Despite good festive sales, Thangamayil Jewellery’s operating profit took a hit due to change in accounting policy
Madurai-based Thangamayil Jewellery Ltd, recommended by Moneylife magazine on 23 August 2012 (http://www.moneylife.in/article/thangamayil-jewellery-is-the-growth-sustainable/28072.html) has reported a 41% year-on-year (y-o-y) increase in net sales to Rs436.96 crore for the quarter ended 31 December 2012. While this is an impressive number, it disappointed on the operations side of the business when its operating profit for the quarter ended 31 December 2012 plummeted 34% y-o-y to Rs22.71 crore when compared to the corresponding period last year. The major culprit was increase in advertising and publicity expenses due to change in accounting treatment, which affected its bottom-line.
According to the quarterly release, the statement reflecting change in accounting policy said, “In line with changes in accounting treatment and in accordance with generally accepted accounting standard on advertisement expenses the company opted to write off deferred revenue expenditure of earlier years in three equal quarterly installments in the current year together with fully charging of current year advertisement and publicity expenses in the profit and loss account of the current year. Consequent to this it has resulted in understatement of profit for the quarter and nine month ended 31 December 2012 by Rs6.14 crore and 13.95 crore net of taxes respectively on a comparable basis”
Moneylife’s database showed that Thangamayil’s sales lived up to its three-quarter y-o-y growth trend of 43%. Sales were buoyed by the festive season last year which is promising. However, despite the accounting change, its operating profit suffered in the previous quarter as well. Therefore, it has reported negative operating profit of 30% and 34% in the September 2012 and December 2012 quarters respectively. This is a worrying trend. Investors would need to keep an eye on operating profit in the current quarter to see if the trend persists. Leaving this aside, it has reported high return on networth of 33% while its valuation remains somewhat depressed with its market capitalisation just over four times its operating profit.
Also, the rise in price of gold to possibly unrealistic levels might deter buyers from buying gold jewelry. With the festive season past us, questions linger whether the price of gold will come down given that it is artificially being propped up by various central bankers world over. However, as far as overall sales are concerned it remains robust. Eyes will be on how its operating profit fares this quarter.
We had recommended this stock at Rs200.55, and now up nearly 50% and currently Rs299 on the National Stock Exchange.
Read past news on Thangamayil over here.
Nifty yet to show its hand though the trend is mildly down
Most of the Asian indices had negative opening while the others opened flat after the US reported first quarter of negative GDP growth (-0.1% quarter-on-quarter at an annualized rate). The indices back home opened in the negative. The Sensex opened at 19,987 while the Nifty opened at 6,046. Both the indices immediately hit their respective highs of the day and started a small downward trend. Yesterday, we mentioned that indices await fresh cues and only a sharp fall below 6,020 will push the Nifty towards 5,950 while a close above 6,100 will mean a continuation of the creeping bull market. The NSE saw an advance decline ratio of 704:777 and a volume of 99.99 crore shares today.
The US Federal Reserve on Wednesday maintained its monthly $85 billion bond-buying stimulus plan, saying economic growth had stalled but indicating the pullback was likely temporary. The Fed repeated that it would keep overnight rates near zero until the unemployment rate hits 6.5%, as long as inflation does not threaten to exceed 2.5%.
The Sensex hit a high of 20,009 while the Nifty manage to hit 6,058. Market was unable to move higher except for a minor pull up when ICICI Bank came up with a forecast beating result. The Indian Government today revised the economic growth for fiscal 2011-12 to 6.2% from the earlier estimate of 6.5%.
With the expiry of the F&O contracts, the indices faced selling pressures and in the last hour of the trading session the Sensex hit a 10 day low (including today) of 19,866 while the Nifty hit a four day low (including today) of 6,025. Soon after, the indices closed marginally above its respective day’s low. The Sensex closed at 19,895 (fell 110 points, 0.55%) while the Nifty closed at 6,035 (fell 21 points, 0.35%).
The Asian indices had a mixed performance. While the major gainer were Nikkei 225 and Taiwan Weighted, where both rose 0.22%, the Hang Seng fell the most, 0.39%. Both the European markets and US Futures were trading in the red.
Tomorrow Markit Economics will unveil HSBC India Manufacturing PMI, which gauges the business activity of India's factories, for January 2013.
The BSE Mid-cap index rose 0.54% while the BSE Small-cap index fell 0.11%.
The top sectoral gainers were BSE Realty (up 1.38%); BSE PSU (up 1.02%); BSE Consumer Durables and BSE FMCG (up 0.61% each) and BSE Power (up 0.46%). The main losers were BSE Bankex and BSE Oil & Gas (fell 0.42% each); BSE IT (fell 0.26%); BSE TECk (fell 0.23%) and BSE Capital Goods (fell 0.16%).
