Garware Wallropes

Few questions from AR

I am tracking the company for a while now… A consistent performer in a niche area of product with huge possibility in the expansion of Synthetic Cordage market.

However, while going through the Annual report in detail, I came across few issues, which unless clearly understood, is difficult to build a conviction in spite of perceived quality of management being good.

Enclosed is an excel file (with 4 years’ numbers) which I prepared after finding few numbers which need better clarity…. Here are crux of my observations…

1) There is a Revenue booking of Rs. 12 Cr. to 15 Cr. (appx) each year during last four years under “Efforts made for construction contracts” —- Unable to understand what it actually means?

2) Garware change accounting figures of previous years on subsequent years in many instances…… Some instances are mentioned in the worksheet. What may be the reason for such frequent changes?

3) Other Provisions / Other Payables figure are increasing at much higher rate than sales or profit….. Check excel…. Any specific reason for the change? Like, some change in business practises etc? If so, need to understand.

4) Forex exposure Liability has increased substantially over the years (check excel) …. We need to understand the nature and reason for this. Garware blended (domestic + exports) receivable days are less than 90 days and net forex exposure is about Rs. 268 cr. It is to be noted that, Rupee also didn’t show much volatility during the accounting period of 2014 – 2015. We are unclear about the reason for having such large and increasing forex hedge liability.How will Garware liquidate the liability. If the receivable days are less than 90 then there should be constant circulation of forex exposure …. How can it increase so much? Also, they didn’t have any large Capital Goods import pending.

5) Non-elucidated (No narration given in AR) Short Term loan and Advances has gone up at 38% CAGR between 2012 – 2015 —- What may be the reason?

I tried to seek clarification from management through few mail / phone but unable to elicit any response.

GARWARE 040915.xlsx (13.2 KB)