Forensic Analyst, Trudence Capital Advisors

Nitin Mangal

Nitin Mangal is a Research Analyst with more than 15 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed product for Institutional Investors named as "Analysis Beyond Consensus" during his association with Edelweiss Securities Ltd, Mumbai. Later during the career, he has worked with Veritas Investment Research Corporation, Canada as Asia Consultant covering Indian and US equities. He has been profiled by leading financial newspapers such as Wall Street Journal, Business Standard etc

Forensic Analyst

Buy Nifty Weakness but Watch Out Overhead

Nifty Impulse Sell Signals with Macro Risk

Mahindra and Mahindra: Deceleration Accelerates, Plateau Ahead

Demonetization Paradox: INR 45 Bn Cash In Corporate Coffers And Myriad Patterns Of SBN Disclosures

M&M: Strong Rally in Stock Price Unwarranted; Delay in Crop Sowing May Affect Topline in 1HFY2019

The First Impact Of GST And Ind-AS Combine: Visible During Q2F18

Whether the bull had passed through the china shop? Let’s inspect the shop, is the simplest answer. Whether the bulls stomped through the china shop?  Once again, the answer is simple – Let’s inspect the shop!!!In our last report - Demonetization Paradox: INR 45 billion Cash Flow In Corporate Coffers and Myriad Patterns of SBN Disclosures, we have spoken about the myriad pattern of cash transactions and bizarre remarks/ management notes regarding dealing with the cash by corporates during the 52 days of demonetization. We had covered 67 companies of BSE-100 Index in our analysis in the last report, which incidentally was our first report on demonetization.In our first report, we had observed that seven Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) – clubbed together as Financial Institutions (FIs) – among the 67 companies analysed had a 52% share in receipt of non-demonetized currency in hard cash during those 52 days when cash crunch was the main course. To dig further into the issue, we have expanded the ambit of our analysis and have now looked into such listed NBFCs/HFCs (other than Public sector undertakings) having a market capitalization of more than INR 30 bn.Our analysis of the financials of these FIs throws up details which run contrary to cash crunch during the demonetization days. It also props up certain uncomfortable questions for the auditors as also the various agencies of the government under whose vigil Operation Demonetization was carried out. During those 52 days, the total amount of cash received by these FIs along with two microfinance companies (MFIs) was around INR 86.1 bn. Of this, an astronomical INR 77.8 bn was in non-SBNs i.e. non-demonetized currency (notes other than old INR 500 and INR 1000). Also, it includes INR 6.1 bn for which denomination details are not available with the companies.Just to give some feeler about the quantum of cash receipts, in few companies it constitutes around 2% to 3% of total Assets Under Management (AUM). What’s more perplexing are the reasons that sound as excuses given by the management of some companies in the statutory disclosures. What’s further perplexing is that most of the people, not only auditors, who have an even small idea about the functioning of FIs, would have identified the sore thumbs jutting before their wide eyes in many of these disclosures, but none of them did so.We have further discussed following points to simplify understanding:<ul class=""><li>Practical aspect of FI's dealing with borrower</li><li>Authorized person to transact in the account of FIs'</li><li>Let’s Play Devil’s Advocate</li><li>Why cash deposit is cause for worry</li><li>Another argument disproving our hypothesis might come as old overdue/NPA accounts must be repaid during this period - Did it happen?</li><li>MFIs disclosures are not much different than NBFCs</li><li>A Curious case of HFCs</li><li>Unattended unlawful transactions</li></ul> Note: We sent a questionnaire to many NBFCs but received no reply from them.

Whether the bull had passed through the china shop? Let’s inspect the shop, is the simplest answer. Whether the bulls stomped through the china shop?  Once again, the answer is simple – Let’s inspect the shop!!!In our last report - Demonetization Paradox: INR 45 billion Cash Flow In Corporate Coffers and Myriad Patterns of SBN Disclosures, we have spoken about the myriad pattern of cash transactions and bizarre remarks/ management notes regarding dealing with the cash by corporates during the 52 days of demonetization. We had covered 67 companies of BSE-100 Index in our analysis in the last report, which incidentally was our first report on demonetization.In our first report, we had observed that seven Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) – clubbed together as Financial Institutions (FIs) – among the 67 companies analysed had a 52% share in receipt of non-demonetized currency in hard cash during those 52 days when cash crunch was the main course. To dig further into the issue, we have expanded the ambit of our analysis and have now looked into such listed NBFCs/HFCs (other than Public sector undertakings) having a market capitalization of more than INR 30 bn.Our analysis of the financials of these FIs throws up details which run contrary to cash crunch during the demonetization days. It also props up certain uncomfortable questions for the auditors as also the various agencies of the government under whose vigil Operation Demonetization was carried out. During those 52 days, the total amount of cash received by these FIs along with two microfinance companies (MFIs) was around INR 86.1 bn. Of this, an astronomical INR 77.8 bn was in non-SBNs i.e. non-demonetized currency (notes other than old INR 500 and INR 1000). Also, it includes INR 6.1 bn for which denomination details are not available with the companies.Just to give some feeler about the quantum of cash receipts, in few companies it constitutes around 2% to 3% of total Assets Under Management (AUM). What’s more perplexing are the reasons that sound as excuses given by the management of some companies in the statutory disclosures. What’s further perplexing is that most of the people, not only auditors, who have an even small idea about the functioning of FIs, would have identified the sore thumbs jutting before their wide eyes in many of these disclosures, but none of them did so.We have further discussed following points to simplify understanding:Practical aspect of FI's dealing with borrowerAuthorized person to transact in the account of FIs'Let’s Play Devil’s AdvocateWhy cash deposit is cause for worryAnother argument disproving our hypothesis might come as old overdue/NPA accounts must be repaid during this period - Did it happen?MFIs disclosures are not much different than NBFCsA Curious case of HFCsUnattended unlawful transactions Note: We sent a questionnaire to many NBFCs but received no reply from them.

Mahindra & Mahindra Fin Services Ltd. (MMFS IN)

Demonetization Paradox 2.0: Bungle Bells, Bungle Bells, Bungles All The Way

NIFTY Index

Demonetization Paradox 2.0: Bungle Bells, Bungle Bells, Bungles All The Way