Coal tangle worsens – Now coal secy issues idiotic statement

Every other day the government seems to regress back to the ’80s. Witness these statements by the Coal Secy who is on the board of Coal India..

Coal Secy Ashok Perti said their first loyalty of independent directors should be towards the company and not its minority shareholders.

So will the government look to replace them or take any action against them? Perti said no such action was being planned against these directors. And top coal ministry sources added that any such decision—taking action against independent directors—would involve a very lengthy process which the ministry perhaps wants to avoid.

This is bizarre. Independent directors are there to protect minority shareholders, and here is the coal secy saying something totally differnt. And it seems, all independent directors had opposed the new coal FSAs

Good reporting example – Motherson Sumi

Motherson has been declaring its 5 year performance goals. This is the past 2 –

Past 5 year targets

Of course, this would make no sense if future targets were not declared. This is the current 5 year plan it is working on –

Current 5 year target

The co should be able to achieve the revenue goal, in others it may struggle given current global scenario. However, the market seems to have a lot of faith in the management, given the way high valuations the co gets now. Given that it disclosed and made its targets, seems deserved

Good reporting example – KPIT

Acquired company performance

Rare to see this kind of slide.

3i Infotech in debt trouble – where’s the corporate governance

3i Infotech is in serious debt trouble, reports The Economic Times today.

Lenders, investors shun debt-laden 3i Infotech; prospect of distress sale looms

I had written earlier how 3i was a great example of a sleeping board (3i Infotech – An example of lax corporate governance) . Here, the chairman, CEO and CEO has unchanged for 8-10 years. It is clear they have practiced cowboy capitalism, and use public and borrowed funds, and run them to the ground. The destruction of other people’s money is simply amazing.

Yet, we have no change in leadership. How come these people havent been fired yet? Now, it appears the company is defaulting.

The ET story says: “The company has been facing a temporary cash flow issue as refinance is not happening on time for shorter maturity loans,” says V Srinivasan, managing director & global CEO of 3i.

3i Info was floated by ICICI Bank, and it no wonder it is still lending to 3i. The CEO is quoted saying “We have borrowedRs200 crore in long-term loans from ICICI Bank in October. Also, ICICI Bank is working on loan syndication for a long-term loan of Rs 300 crore. We are capable for paying the salaries through operations,” he adds

ICICI Bank is still the largest shareholder in 3i. Wonder if it is violating some RBI guidelines, or even corporate governance ethics, by continuing to support 3i at a time when no one wants to touch it. What’s it about ICICI, and corporate governance? The other company floated by it, First Source is in a similar mess.

 

 

 

How real are Madura numbers?

There was a news item last week that Aditya Birla Nuvo may want to unlock value in the Madura Fashion & Lifestyle business, either by  a PE round, or an IPO. While the article was a little speculative, but the financial numbers seem to indicate that Madura is being dressed up for a sale.

FY11 has seen a dramatic, almost flashy performance, which has no precedence in the earlier 10 years. Revenues grew almost 45%, from Rs 1251 crore in FY10 to Rs 1809 crore in FY11. The reported numbers even show a sharp upswing in profitability, with PBITDA of Rs 137 crore compared to a loss in FY10. In the preceding 9 years, Madura has made a total EBIT of only Rs 52 crore, with losses in 5 out of those 9.

While one could say that Madura has turned around, but there is something fishy in their numbers. Some of the declared numbers dont add up.

A lot of growth has come from expansion of distribution.The company has declared inconsistent numbers for retail expansion.

In a presentation dated 30May’11, to explain its Q4 FY11 results, the company says it company added 250 exclusive brand outlets (EBOs) to reach 900 by end of FY11, a growth of 38% in the EBO channel. But this does not add up with what it said in its earlier PPTs.

A presentation in Feb’11, after Q3 results, says: ‘Expanded retail presence to reach a total of 506 Exclusive Brand Outlets (EBOs)’. If it was 506 on 30 Dec 2010, and then 900 by March 2011, how did the company add only 250 stores in entire FY11?  A presentation dated 30 July 2010, to explain Q1 FY11 results, says: ‘Launched 33 new EBOs (Exclusive Brand Outlets) to reach a total of 425 EBOs’. A simple math here tells us the Madura business started FY11 with 392 EBOs. Given that it ended with 900, the growth in EBOs seems to be 408 stores, or more than 100%.

While this inconsistency in numbers may not be anything serious, but for a company of Madura’s size (or one owned by AB Group) this shouldn’t be happening.

3i Infotech – An example of lax corporate governance

If there is one company which exemplifies complete lack of corporate governance, it is 3i Infotech. And the amazing thing is, it is supposedly a professionally managed company.

Its share price has come down to as low as Rs 42 now. Looks at the prices of successive public dilutions it has done since the IPO:

Apr’2005 – Rs 100 (this was the IPO)

2007 – Rs 220 (a series of bond conversions)

Sep’09 – Rs 84

Apr’10 – Rs 78

So the last 2 dilutions have been at a discount to the IPO price. Equity has ballooned about 4 times since the IPO, or in just about 5 years. There is still an outstanding FCCB, which wont convert though.The D/E at the end of FY10 was 2.3x, despite 2 dilutions within FY10.

The company took a Rs 230 crore write off in FY10 as well. And what happens to the management? To the best of my knowledge there’e been no change in the CXOs. Some of these gents have been in saddle since IPO.

• V Srinivasan (MD & CEO, since 1999)
• Amar Chintopanth (CFO, since 2001)

So the board seems be sleeping at its job. It has not asked anyone to quit despite the steady slide of the company.

Here are the names of the gents sleeping on the board (these are the independent directors):

• Hoshang N. Sinor (chairman, since 2003)
• Mahadevan Chandrasekaran
• Dilip Choksi
• Ashok Jhunjhunwala
• Bruce Kogut
• Samir Mitter

I couldnt get the dates of appointment of other directors. But it appears the 2 CXOs and the chairman have been there 7-8 years. Cosy arrangement indeed. The board directors get paid about Rs 12 lakh a year, for sleeping thru the 4-5 meetings they perhaps attend in a year. ICICI Bank is the largest shareholder in 3i (it was a perhaps a promoter of 3i, as it is of the other laggard Firstsource). Vishaka Mulye is in ICICI. Even Sinor and Choksi are on the boardss of several ICICI companies. So in effect, it is ICICI sleeping on the job.

The CFO got paid Rs 3.2 crore in FY10. Thats a fat salary by India standards. Couldnt find the CEO’s sal, must be a good sum too (he’s based in the US)