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Read more14 February 2018
While analysing a company engaged in operating a network of last-mile retail touch points for banking, insurance, e-governance, e-commerce services, we came across some notable issues concerning quality of earnings & corporate governance at the company. This note explains our findings on the same.
About the Company:
Company is a technology driven company providing last-mile retail touch points to deliver real-time banking, insurance, e-governance, e-commerce and ATM services to the rural, semi-urban and urban markets. These retail touch points (sometimes referred as âKendrasâ) act as the âOne-stop shopâ for availing various services and products.
Quality of Earnings & Corporate Governance Issues:
We also observed the volume of shares contributed by these entities as a % of total traded volume on both the exchanges to be significantly high at 39.3% & 12.0% in financial year 2015 & 2016 respectively.A recent news article has also highlighted that between January 1 and June 30, 2016, a group of 22 investors related to each other as well as to the company were continuously buying and selling the scrip, accounting for 74.87% of market gross volumes on certain days. Also noteworthy is that 18 of these 22 had more than 90% trading activity in this scrip only.Another interesting observation during our exercise was the difference between shareholding reported in annual report & shareholding reported in BSE filing for the quarter ended 31st March, 2016.
Such gross misrepresentations in statutory filings raises concerns on corporate governance practices, particularly from minority shareholderâs perspective.
Conclusion
This exercise reaffirmed our strong belief that an in-depth assessment of a companyâs quality of earnings is indispensable before using the reported numbers and filings for valuation & investment decisions.
In May, 2017, we had covered the subject company for one of our client & had highlighted all the above points as Key Highlights. The said client found it interesting and concurred with the issues/red flags raised by us on the quality of earnings and corporate governance and therefore avoided any investment in the company.
Note: Names of parties/companies have been masked/changed for compliance purpose.
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Sr. No. | Received from | Pending at the end of last month | Received | Resolved* | Total Pending # | Pending complaints > 3 months | Average Resolution time^ (in days) |
---|---|---|---|---|---|---|---|
1 | Directly from Investors | 0 | 0 | 0 | 0 | 0 | 0 |
2 | SEBI (SCORES) | 0 | 0 | 0 | 0 | 0 | 0 |
3 | Other Sources (if any) |
0 | 0 | 0 | 0 | 0 | 0 |
Grand Total | 0 | 0 | 0 | 0 | 0 | 0 |
Trend of Monthly Disposal of Complaints
Sr. No. | Month | Carried forward from previous month | Received | Resolved* | Pending# |
---|---|---|---|---|---|
1 | April 2023 | 0 | 0 | 0 | 0 |
2 | May 2023 | 0 | 0 | 0 | 0 |
3 | June 2023 | 0 | 0 | 0 | 0 |
4 | July 2023 | 0 | 0 | 0 | 0 |
5 | August 2023 | 0 | 0 | 0 | 0 |
6 | September 2023 | 0 | 0 | 0 | 0 |
7 | October 2023 | 0 | 0 | 0 | 0 |
8 | November 2023 | 0 | 0 | 0 | 0 |
9 | December 2023 | 0 | 0 | 0 | 0 |
10 | January 2024 | 0 | 0 | 0 | 0 |
10 | February 2024 | 0 | 0 | 0 | 0 |
Grand Total |
0 |
0 |
0 |
0 |
Trend of Annual Disposal of Complaints
Sr. No. | Year | Carried forward from previous year | Received | Resolved* | Pending# |
---|---|---|---|---|---|
1 | 2019-20 | 0 | 0 | 0 | 0 |
2 | 2020-21 | 0 | 0 | 0 | 0 |
3 | 2021-22 | 0 | 0 | 0 | 0 |
4 | 2022-23 | 0 | 0 | 0 | 0 |
Grand Total | 0 | 0 | 0 | 0 |