaw Try to check the MF holding of the bluest of blue stock in market like Gruh. Might get a clue, how much of this really matters.
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If it is a EEFC account - then it is not too difficult to figure out.
The only Overseas Banking branch of SBI in kerala is SBI, Indira Gandhi Rd, Willingdon Island, Kochi, Kerala 682003
EEFC accounts are only at Overseas Banking branches (at least that is my understanding!). So, any contacts at this branch can help out. (I could do this - but then I am not invested in Kitex, so prefer not to get my hands dirty on this).
Nothing to do with the discussion of kitex - if someone can really find out the details of a bank account through contacts or otherwise, i will be very very concerned about the holding my account with any such bank or branch. what kind of bank goes around sharing the details of their customers this way assuming its even legal to to do it.
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