I got the exact same reply, almost word for word. I think they have done a copy paste.
So here are my concerns for this reply:
In 2018-2020 period (presumably) KPIT gets into a partnership to develop fuel cell technology. So this is part of the company’s plan then. Then suddenly in FY21, after there is a working product, the management decides that this is no longer part of the plan and therefore we have to stop working on fuel cell. So what do they do? They write off all the investment made in this venture.and then hand this tech over to a promoter controlled company. So, KPIT bore the write-off loss, and the promoters got it for free? They should clarify.
Also, how is the company’s capital allocation policy changing so often? One year they decide to do fuel cell, next year they dont. Very strange. And are the independent directors not questioning this?! Intriguing to say the least.
Also it is not clear why this Sentient is not made a subsidiary. See, you spin off non core activities so that management bandwidth is not diverted. For example L&T sold off its cement division so that it could focus on ifra. But in this case, the same management is on the board of both KPIT and Sentient. They are clearly sharing high level resources, so why hold it in a management controlled vehicle instead of the listed entity?
Also, they mention that they have a royalty agreement, but what are the terms? In 5 years when fuel cell might be a big deal, people might not even remember sentient because the name will have gone off their balance sheet altogether. And then who is going to track royalty payments and if it is correct amount or not?
In my view this is a corporate governance issue. And in my experience there is never just one.
I do not think KPIT has adequately clarified this. I am trying to get hold of sentient accounts, as they should be on the MCA website. I checked with KPIT if they have these accounts and they said they dont. So if they dont know what is happening in Sentient, how are they even going to monitor the royalty?
In case anyone gets their hands on sentient accounts for past years, please do let me know. Thanks.