The latest Q3 Results of EKI Energy has uncovered a dark truth : non-compliance with IndAS 115, Revenue Recognition.
Auditor Walker Chandiok (Grant Thornton) today issued a qualified report.
Is this just the tip of the iceberg?
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Reported Figures for 9M-
Revenue - 1384 Cr
PBT - 347 Cr
PAT - 260 Cr
As per Auditor -
Revenue - 1194 Cr (-14%)
PBT - 237 Cr (-32%)
PAT - 177 Cr (-32%)
Generally company also have Concall post results,this time there is no mention of concall.
Dark clouds of doubt now loom over the previous auditor D.N. Jhamb, who issued unqualified report in Sep-22, and resigned on 8-Dec-22 citing reasons of pre-occupation.
Now the bigger question is whether revenue recognised in earlier years are as per IndAS requirements or not?
More interestingly - In 4-Nov-20, just before there IPO, Anmol Bohra & Co also resigned as Auditor citing the same reason of pre-occupation.
Now Walker Chandiok - which comes with qualified report
The eye brow raising question is Whether it’s previous 4 year financial were relying on which stock has been on its dream run
IPO came at 40(adjusted split)
Made a high of 3150 (7875%)
Now trading at 1097 ~ corrected by more than 65% from highs
A good read from Bloomberg on EKI Energy raising question on its business
Clarification from the company 's Investor Presentation. It mainly talks about the difference between the opinion of Auditor/Accounting Principles and Management over recognition of the revenue for the period 9M ended on 31st Dec -22
Question of accounting gimmick remain same
Adding more redlfags on EKI Subsidiary financials & their status of audit
- Unaudited
- Auditor have signed FS but no Audit Report available
- Audited by old auditor who resigned earlier due to pre-commitments
Fundamental Problem - Why it's a Ponzi Scheme for VEDL Shareholders
To service its own debt burden, VRL is systematically draining VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors.
VRL forces VEDL to declare disproportionately large dividends, which are funded not by free cash flow but by taking on more debt and draining its balance sheet
VEDL has incurred a $5.6b free cash flow shortfall against dividends paid in the last 3 years..
This arrangement has pushed the entire group to the brink of insolvency, propped up only by a continuous cycle of new debt, accounting tricks, and the deferral of massive, undisclosed liabilities.
Major allegations/red flags:
Bait and Switch Funding Model - Raise fresh capital to service debt in the name of new projects like Semiconductor
Irreconcilable Interest Expenses
Inflated asset values of non-operating subsidiaries exceed the value of debt
CAPEX Fraud - Expenses across operating subsidiaries are systematically capitalized, artificially inflating profits and asset values. This is a material misrepresentation.
Off-Balance Sheet Items – Billions of dollars of disputed expenses are kept off-balance sheet and undisclosed in financial reports.
Governance failures across management and auditors, including inappropriate auditor choices
Listed at ₹3000, now trading at a deep discount,
yet no buying interest.
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Learning: "Not every special situation is worth looking."
I request you to read all tweets to understand the full story of value destruction and how we can learn from the same.
The story began with big restructuring at Raymond Ltd. In FY23, they sold their FMCG business to Godrej Consumer for ₹2825 Crs, mainly to cut debt. Net debt significantly reduced.
This sale was supposed to leave a net surplus of ~₹1500 Crs on the balance sheet for growth capital after clearing debt.
Let's start with what SEBI found : Gensol actually submitted false documents about debt servicing to Credit Rating agencies concerning two lenders (IREDA and PFC).
Interesting charts, data points and investing perspective
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Favourite: There is always a reason to sell
Whenever such events occur, we feel it is a time to invest through mutual funds (Why not equity? Because you don't need to worry about ab konsa stock/ sector chalega)
Despite several intermittent crises, Indian Equities have gone up over the long run mirroring earnings growth