Below is an interesting case of red flags. You’re welcome to check it out and correct me if I’m wrong somewhere or add to the list of red flags
(Note- This was done through just a cursory glance on the financials and fy24 annual report. So it’s not thorough)
Company name – BLUE CLOUD SOFTECH SOLUTIONS
PE – 137
Market cap- 3526cr
Here we go:
Its a Simple chain of thought
Sudden increase in revenues → negative Operating cash flows last 2 years (so sales are probably fictious) → promoter stake has come down from 55% to 2% in space of 3 years (if sales growth is so fast why is promoter rapidly selling stake → the stake sale has been accompanied with huge rise in share price , from 13 rs to 250rs high… so probably operator driven stock… promoter – operator nexus very likely-> warrants were alloted at very cheap prices and then sold by promoter at inflated prices to retail investors-> so operator drives stock up, promoter dumps stock on dumb retail investors
Also name of company is very fancy…to lure in the unsuspecting public
Company has 1 cr of fixed assets like property and computers (48cr of intangible assets in fixed assets) … doing 500cr sales…highly unlikely
50cr investment as loan given to related party (IT corpz ltd) … quite possibly siphoning of off funds from listed company to unlisted promoter company
Out of 504cr revenue, 186cr is from foreign branch (many times it has happened… where a listed company reports revenue from foreign branch/subsidiary only for that subsidiary to turn out fictious… Brightcom group is an example)
Statutory auditor resigned
No details given in annual report about the number of employees on company books…no details about promoter remuneration. No details of management discussion on industry and company operations.
Subsidiary was bought for 50cr from some parties through share swap arrangements (Did’nt look into it in depth, could be a plethora of red flags in here as well)
Disclaimer: This was just an interesting exercise to perform. waiting to hear you guys’ opinion
| Subscribe To Our Free Newsletter |
