As a young value investor, I have been examining the company from this thread and its annual reports of past 10 years. Here are my thoughts, along with some corrections:
Red Flags
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- Mr. Vishal Khandelwal once said, “Annual reports are supposed to be black and white and boring, with no pictures in them. The more colors there are, the more the company wants to fake their report and do more marketing.” Interestingly, the company’s annual reports were very simple until 2016 and had that old black-and-white look. However, starting in 2017, they transformed into marketing ads, featuring almost a picture on every second page. Feel free to correct me.
Just have a look-
this is not what we call an annual report its more like a Television Ad. No relavant info written in the reports
- Mr. Vishal Khandelwal once said, “Annual reports are supposed to be black and white and boring, with no pictures in them. The more colors there are, the more the company wants to fake their report and do more marketing.” Interestingly, the company’s annual reports were very simple until 2016 and had that old black-and-white look. However, starting in 2017, they transformed into marketing ads, featuring almost a picture on every second page. Feel free to correct me.
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- Second red flag i think is the remunerations of the Directors
The company has been mostly making negative free cash flows in the past, but still it is increasing there salaries by 116%
here is the proof from 2018 annual report
this is from 2020 annual report
see the sudden increase here
- Second red flag i think is the remunerations of the Directors
They kept increasing it in 2019 too…!
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- Now comes the most important party “THE RELATRED PARTY TRANSACTIONS”
I usually try to stay away from companies with high number of related party transactions.
Just look at this, imagine whats going inside the company. Mostly all the money is going in and out in the promoters company only
most of there investments ( which came from huge borrowings) are into there own subsidiaries.
- Now comes the most important party “THE RELATRED PARTY TRANSACTIONS”
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also they are paying this huge amount of consultancy fees to there own subsidiary (called as K Soft systems ltd)
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- Why the hell would someone start a Healthcare business if they are totally into the IT sector? To be honest, the IT sector is beyond my circle of competence, but this company combining healthcare and IT software throws me off.
- So just think…what do you really expect from any annual report of a company, clean direct communication, honest reporting, simplicity, focus on the future opportunities… all this seems missing from there reports.
- Also they did an ESOP in 2019 at just face value of rs.10 (not good for minority share holders)
at the end i would advice you to stay away from such companies, there are thousands of other opportunities waiting for you in this world of investing