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.)
1) The company has a furniture, air conditioner, electrical installation typically all that you would expect in a 12th grade exam question balance sheet here in India.
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.
3) The company has some unquoted investments in the balance sheets worth Rs 34 lacs. They can’t be traced by market price as they don’t have any market price.
The govt database from MCA screenshots for some of the companies shows something like this.
The companies in which it has currently invested has the same email id i.e [email protected] 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.
c) There are large movements in some of the shareholders holding the shares.
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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Hey Monik,
Nice Article on such shell companies. But there are certain points that i think that we both would agree to disagree with the article 😀
Following are some vital parts of the article that i thought was important mentioning –
1) The Company does not incur any rent expense or does not have any Asset representing Shop under the head Property, Plant and Equipment, the reason why this might be the case is that, the Company might not be owning a shop or they might be having a lot of residential property even before starting this company and it must have been decided by the owners that they would conduct any such sale transactions through that residential property which might have been converted into a SHOP (to note – that it is an E-commerce Company, a unpopular one). And so, such expenditure on the residential property (Now converted into shop), is not an Expenditure incurred for BUSINESS PURPOSE , and they cannot show in Balancesheet as an Asset under PPE , Because when it was purchased, it was not purchased for Conducting Business and also that expenditure did not happen after commencing the business.
2) The value of Unno Industries Limited is showing at Rs.185000 for 5000 shares (i.e., Rs.37 per share), which is the Cost of Share at the time of Acquisition. And as per our IGAAP, we have to record the Investment in Shares at Cost (And not at fair value) and Disclose the Current Market Value of that share; so even though its Market price is now 0.5 per share only on BSE, it is shown in the Balancesheet at a cost of acquisition Rs.37 per share (And if you see the data for 5 years, then you can see that it had also surged to reach a peak price of 109.65 per share in 2013 and so without the date of acquisition, we cannot judge). But as per Ind-AS, the company has to value the investment in listed shares through Fair Value (Market Price) routing the difference through P/L Account or OCI depending on the mode chosen by the company (‘FV through P/L A/c’ or ‘FV Through OCI’)
3) The Email-id of [email protected] , the same email has been provided by the 2 different companies which might be a possibility that the companies may not be having its Own Email ID, but for the purpose of reporting any medium of Contact for customers, they might have provided the same email-ID through which they must have sent the corporate info to the ROC because if public want access to any Corporate Info, they can get it Through ROC. (There may be such a possibility in this case – Need to Clarify)
All other points were fine. Except that, P/E and P/B are shocking and heinous. Even TCS has a P/E of 23.22 and P/B of 10.53 (LOL).
Thnx for the comment on my post Vishal. You have made it nice by reading it. Thnx for your time.
1) It might be a possibility but i guess such a type of transaction mandates a disclosure in the annual report that we do so. In substance i guess the disclosure should be made.
2) I have not independently looked at unno industries but i am not concerned what the laws have to say when i look at a stock. i am just concerned what is in substance to the business. Also can you please help us in showing the price of 109.65 in 2013 because maybe i am missing it. i cannot see a price above 50 in money control.
3) If we need to contact ROC for information on a public company which is listed and being valued at 600 cr (which is surely overvalued) i guess it shows how poor is the reporting of the company.
Thnx for your inputs
Thank You for such Quick Reply.. Highly Appreciated ! 🙂
2) It may be due to misunderstanding, what i meant was The market price of 109.65 was of DWITIYA TRADING (Sorry, i know it came out wrong :P). What i wanted to explain was the stock price of DWITIYA TRADING in comparison with Stock Price of UNNO IND. and how can we cannot judge without date of Acquisition. And yes, they must have disclosed the current market value.
3) And also, that E-mail ID is not of DWITIYA TRADING, it is of the Companies in which it has invested, and so i dont think that we can judge on the reporting of DWITIYA TRADING based on the poor reporting of companies in which has invested.
Thnx for your response Vishal
The companies are wholly owned subsidiaries of diwitiya trading and based on that i guess there is a responsibility on the managers to tell the shareholders about the same. Also the share of the company have been acquired I. The current year and that too at a premium.
Thnx for your time.
Alright…
I did not research on these companies.
Anyways, thanks for informing.
Thnx Vishal
It is also not worth that you spend time on all this research when it is known that the parent company is not appropriate for you.
Thnx for your time.