Posts
>AQUA LOGISTICS: IPO NOTE
■ Company follows so loose working capital management policy that it is almost acting like a financial services firm which fund logistics operation of customers. In fact, more than half of PBIT (~14 cr. out of 21.86 cr) can be attribute to income which is “in effect” interest income rather than income from logistics operations.
■ Despite of such loose credit policies company claims that it didn’t had any bad or doubtful debt for last 5 years (Refer “Annexure 8”). If this is true, it’s a miracle. We haven’t come across any 3PL or for that matter any transportation company in our global coverage universe which doesn’t have allowances for doubtful debt. There is a good chance that some of the doubtful debts are not mentioned and others are artificially made good just to spike EPS & get higher valuations.
■ Employee costs have been artificially kept low by paying them via issuing equity at discounted price. Excluding promoters and related parties, employees were paid ~8 cr via issuing equity at discounted rate (in Dec. 2008) which even if spread over 2 years and taken out along with “in effect” interest income would make company loss making.
■ Seems like this discounted equity issuance was not enough and a lot of employees were not even mentioned on company books. They were just paid separately. DRHP of company filed with SEBI support this. For eg., Although the company has mentioned that their “key managers” Mr. Prasanna R. Yedkar and Mr. Narendran Kochat have joined them in March 2009 and February 2009, our checks indicate that they were working for the company even before that. DRHP of the company validates that they were made significant payments via these discounted equity routes in Dec. 2008 along with other “on book” employees. And it’s not just limited to top management. It’s quite widespread. Although, the company’s co-promoter and CEO married his ex-assistant (who is almost half his age), even her salary is nowhere mentioned in related party transactions in Annexure 18. [SEBI requires disclosing all related party transactions for last 5 years].
■ Promoters are raising cash like there is no tomorrow. Think about any possible reason and that’s there in promoters list. On the one hand they say they are asset light and on the other plan to use significant part of issue proceeds to buy transportation equipments. Then they are just thinking of buying some company (which they have not “thought” about) and are raising money just based on that thought (reminds us of dot com days!). India, China, Hong Kong, Dubai… castles in the air!
To read the full report: AQUA LOGISTICS
2 comments:
It is a clear attempt to malign an organization.
1) There can be no comparisons of Indian logistics companies vis a vis overseas companies with regard to working capital management. In India, one has to operate on 60 day credit terms which was more during the meltdown. Typical transaction cycles would be 15-20 days. Besides, which organization would take a secured loan after pledging its assets and offer an unsecured loan to customers?
2) Regarding salary costs, for last year, company has reported Rs 10.5 crores as salary costs and for 153 employees (again reported), salary would come to an average of Rs 7 lakhs per employee. How more would it be in the logistics sector?
3) Also, regarding equity given in December 2008, It would entail a lock-in of more than two years (i.e till almost Jan 2010). Which employee is willing to accept stocks in lieu of blocking salary for two years? It is totally absurd
4) Regarding the comment on Bad Debts not being shown in the company's books, 5-6 lakhs have been debited year on year and Rs 3 lakhs which was not debited has also been restated in the revised balance sheet. The reporter seems to have missed out this entire thing
One should not go by these reports with specific agenda to malign an organization without any financial basis
It is a clear attempt to malign an organization.
1) There can be no comparisons of Indian logistics companies vis a vis overseas companies with regard to working capital management. In India, one has to operate on 60 day credit terms which was more during the meltdown. Typical transaction cycles would be 15-20 days. Besides, which organization would take a secured loan after pledging its assets and offer an unsecured loan to customers?
2) Regarding salary costs, for last year, company has reported Rs 10.5 crores as salary costs and for 153 employees (again reported), salary would come to an average of Rs 7 lakhs per employee. How more would it be in the logistics sector?
3) Also, regarding equity given in December 2008, It would entail a lock-in of more than two years (i.e till almost Jan 2010). Which employee is willing to accept stocks in lieu of blocking salary for two years? It is totally absurd
4) Regarding the comment on Bad Debts not being shown in the company's books, 5-6 lakhs have been debited year on year and Rs 3 lakhs which was not debited has also been restated in the revised balance sheet. The reporter seems to have missed out this entire thing
One should not go by these reports with specific agenda to malign an organization without any financial basis
Post a Comment