In the May issue of Wealth Insight this year, we featured an article ‘A smokescreen of performance’ in the Market Compass section. Therein, we talked about 21 companies that had showed healthy growth in their topline on a year-on-year basis and had made considerable profits. But something raised our suspicion and after an in-depth analysis it was apparent that there was something big which was not meeting the eye. What came out was that these companies sold mostly on credit, thus inflating their revenue without realising cash; the very basic aspect of conducting a business. Since that report four months ago, more than half of the featured companies have
collectively lost one-fifth of their market value; in contrast to the Sensex which has actually grown by more than 3 per cent during the same period. In fact, Amar Remedies has lost more than half of its value and Gemini Communications is down 36 per cent. What’s more, despite so much fall in their price they are still far-off from being a value-buy as they breach the very fundamental aspects of investment.
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