The Milestone saga: a CA on the run and missing financial results

You may have heard of "my dog ate my homework", but have you heard of "CA ran away with the results"?

It might sound like the start of a bad joke, but that is precisely what Milestone Furniture , a company listed on the BSE, is claiming in its recent update.

In its official update on the BSE, Milestone's management has stated that it won't be able to file FY23's financial results as mandated by SEBI because "the existing Chartered Accountant named CA Bhupendra Gandhi got disappeared and is not answering the calls, so the financial statements are pending due to unavailability of financial data as well as the absence of persons-in charge of the data".

First, credit where it's due; we must thank Samir Arora, the founder and fund manager of Helios Capital, for bringing light on this bemusing little news through his recent tweet.

After reading his tweet and laughing for a good couple of hours, we decided to dig deeper. Who wouldn't want to know the events that led to a company's CA calling it quits and disappearing?

So, let's start from the beginning.

The market debut
Contrary to its present state, Milestone had a rather uneventful entry into the market. The company got listed on BSE SME on May 21, 2018, at Rs 45 per share. It raised around Rs 15 crore through the IPO for working capital and capex for a manufacturing facility. That is what the management said back then.

And given that the company reported decent topline and profit after tax growth in the three years preceding its IPO in FY19, there were no reasons to distrust the management.

The vanishing assets
However, the said manufacturing facility never came to be, and there is no mention of any capex pertaining to it in any of the company's available annual results.

On the contrary, the company reported a consistent decline in long-term tangible assets over the last three years.

Financials started reeking fishy
In FY21, the company reported a total revenue of Rs 22 lakh, while the accounts receivables stood at Rs 4.5 crore.

It would be an understatement to say that if account receivables are 37.5 times the revenue, it is a red flag. Even your local store will stop selling you on credit if you owe them more than 30 times their annual revenue.

Before the CA, the promoters ran
At the time of listing, promoters held over 60 per cent stake in the company, and it remained around that level until FY21. But then something happened (that's the risk with SMEs, you often don't know what happened), and promoters decided it was time to dump the entire business on retail investors.

Promoter stake fell to 37 per cent by FY22. And by September 2022, retail investors held 100 per cent of the company.

Nil sales in FY22
Now that you know what transpired, you may feel there were enough omens for the present turn of events.

And you would be right in thinking so. But we haven't yet mentioned one crucial tidbit.

The company did not make any sales in FY22!

We often speak of how profits are important to sustain a business. But if a company is not selling products or services, can it even be called a business?

A lesson to be learnt
The entire Milestone Furniture fiasco exemplifies why we have always asked our readers to refrain from investing in SME IPOs .

All the signs of what worries us about SME IPOs were present in Milestone: IPO came right after a decent run of results, the promoter started jumping ship suddenly, there was a drastic lack of information, etc.

We would like to remind our readers through this story that while all investments come with risks, companies with such dubious management and drastic lack of information are risks on steroids.