India Gate manufacturer KRBL annual report-some comments

Recently, I read the annual report of KRBL. Following observations

• Typical 'lala' company with sole propritary auditor albeit quite well paid at 18lakhs, underpaid professional KMP(CFO at 35lakhs and CS at 7 lakhs; cost auditor at 0.5lakh).
• Spent just 10% of CSR budget(!)-prudent financial management :D
• Brand focus with commensurate R&D investments
• Exports are largely to middle east
• However, the company substantiates its leadership posiiton claim with data from AC Nielen on overall, traditional and modern trade market shares. 

Some accounting red flags via unexplained expenses growth in key items not commensurate with sales/explained factors

Amounts in Lakhs

Note	Pg	Item	FY 2016	FY 2015	Variance	Comment
29	149	Internal Auditor's Fees	32.5	20.22	61%	E&Y appointed from 1 Oct 2015, at probably double the remuneration of earlier auditor(Pg41)
29	149	Land, Warehouse & Godown Rent	948.75	278.72	240%	Topline growth only 7%, so this is unusual
29	149	Insurance Charges	144.92	77.95	86%	Topline growth only 7%, so this is unusual
29	149	Testing & Inspection Charges	107.4	28.02	283%	Export Sales growth only 40%(overall 7%) so this is unusual
30.02	150	Auditor Remuneration(Taxation matters)	10.77	1.69	537%	Unexplained auditors payments-red flag

In totality, since the CAGR in revenues, EBIT, PBT are in line, and there has been debt reduction, the company does not seem a risk. However, above is an example of analysis which one could do to identify accounting risk.

Those interested in the annual report can download from below:

http://krblrice.com/fy-2016/annual-report/2015-16%20Annual%20Report_KRBL%20Limited.pdf