Teledata Informatics

- The company has an NCA of 30.43 and is available for 22 rupees. Would you go for it?

- The company is virtually debt free. Would you go for it?

- It has an additional investment of 14.05 rupees per share. Would you now go for it?

- The company has 19.80 rupees per share in cash. How about now?

- Profits are 20.70 rupees per share. Now?

- It's at it's 52 week low of 22 rupees. The 52 week high was 62 rupees.

Would I buy? I wouldn't. Being "suspicious", I found out that the promoter stake is only 7% in the company. Secondly, the company has been pointed out by it's auditors on more than one occassion on the irregularities in accounting (irregularities is my euphymism for misleading practices). Thirdly, look at the tax charge. It's 0.04% of the PAT. I compared it with Infosys which pays 14.5% tax charge. A zero tax charge is impossible.

I would put the management of the company under the highly questionable banner and wouldn't recommend a buy or hold.

Rags to riches

The recent bull run has exposed the truly Mr Market - sometimes elated, sometimes depressed. JM Financial is an interesting example.

An year back, JM Financials was available at 40 rupees. The current NCA is some 28 rupees. The profit contribution is 9.7 crores i.e. around 8.5 rupees per share. The current CMP is a neat 439 rupees. Consequently the P/E ratio is a huge 52 times. Crazy !!! Click on the title for the BSE Charting.

Being conservative and suspicious

"Being conservative" is the hallmark of a value investor. Which means, always look at companys with a suspicious eye. To illustrate -
a) I have come across a number of companies which always account for only a trifle of thier PBT for purposes of taxation. (called tax charge in the P&L account). Corporate income tax in India is 33%. Yet they create a provision for only 5% or even lesser amount. This would be incorrect unless they have a tax holiday.
b) Any inconsistent change in value of sales/profits should be looked at negatively. Why was there such a marked change? What did the company do to get such a change? Be doubly suspicious if the number is reducing.
c) Always be wary of "non recurring" income or expediture in the profit and loss statement
d) Sales/profits are not growing - be suspicious. (these companies are negative companies for us)

The idea is not to pick negative points in scrips but to do a perfect evaluation of the stock. I have found myself, when is the going is smooth, to actually start picking "uncalled for" good points in even some bad stocks. I have lost a good amount of my gains due to this. Be careful of such tendencies. As Warren Buffett says - "its better to be approximately right than being precisely wrong"