As mentioned by @rajput_delhi… coakroaches / can of worms, whatever, has come out with eventual losses to retail investors…
My 2 cents
- Sales has dropped from 82 Cr in Qtr Dec 2016 to 52 Cr in Sept Qtr 2017 (when they did not disclose the results), and then to 22 Cr in Qtr Dec 2017. Either the company products are getting outdated (less likely) or they are losing customers (more likely) and facing severe working capital problems (very highly likely). Had the sales been flat or growing as mentioned in Concalls and the bottm line would have been negative due to exceptional items, write-offs, I would have still given benefit of doubt
- “Changes in inventory” has large positive figures (it means they are building up inventory but to no avail?). More on that below too…
- Finance cost is still stubborn
- In Sept Qtr, they take a write-off for 52Cr for “R&D efforts which will not fructify” – a big red flag, especially given the way they did not report Sept results. And was this hidden on purpose and then disclosed only because now INDAS fair valuation methodology says so? (I am no accounting expert here, but appears so from note 7 to accounts). 52 Cr in my opinion would have not been spent in 1 Qtr alone. Still why was R&D being progressed, or is this the case of siphoning off money?
- Their Sept 2017 balance sheet shows negative networth – is this the case for BIFR / restructuring candidate now compared to going concern earlier? As buffett says “turnaround seldom turn”
- Borrowing of 190 Cr and trade payables of 150 Cr shows that company is severely crunched
- NOW THE MOST IMPORTANT PART: Auditors report gives a QUALIFIED opinion.
- Company has negative 71 Cr net worth and yet the going concern assumption is made. In my opinion it is only a matter of time that this assumption will fall apart. (and who will subscribe to the rights now, I do not know)
- Inventory of 34 Cr was damaged and sold for 3 Cr. Company has filed compensation claim on suppliers, absent which loss of 30 Cr has NOT YET BEEN PROVIDED. Come on, the company expects to get the claim? I will NOT give the benefit of doubt to the company. Hence, the stated net worth is overstated and it should be negative 100 Cr (on a conservative basis)
Not disclosing Sept results on time was a red flag which I conveniently ignored. Valorem Advisors (the IR consultant) has not been renewed and they are no longer holding their IR account – 2nd red flag I ignored. And now the auditor’s qualified opinion (which I cannot ignore)
@nkgambhir and other senior members who track closely, please give your opinion. Also, is there a way wherein we can raise a complain / red flag to SEBI regarding non-disclosure of results in stipulated time and non-disclosure of material events (write-off / negative networth) in time? If so, please let me know and I will request everyone to raise their voice to SEBI
Exited at a loss – I paid a heavy price to market to teach me some valuable lessons. I would advice to stay away from the counter BUT AGAIN, I AM NOT A CERTIFIED FINANICAL ADVISER
(invested in LASA since de-merger, exited Omkar at a loss)