Bartronics India Ltd - Another Satyam in making

 Bartronics India Ltd :   - Another Satyam in making ?

Company is supposed to be in RFID and Cards Business –

But  company’s sales is comprised of :
Sooftware Export – Value Added : Rs 127.87 Cr
Software Export – Self Developed : Rs 174.68 Cr
Manufacturing : Rs 29.11 Cr.
Trading in Software & Hardware : Rs 226.73 Cr

Against Software Export (Value added) of Rs 127.87 cr, company bought imported Software for Rs 112.97 Cr and after accounting for Opening/Closing, net software consumption was Rs 108.45 Cr – Thus Gross Margin earned Rs 19.42.  No manufacturing activity has taken place in the company for this item.

Against Software Export – Self Developed of Rs 174.68 Cr – company’s claim is that the same was developed in previous years by the company and no expenditure was done during the year. (During last year also company exported software worth Rs 100.08 Cr.).  Thus Gross Margin earned during the year is Rs 174.68 Cr.

Let us consider some of the points in respect of its income :

When the company is capable of developing its own software, why it is importing and what is this import. This could be to inflate the sales and book some Profit (Tax free).

Company claims to have sold software developed by it in the previous years. During last 2 years itself, company has sold software worth Rs 274.76 cr. It is common that to develop software, only raw material is manpower. During last 9 years amount spent by the company on salary & wages is only Rs 19.73 Cr. These salary expenses also includes, salary for other manufacturing activities undertaken by the Company.

Against the trading sales of Rs 226.73 cr, company has purchased (imported) software and hardware for Rs 192.03 Cr. It is difficult to understand the difference between trading sales of software and Software Exports (Value added). Both the sales have been against import only and there has been no value additions by the company.

Apart from above items of sales, company has booked revenue against services for Rs 21.70 Cr. Against this, the company has spent Rs 20.12 cr towards sub – contracting charges so no value added here also.

To highlight, the kind of manufacturing activities or value additions, the company does, let us see some (in fact all) of the expenses it has incurred during the year.

Salary & Wages : Rs 5.67 Cr

Factory Maintenance Rs 0.34 Cr

Power & Fuel Rs 0.46 Cr

Insurance : Rs 0.78 Cr

Printing & Stationary : Rs 0.23 Cr

Communication Expenses : Rs 0.37 Cr

Travelling & Conveyence : Rs 1.41 Cr

Repairs & Maint (others) Rs 0.57 Cr

These expenses has to be seen, considering the fixed assets base of Rs 71.23 cr in Plant & Machineries, Rs 104.65 Cr in Computers besides investment in building, electrical installation, vehicle etc. Thus there are hardly any manufacturing activities in the company.

Now consider Balance Sheet items:

Fixed Assets :
Company has added Rs 62.57 cr towards computers during the year. This is over and above the existing computers of Rs 45.35 cr.  Against this Salary & Wages expense of the company for the year is only Rs 5.67 cr that too has come down from Rs 6.39 cr. The activities within the company hardly justify huge additions of computers. Auditors have also qualified its report on fixed assets register.
The Company has made capital advance of Rs 183.22 Cr included in total capital WIP of Rs 206.54 Cr. – This seems to be next to impossible considering financial condition of the company as explained later in this note. The company has outstanding capital commitment of over Rs 267 cr as on 31/3/2010.
Fixed assets also include software for Rs 176 cr capitalised in the past.

Sundry Debtors :

Against total sales of Rs 581.58 cr, outstanding from customers are Rs 568.66 cr, which shows that the products sold by the company has no priority for the customers.

Sundry Debtors includes amount outstanding over 6 months Rs 270 Cr. Against total sales of Rs 587 Cr.

Loans & advances :

Company has given advances to its subsidiaries for Rs 317.61 Cr which is largely due from 2 of its subsidiaries as under :

Bartronics America Inc USD 48,752,556 (  Rs 219.38 Cr. @ 45/$).  This amount is bad because this subsidiary does not have any assets – Entire amount has been used in Goodwill Rs 150 Cr (at Rs 45/-$), Intangible assets Rs 77.35 Cr (at Rs 45/-$), and other assets which includes debtors, inter company receivable etc. The subsidiary has liability of Rs 32.26 cr as well.

Bartronics Asia Pte Ltd USD 21,097,042. (Rs 94.94 cr). – The company does not have any assets except Trade receivable running since last year. Probably very doubtful of recovery.

Sundry Creditors :

Against total purchases of Software/Hardware/Raw material of Rs 328 cr, amount due to the creditors is Rs 229 cr showing the truth behind it.

Secured Loans :

During the year the company raised additional loan of Rs 138.53 cr from banks taking its liability to Rs 395.57 cr.

Promoters Contributions :

Promoters raised through preference issue/ warrant Rs 103.68 Cr.

Now, Consider some of the points which shows that the company has no corporate governance, no liquidity (bankrupt) and the promoters are just manipulating the accounts.

The company is wilful defaulters of Income Tax and other taxes having not paid even undisputed income taxes for the years from 2007-08 to 2009-10 amounting to Rs 23.54 crores.

All other taxes like PF, ESI, Professional Taxes, FBT, Services Taxes etc have not been deposited in time.

Loan repayments have been delayed upto 6 months.

How can a company which has raised more than 100 cr from promoters, raised additional loan of Rs 138 cr from banks, and which has made capital advances of Rs 183.22 cr, default on admitted tax liabilities and does not pay its taxes in time. During the year debtors has gone up by Rs 350 cr..

To sum up, The company has no business model. Accounts are unrealistic and in all probability crooked up. Most of the assets it shows are not realisable. It is engaged in bogus software trading. Co is doing very small manufacturing activities of around Rs 20 cr or so. The company activities hardly require any managerial inputs. Quality of fixed assets is highly doubtful, advances for capital assets is uncalled for as these are not supported by any business plan. Some or most of the sundry debtors are never going to be realised if company stops making sales. Advances to subsidiaries are fully bad as subsidiaries have no assets to pay back. Bankers run the risk of loosing their loan money. Company has subsidiaries at USA and Singapore whereas 80% of exports are to Hongkong and UAE. Only 3% export is to USA.

Moreover, Rs 225 cr FCCB is due for conversion/ redemption  in 2013 at substantial premium to present market price. If redeemed company has no resources for that.