Focus Lighting & Fixtures Limited (SME)

Been a while. Let me update on my email communication with the MD on my questions/concerns.

1. Regarding Shethvinod (recap) – as per MD in conf call, Shethvinod was a fully owned subsidiary of Focus but it was merged into the main company 3 years ago and all assets were transferred to the main company.
   However the annual reports are not matching this. Referring to AR from 2019 to 2022, there is no mention of Shethvinod in fully owned subsidiaries. Nor any mention of merging Shethvinod. In all these AR’s Shethvinod is described as associate entity. Only AR 2022 mentions about purchase of assets from Shethvinod, still no mention of fully owned subsidiary or merger. Also, as per conf call the assets were bought over 3 years ago, but this was mentioned only in AR 2022 about such a purchase.
   

But MCA website shows that the company is still active. AR 2022 mentioned a resolution about assets purchase from Shethvinod.

Focus MD response – Kindly note that the Shethvinod is not a subsidiary of Focus and neither we have merged it with Focus. As informed over the call, As on date we have only 2 WOS i.e. Plus Light Tech – which is in UAE and Focus Lighting & Fixtures PTE LTD – which is in Singapore and 1 majority subsidiary. As mentioned in our earlier email, Sheth Vinod has sold their entire Assets and Inventory to Focus Lighting & Fixtures Ltd by way of itemised sale and this transaction was consummated in the financial year 2022-23. Therefore there is no mention of Shethvinod as fully owned subsidiaries in our AR as well. As you have mentioned in your query, the relevant disclosures for transaction of itemised sale is covered in AR. This is the correct factual position.

This is confusing to me, why do they say different things, why cant they simply explain this in the annual report?

2. Query – There are substantial amounts of loan given to associate entities like Arion, Shri Jay Exim, Opti innovation. Even though going by your previous response that this was given to help with their capital needs, why is Focus Lighting obligated to do this with an associate company? In what way these companies help or add value to Focus lighting in order to do this? Why is this in the best interest of Focus Lighting and its shareholders?

Reply 1- Arion was all about trading of LED Lights thorough online portal & Opti was all about Specialised lighting solutions and therefore it is a a separate line of business and that is the reason why we had formed separate companies. Initially Focus had provided loans to these companies for working capital requirements. Arion operations are closed down as unviable and focus has recovered the loan amount along with interest. In Opti there is some value addition over and above regular business of Focus because it is solution providing activities not related to activities of Focus the Opti business will continue for sometime.

In regards to Shri Jay Pharma there are no business transactions and we are looking at options including closure of this company.

Reply 2: Kindly note we have not given any loan to Shri Jay Pharma at all. The name of Shri Jay Pharma is appearing in AR as it is a related party for Focus.

However Shri Jay Pharma appeared in 2018 related party transactions, with 10L loan given. It was listed as an associated entity. If there is no business transactions, this loan given was absolutely against shareholders’ interest, whatever small amount that was.

Regarding Arion and Opti, why cant they simply explain what kind of business relation exists, in the AR?

3. Regarding preferential issues, obviously stand firm that it was the right path, however it ended up in 20% dilution for the shareholders. They have maintained in the AR that whenever needed they will take in investors, that is they are not hesitant to dilute it further.

4. Audit committee has MD also as a member, although cannot vote.

Even though the company looks good and growing, with good prospects, it still does not give confidence with all the above. It might not be big, but it appears to me that the company uses lot of jugaads to scale up, go into new businesses with different partners and so on.

Disc: Not invested.