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The Director compensation as a % of Net profit stands at 13.3% for FY21-22. This was 11.7% in FY21-22. This is indeed a concern and investors should write to the Management asking them about this. The Law permits Directors to be paid in excess of 11% of PAT via special resolutions requiring majority shareholder approval, but that approval is just a token as Promoters hold 61%
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As far as I could see, the o/s loan to directors was 19.5Cr at FY21-22 end as opposed to 24Cr in FY20-21 end and a total interest of 1.7Crs was paid on that. Taking an average o/s balance of 22Cr, 1.7Cr amounts to 7.7% interest. So I don’t think there’s any leakage happening here. Unless I have missed some data and my calculations are wrong.
- The concern about non-audited foreign subsidiaries is also valid. It seems that Pix’s European subsidiary (England) is not audited at all while the Dubai subsidiary is audited by a local firm. The auditor’s report mentions that foreign subsidiaries which contribute ~20% of PIX topline and ~10% of PIX total assets (This is the European subsidiary) are un-audited and they rely on Management data to certify their financials. People more experienced in accountancy can comment whether this is a red flag or common practice in Indian small/mid caps.
Also audit fees have jumped by 150% from 6 Lakhs to 15 Lakhs this FY. What changes in the company must have necessitated such high jump in auditor remuneration when revenues have only increased 20% YOY? As per the latest AGM resolution passed, now they have appointed MSKA for 22 Lakhs per annum. Again, a steep rise.
Some of the questions raised by Dr. Malik are valid in my view. Even though they may not point to any Corporate mis-governance, they are red flags. Experienced investors in PIX who have attended the AGMs @RajeevJ @sahil_vi @ayushmit can probably throw more light on these concerns. The biggest concern for me is the huge jump in Auditor fees and what justifies the jump?
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