Dwitiya trading company is a company which it says is engaged in the business of trading of sarees but i don’t think the primary earning for the promoters come from the trading of sarees. It probably comes from some other way.
The question which arises is why do i say this-
The company is not traded currently on the stock exchanges i mean there are currently no sellers on the exchanges for you to buy. However as per the last traded price the company is valued at some amount close to 600 cr. Does the company does such a valuation even with the most aggressive standards.
The company has the following assets (if at all you consider it as assets considering the valuation assigned to it in the market.)
2) To add to that the company also has a type writer worth Rs 2500 (this amount is not in lacs or crores it is just Rs 2500 just to avoid any misunderstanding). The company did recognise it as an asset in the books untill last year in the books. If the company would have been in the antiques business this would have been proved of some utility but i doubt it is of any use in saree trading business.
The companies in which it has currently invested has the same email id i.e email@example.com which can be of a chartered accountant and they might have taken a package service which usually they provide for incorporating companies in bulk. Also some of the companies appearing in the balance sheet are at values greater than their authorised which i guess means that the shares have been subscribed at a premium. however there is no explanation of the same.
The company has 5000 shares of unno industries Ltd which can be worth 0.5 per share based on market price. In the books of diwitiya trading they have a book value of 185000.
Profit and loss A/c
The company has two sources of revenue
1) Trading of sarees
2) Int on loan (the company has shown a long term loans and advances of some 53 lacs on which it probably might be earning int. However there are not much details available about the same considering the balance sheet value of the company there should have been additional details about the same.
The company sells sarees as it says but i guess they might be selling door to door sarees as there are no rent expenses, no property, no related party rent transactions which can be related with a shop. If you ever find someone claiming to be from diwitiya trading at your door please do tell me.
The figures for the company are as follows
1) Sales total in past 5 yrs – hardly 5 cr
2) Profit in the past five years-
somewhat 3 lacs
3) Additional points
a) The book value of the company is somewhat Rs 10 per share even after considering the over valuations by the company in respect of the shares of unno industries which are prima facie overvalued.
b) The company has a pretty fancy website boosting about bagyourdeals.com which is probably an e-commerce site but i was unable to open it in all the 5 computers i tried. If you are able to open it firstly check whether the domain is correct and if it is correct do tell the company how you did it.
Valuation as per market
The company was last traded on 26th August 2015 (a little time after our Independence day here in India but there shouldn’t be any connection right). It was then traded at a market cap of 658 cr (the total market value of the company).
The p/e of the company is 10,839(it looks like an amount). The p/b is 123.41 which i guess are more expensive than expensive.
Based on all the things i don’t think the company deserves any way a valuation of 600 cr. Some people are still busy telling how the market us efficient.
Now if we try to explore why the company is so overvalued in the market
It maybe a shell company (shell company article from Wikipedia here.) which is used to convert black money into white money or white money into black. They take an advantage of the long term capital gains tax which is exempt on such shares. This conversion can sometimes be difficult to trace. For an excellent explanation on how this is done you can view the economic times article here.
1) The reason this can be also substantiated is because the shares are traded not frequently but only when it is required.
2) There are large increases in share prices.
3) The company by no means deserves a valuation of 600 cr.
The tax officials can also be helpless in some situations as they cannot do anything when you have all the papers required with you.
I would also suggest the following additional article for tax evasion by shell companies –
Article 2 from et here
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Disclaimer – The views expressed does not constitute any recommendation and will never will. They are simply for illustrative purpose. Please don’t blindly follow. me or my firm doesn’t currently have a position in the company at the time of writing this opinion but some people might have taken some position based on my recommendations which were always forcefully taken.