I think, you have polycab issue in mind.
As per my point of view, cash business has been a tradition for indian businesses , particularly in these segments. Even if you visit your local shops , you will find that they keep two sets of books…One for the tax purposes and one which is real, which includes cash dealings. And when a business gets listed , this habit and tradition continues. I will not take holier than thou approach. Its part and parcel of indian business operations.
I would like to give analogy of another MNC company which I held for 3 yearsand recently sold off. Abbott India ltd. Its an Indian subsidiary of Abbott. Now this MNC parent also maintains a Private Ltd subsidiary called Abbott Healthcare Pvt ltd, which is not a listed subsidiary. Now many good medicines and famous products are launched not under listed subsidiary but under unlisted pvt subsidiary, thus causing loss to the minority shareholders of Abbott India. This is also a form of theft of profit which rightly belongs to shareholders as the cash sales of polycab. But its legitimate and nobody can do anything about it as parent holds listed subsidiary very close with 75% stake. And then there are so many businesses who divert business to their private companies at the cost of listed companies. This is more of a norm and SOP. As and when our markets reacts strictly, some shareholder activism gets established , these practises will become things of the past, but its not going to happen in a hurry. In our lifetime of investing, things will continue and we should not lose sleep over it.
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