Saw these highlights of a stock:

  • Stock is trading at 4.92 times its book value
  •  Though the company is reporting repeated profits, it is not paying out dividend
  • Company has low interest coverage ratio.
  • Promoter’s stake has decreased
  • Promoter holding is low: 9.24%
  • Though the company is reporting regular profits, it is not paying out tax
  • Company has a low return on equity of 2.85% for last 3 years.

The company has a shady past and I am not sure that the future is going to be any different. The promoter holding is a myth because the promoter has taken a long walk after pushing the shareholders off the pier.

The numbers do not seem to match. Interest cost if worked out, seems very low, showing that interest outgoings have been pushed in to some unaccountable corner.

Shareholders are marquee names. So, my analyses is meaningless. Surely they know the company better than the numbers tell. But I like to keep away from such dynamite.

10 thoughts on “The mystery of Investing- Numbers tell a story or is it wrong?”

  1. The query tool in screener.in is very good. I entered the numbers you gave and it gave a single company. The name starts with S, right? I found the company in recommendation of brokerage too.

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  2. thanks for the hint; this finance company is sitting on surplus cash and its ROCE for last year is >16% as you said share holders know more if this is a work around story but yet its not reflected on numbers, I agree sir to stay away from it.

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  3. Well its the over hyped Media fav. and so called Small Bank license fail case.
    Cant help but laugh at its terrible past and poor promoters and poor geographical presence. The big guys you talk abt. I guess see the B/S and sector but donrt understand that Quality is 5 Dimensional and ends up eating up the cash if this goes on. All the big investor names are not from Telangana or AP and infact S. India that they understand the feeling people hold for this company

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  4. Lower Taxation – May cos of earlier losses carried forward
    Low Promoter holding – Surely a point of concern
    Low ROE(3yr avg) – may be because of past losses, will catch up
    CRISIL 4/5 fundamental rating on 8th Oct 2015
    Disc : A confused shareholder

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  6. since you are doing such good work let me also point you to another small fin con / bank that also starts with S! It has a small and deteriorating balance sheet with high provisioning over the last four quarters, reducing capital adequacy that is now down to just about 11% and increasing NPA’s. Despite being a bank almost 30% of its loans are gold loans and 2 wheeler loans. It has no promoters but has marquee investors including an internationally famed follower of Buffet. He is down about 30% on this investment and probably 40% on dollar basis. A large securities company that starts with E had done the last private placement for this bank and is the only one publishing buy reports on this bank. If you dig deep into the numbers and look at the business you would wonder why should this bank exist at all? only old reason would have been to accept deposits from the sons of the country toiling away in the gulf.

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  7. Infosys NRN’s Cataraman Ventures also invested in that company. For the benefit of readers, the company is SKS Microfinance. Also, the user AA must be mentioning about “South India Bank”.
    Disclaimer: I can’t confirm the names.It is just my assumption to the best of my knowledge.

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