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Kitex Garments:Super Efficient or Fraud?

Over the last four years, Kitex has been the first listed company in India to report its audited financial results (Reporting dates: FY16 – 4th April, FY15 – 6th April, FY14 – 3rd April, FY13 – 4th April). Normally, this would be viewed positively as it is reflective of strong financial controls inside the company.

In order to ratify the accounts, the auditor needs to gather substantive audit evidence which includes – physical inspection of assets (machinery, inventory), obtaining confirmations from third parties (banks, suppliers, customers), examining transaction records, checking assumptions and calculations. Completing all these activities within 3-4 days of the end of the financial year while theoretically possible has several practical challenges (for eg. In FY16, April 1st was a bank holiday followed by a weekend which limits ability to get third party confirmations). Even large audit firms with extensive resources are unable to complete the annual audit in such a short period of time.

Kitex’s auditor is the Cochin-based Kolath & Co which does not audit any listed entity other than Kitex. Given Kolath’s limited experience in auditing large businesses, its ultra-quick completion of Kitex’s audit raises concerns about the comprehensiveness of the audit. While Kitex’s audited results demonstrate a high level of efficiency, its secretarial compliance reports show delays in its filings (P&L, Balance Sheet, Modification of Charge, Changes in Directors) with the Registrar of Companies. Kitex’s selective efficiency in financial reporting is quite puzzling.-from 2Point2Capital

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The real issue

So you cannot predict what is going to happen. What you can predict is whether this company which is earning say Rs 100 crore, will earn Rs 1000 crore in next five-six years, 10 years.

Out of the 10 companies you predict, may be 5, 6, 7 will be right, 2-3 will be wide off the downside and few of them will be wide on the upside and the combination will give you a good.

If you have a right process then I am quite sure you will make money. If you end up buying a little higher, your rate will be shorter term, rate of return will be little lower but eventually in five-six years it does not matter

See if the stock has to go from Rs 100 to say Rs 1000, whether you bought it at Rs 103 or Rs 98 does not matter. The issue is whether you bought it or not.

-said Raamdeo Agrawal

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Fino to start Payment Bank Operations by year end

(Disclosure:I am market making in the shares of Fino Paytech)

Fino has been in the business of rural payments for 10 years. Fino has done it all — starting with electronic benefit transfer in Andhra Pradesh in 2007-08 to issuing smart cards to beneficiaries under the Swasthya Bima Yojana, doing remittances for Union Bank for migrants in Mumbai from Uttar Pradesh. This company has grown through a feet-on-street model right from its inception.

It has 400 points for remittances and bill payments named Fino Mart across the nation, which,Rishi Gupta,CEO says will be converted into bank branches. It also has 8,000 agents under Jan Dhan doing enrolments and already handles Rs 7,000-8,000 crore in cash annually.

Gupta, a former executive of IFC, an international project financing company, moved to Mumbai in 2006 to work as a chief financial officer when Fino was still finding its feet.

“At that time, we had got reputed investors on board. This time also, we are confident of raising around Rs 500 crore and start the payments bank operations by the end of this year,” he says.

Profitable since 2010, Fino PayTech crossed revenue of Rs 300 crore in FY16. It does around 80 to 85 million transactions and handles around Rs 8,000 crore in cash through its platform every year. It has enrolled over 50 million people with banks of which 28 million are active.-from ET

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On Selling Strategies

Source:MicroCap Club

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Fairfax to pick up stake in Catholic Syrian Bank

(Disclosure:I am market making in the shares of CSB)

Canadian billionaire Prem Watsa’s Fairfax Financial Holdings is looking to acquire more than 10% stake in Kerala-based Catholic Syrian Bank, people familiar with the development told ET. Watsa’s latest Indian bet is seen as part of the Canadian billionaire’s plan to establish a conglomerate in India with interests in fields ranging from banking, insurance, broking, infrastructure and chemicals.

A proposal to this regard has also been submitted to the Reserve Bank of India, sources said. “The bank needs constant capital …we are talking to many investors including Fairfax,” said S Santhanakrishnan chairman, Catholic Syrian Bank. A mail sent to Fairfax Financial did not elicit any response until press time Sunday.

–from ET