Rudraji,
Interesting observation 
From when does we started judging a company fraud after doing a due google search on it (that too after finding a lone post in a single post thread)?
Subash,
Some things are better learned the hard way. I had paid large tuition fees in the past.
Choice is yours 
I rest my case.
Please carry on the investment discussions.
This is a big fraud company. Please do a google search. Avoid.
Better add this to our thread of Corporate frauds.
I thought biggest advantage for Zylog at this price is, there is no direct fraud as such… although overall company’s strategy falter…
Rudraji- coould you please give a clue about what fraud/malpractices u referring to?
Hi Folks,
I am not sure, what is to be done with Zylog Systems, but can you please restrict discussions to the theme they pertain to? The discussion here is neither going on a level which does justice to be called a thesis, nor it is a Special Situation in its own right.
Mr Sood, for the benefit of the community it would be appreciated if you elicit opinions on stocks in threads meant for them.
Hi StableBoy,
I find the signs ominous. Please do your own due diligence.
a) High debt /equity (highly unlikely in IT sector as business throws up lots of cash. Better pay a nominal fee and check the list of debt company/promoters have taken from the MCA site. We did so in case of DCHL and saw the humongous debt, as reported by TOI, which was unreported.)
b) Sep-30 trade receivables of 913 Cr on an annual revenue run rate of 2,200 Cr
c) Operating cash flows significantly trailing reported net profits.
d) continually decreasing interest coverage. steady increase in debt.
e) continuous increase in working capital/sales over last 5 years
f) company unable to pay dividends, salary due to employees
Another classic fraud case. Reminds me of what happened to Cranes Software.
Also read this, how HP was taken for a ride by Autonomy Link: http://allthingsd.com/20121121/the-red-flags-that-were-obvious-to-some-in-the-hp-autonomy-deal/?refcat=newshttp://
This is a big fraud company. Please do a google search. Avoid.
Better add this to our thread of Corporate frauds.
in my stockpicking strategy, I always keep a small portion for ‘junk’ stocks - stocks which have been beaten down excessively because of various reasons other than known deviousness of the promoter. If there may be light at the end of the tunnel, and the promoter has not thrown in the towel, or even if a dead elephant is pricier than if it were alive, one may bet on the elephant! You may very well lose nearly all of your money here ( I know the first rule in the market is to not lose money) but the returns can also be excessive. People made a ton of money buying satyam at 6 bucks.
There can never be a clear answer in discussing stocks such as Zylog. One will have to take a calculated risk with some gambling money and hope for the best. Maybe 6 months ahead you will know the answer.
Zylog did carry half page ads giving their results this time so they are not giving up that easy.I did go looking for the auditor’s statement in the half yearly results and thought I found some guarded statements there that I do not know how to interpret. I guess other auditors will be able to read between the lines. It’s an unknown firm so my guess is that the auditor will now speak the truth unless he wants to be banned or go to jail.
discl: I bought some shares at 69 when it started trading and sold at 79 when it started faltering. I may buy again. My personal opinion is that it will stay at current levels for a while until the picture becomes clearer one way or the other in a few months.
Thanks Rudraji, Yeah continuous increase in debt is a concern. These guys seems to be lousy people in good industry.
Just Disclosure- I have no position in this stock but I am keeping close eye on it to check how it perform in near future… there was heavy selling of pledged shares… then some pledge ones released. As inherent nature of the industry is good , trying to analyze each event and if any pattern can be learnt.
HP article is interesting one, thanks for it.
from Zylog AR
Anoda Software 2007-08
Insurance Software Solutions and Third Party Administration (TPA) Services. Enabled Zylogto have end to end core insurance solutions.
Fairfax 2008-09
Content Management Service firm with focus on the Pharmaceutical and Healthcare verticals. Opened up more opportunities in the US and Eurpoean markets as well as strengthendpresence in the pharmaceuticalspace.
Ducont 2008-09
Application provider in wireless application space. It has number of banks, telecom operators and government bodies as its clients. Expanded presence across the Middle-East market and also strengthend partnership ties with GBM, Microsoft, Oracle Reuters, Captarisand others
Brainhunter 2009-10
Staffing (90% of revenues) consulting and engineering services provider with Government of Canandabeing the key client.Enabled to get footprint in the Canadian market. Expanded presence in Telecom, BFSI and oil and pipeline verticals.
It reminds me of Ajay Piramal or Oracle.
Another thing that I noticed is at current price, market is even discounting the cash available on its books.
They are still doing sales of 600crs per quarter with 20crs in net profit in Sep’12 quarter after 16cr of Interest ourflow.
Disclaimer - I hold 3% of my portfolio in Zylog
I was also drawn to this stock after the massive fall…but as someone pointed out earlier this company belongs to an industry where leveraging or taking debt is not the norm.
People are talking about P N Vijay recommending the company…just a gentle reminder that at one time Satyam got a golden peacock award for corporate governance…
Investing in such stocks is similar to playing the lottery…another negative is that management had given no reason for the massive fall in stock price besides the pledging so it seems management is not competent as well as ethical to run the business.
It is best to avoid them unless u feel like gambling and putting a bet on this dark horse
Talent Flow’s most comparable solution is Taleo which was acquired by Oracle for $1.9B
so if they really want to get out of trouble they have IP’s which can fetch them millions of $$.
Micheal Schuler has joined Zylog Canada in Sep this year.
Hi rudra
where can you find the debt for company/ promoters on the MCA site ?
rgds
rohit
I couldn’t find those details in MCA website as well, i can only get company master details there. It’s navigation is not user friendly.
Hi T Anil Kumar/Rohit,
Sorry for the delay as I was busy with the relocation to Bangalore.
One needs to enter the following site and register (just below Login link)
Once done, one needs to use “view public documents” option. The one time fees is Rs 50.
However, you can view the documents only for a limited time after making payment.
Rudra Ji,
Thanks for providing the link. I tried to register, however, it does not really open any document for me, when I click on any filing, it just opens a comment box. Am I missing something?
Tarun
Interesting post from Rohit on Zylog
http://valueinvestorindia.blogspot.in/2013/06/self-torture.html(Value+investor+India)))
@Rohit, did you manage to unearth debt positions for the company ?
hi rudra
no i was not able to get the MCA site working. well the questions on the company are answered isnt it
rgds
rohit
The signs were ominous (please refer previous page) after a similar lesson in Cranes software( products related moat, foreign subsidiaries and blah blah) I learnt not to repeat past mistakes.
This was a clear avoid for me.
rgds
rohit
Hi rudra
problem is that the current drop is not due to fundamentals (assuming they are not cooked up too). it is a governance issue where the market does not trust the management.
look at it this way - if you apply the same criteria of high debt, foriegn subs etc , how many more companies will come up ? we may have a lot of false positives. how to identify the true positives from the false positives …that is what i am trying to figure and unable to answer.
one approach would be avoid all such cases