Eleven of the 30 stocks on the Sensex closed in the positive. The chief gainers were BHEL (up 2.36%); Sun Pharma (up 1.33%); Hero MotoCorp (up 1.31%); ITC (up 1.25%) and GAIL (up 1.03%). The key losers were Tata Power (fell 2.18%); ICICI Bank (fell 1.93%); HDFC Bank (fell 1.87%); Bharti Airtel (fell 1.52%) and Reliance Industries (fell 1.39%).
The top two A Group gainers on the BSE were—Suzlon Energy (up 15.57%) and Essar Oil (up 13.30%).
The top two A Group losers on the BSE were—Colgate Palmolive (fell 2.43%) and National Aluminium (fell 2.37%).
The top two B Group gainers on the BSE were—Murli Industries (up 15.10%) and Panacea Biotec (up 13.28%).
The top two B Group losers on the BSE were— Midfield Industries (fell 14.09%) and Riba Textiles (fell 12.54%).
Out of the 50 stocks listed on the Nifty, 25 stocks settled in the positive. The major gainers were Punjab National Bank (up 10.24%); Bank of Baroda (up 4.11%); BHEL (up 3.16%); DLF (up 2.60%) and GAIL (up 1.75%). The chief losers were Tata Power (fell 2.37%); HDFC Bank (fell 2.08%); Bharti Airtel (fell 2.06%); ICICI Bank (fell 1.93%) and Hindustan Unilever (fell 1.52%).
DLF has entered into definitive Business Transfer Agreement with BLP Vayu (Project 1) Pvt. Ltd., a subsidiary of Bharat Light & Power Pvt. Ltd. for transferring of its undertaking comprising of 150 MW capacity wind turbines situated at Kutch, Gujarat on ‘as is where is basis’ by way of slump-sale for a lump sum consideration of Rs282.30 crore. The transaction is in line with the DLF's objective of divesting its non core assets. DLF rose 1.87% to close at Rs277.80 on the BSE.
The Cabinet today approved the Rs200-crore revival package for ailing public sector unit, Scooters India. After the government shelved the plan to sell out its entire stake in SIL, the Department of Heavy Industry had proposed a revival package of more than Rs200 crore for revival of the company. Besides, the department had consulted the Board for Reconstruction of Public Sector Enterprises, which examined the case, and later suggested a revival package for the sick unit. Scooters India rose 4.88% to close at Rs36.55 on the BSE.
Principal of Delhi's Aditi Mahavidyalaya was fined Rs5,000 for delay in complying orders of the CIC to display information as mandated under Section 4 of the RTI Act. This is the 31st in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
Taking a serious note of delay in complying with its order, the Central Information Commission (CIC), levied a penalty of Rs5,000 on a Principal of a college. While giving this important judgement, Shailesh Gandhi, former Central Information Commissioner asked the Chairman of governing body of the college to recover the amount from the salary of the Principal.
“As per the provisions of Section 20 (1) of the Right to Information (RTI) Act 2005, the Commission finds this as a fit case for levying penalty on the Dr Kalpana Bhrara, Principal. Since there has been a delay in complying with the order of the Commission, the Commission is passing an order to levy a penalty of Rs5,000,” the CIC said in its order issued on 24 November 2009.
Delhi resident Rajeel Lala, on 12 November 2009, filed a complaint about Aditi Mahavidyalaya and alleged that the College has not displayed the information as required under Section 4 of the RTI Act. The Commission had sent a demi-official letter on 28 May 2009 to remind the Principal regarding this obligation under Section 4 of the RTI Act.
The Commission again sent reminder letters in this regard to the College on 12 August 2009. In this letter it was stated that if Section 4 of the RTI Act remained un-implemented, the Commission would be constrained to use the powers under the RTI Act and initiate proceedings against erring institutions.
The Commission after perusing the website of the College, found that it had not met its obligations with regard to suo moto disclosures under Section 4 and in view of its repeated violation of the law and refusal to pro-actively disclose the details as per Section 4 of the RTI Act, decided to institute an enquiry under Section 18 (2) of the Act. The CIC then issued a show cause notice to the Principal.
During a hearing on 24 November 2009, the Principal, in a letter stated that some part of Section-4 is to be hosted on the website and that the Section-4 compliance will be put up on the website in the next three months.
According to observation of the Commission on 23 November 2009 on the website of the college the following had been found:
1. No link for RTI
2. Name and contact details of PIO is not given
3. No contact detail provided in the directory
4. No info about budget is provided
5. Updation has not been done for a long period
During the hearing, the respondent brought a hard copy of the manuals for Section 4, which again did not give any details on the budget of the College.
Mr Gandhi said, in spite of repeated reminders, the College does not appear to be willing to meet the Section-4 requirements of the RTI Act. He then imposed a fine of Rs5,000 on the Principal while asking her to fully comply with direction of Section 4 before 30 December 2009 and sent a compliance report.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SG/C/2009/001566/5669Penalty-1
Complaint No. CIC/SG/C/2009/001566
Complainant : Rajeev Lala,
JNU, New Delhi- 110067
Respondent : Dr Kalpana Bhrara