Whats the rationale behind this statement? A casual glance at the balance sheet shows there are no revenue expenditure items in non-current assets.
If a company is capitalizing its revenue expenditure, it can done in 3 ways:
- By putting revenue expenditures as part of intangible assets
- By putting them under other financial assets
- By putting them under PPE & CWIP
1. Intangible assets: There’s barely any
2. Other financial assets: These are clearly explained as deposits to government or payments made to vendors.
3. PPE: All the items mentioned in this schedule corresponds to capital asset of a company.
In last 3 years, cumulative fixed asset purchases was ~427 cr. and cumulative depreciation was ~464 cr. In this time period, company achieved higher overall capacity (e.g. added LPG capacity). Thus, depreciation figure is actually in excess of maintenance capex, thereby penalizing net income. This is a common phenomena in a growing company, where depreciation figure may not actually represent true nature of maintenance capex.
If you need clarifications, let me know. I don’t see how company is capitalizing its expenses.
Disclosure: Invested (position size here, bought shares in last-30 days)