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Sunday, January 26, 2014

Interesting nuggets from company quarterly results from Jan 1 to Jan 25,2014

As per the quarterly reporting calendar mandated by the Indian securities regulator SEBI, listed companies are supposed to release their quarterly income statement within 45 days from end of the quarter(and balance sheet every half year). Notes to accounts are also mandatory, and while often overlooked, give very interesting information which could otherwise be overlooked, or only mentioned by discerning news sources like Mint newspaper. Why should investors bother? All these are issues which go directly to the quality of earnings considerations, and warrant a relook at the investment thesis, as also early warning flags even if not highlighted in company press releases

Following goes
1) In Note 3 of its results, CAIRN INDIA disclosed an one time P&L charge of Rs 1555 Mn(around Rs 1395 Mn post tax) on account of measuring its outstanding employee stock options via Black Scholes method instead of intrinsic value method(only accountants would really go into these details). While this impact was hardly 1.5% of the year to date PAT, it was still quite interesting to see such large impacts and the timing of this non mandatory charge-maybe cleaning up the books to reduce CSR charge? http://www.bseindia.com/xml-data/corpfiling/AttachLive/Cairn_India_Ltd_230114.pdf

2)In their report annexed to DISH TV financials, the auditors i.e KPMG flagged attention to the erosion in net worth, non renewal of license(till date, though mere formality), and the company's mismatch in depreciating CPEs over 5 yrs, but booking the advance revenue in 3yrs. This was probably another long drawn audit unadjusted difference, which the company expensed this time  http://www.bseindia.com/xml-data/corpfiling/AttachLive/Dish_TV_India_Ltd_230114.pdf

3)THERMAX Group expensed nearly 10% of their previous years profit(i.e 10% of 350 crores cf Rs 35 crores)  being provision made for estimated liability likely to arise upon its claim for deduction of certain business expenses being held inadmissible consequent to a survey u/s 133A of the Income Tax Act This was despite not having received an order after the survey!! Usually companies vehemently contest the charges as being without merit etc, but Thermax seems to have rolled over! Also, the closure of the Mundra SEZ unit for not having received environmental clearances, affected this quarter http://www.bseindia.com/xml-data/corpfiling/AttachHis/Thermax_Ltd_210114.pdf

4) ASHOK LEYLAND credited the net profit around Rs 14 crores, from sale of immovable property to its profit and loss instead of directly to equity via general reserve. This change was done this quarter i.e Dec13 onwards, just when the company shifted into losses! http://www.bseindia.com/xml-data/corpfiling/AttachHis/Ashok_Leyland_Ltd1_210114.pdf

5)In KEMROCK financials, the auditor drew attention to the debt restructuring of the company referred to in Note 5 of the financials, which are missing!! 4!!! http://www.bseindia.com/xml-data/corpfiling/AttachHis/Kemrock_Industries_and_Exports_Ltd_160114_Rst.pdf