Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

<p>Analysis of financials of <a href="https://www.smartkarma.com/entities/27268" target="_blank" data-smartkarma-citation="entities:27268:1">Shankara Building Products L (SHANKARA IN)</a> leaving us in awe over the audacity of the auditors, the risky levers of internal control, expensive acquisitions and related party angles.</p>

Analysis of financials of Shankara Building Products L (SHANKARA IN) leaving us in awe over the audacity of the auditors, the risky levers of internal control, expensive acquisitions and related party angles.

Shankara Building Products: Some Shaky Building Blocks

Value investor- India mid & small caps

Bhaskar Chakraborty

Equity Bottom-Up

Shankara Building Products L / Equity Bottom-Up

<ul>
<li>Retail revenues have quadrupled over FY12-18 without virtually any spend in advertising and promotion. This despite company entering many new cities over the years.</li>
<li>Even though retail proportion of sales doubled over FY14-18, receivable days increased. Receivables bumped up sharply in FY18 even though revenue from non-retail channels was flat YoY.</li>
<li>Reported receivables &gt; 180 days past due increased 6x YoY to Rs419m in FY18. Company attributes this jump to the channel and enterprise segments. But interestingly, channel and enterprise revenues were flat YoY in FY18.</li>
<li>Inventory days jumped 40% YoY in FY18. Management explanation doesn’t cut ice.</li>
<li>Company opened as many new stores in FY18 as in FY16 and FY17 combined. It also saw Rs2.3bn YoY increase in sales of its in-house brands. Despite entering new cities and selling more of its own produce, the absolute Rupee value of freight costs incurred is flat YoY.</li>
<li>If stocking more brands with higher value-add under the same roof is the correct strategy then why is the average ticket size flat over FY13-18? Why aren’t its customers increasing the size of each purchase?</li>
</ul>


Retail revenues have quadrupled over FY12-18 without virtually any spend in advertising and promotion. This despite company entering many new cities over the years.
Even though retail proportion of sales doubled over FY14-18, receivable days increased. Receivables bumped up sharply in FY18 even though revenue from non-retail channels was flat YoY.
Reported receivables &gt; 180 days past due increased 6x YoY to Rs419m in FY18. Company attributes this jump to the channel and enterprise segments. But interestingly, channel and enterprise revenues were flat YoY in FY18.
Inventory days jumped 40% YoY in FY18. Management explanation doesn’t cut ice.
Company opened as many new stores in FY18 as in FY16 and FY17 combined. It also saw Rs2.3bn YoY increase in sales of its in-house brands. Despite entering new cities and selling more of its own produce, the absolute Rupee value of freight costs incurred is flat YoY.
If stocking more brands with higher value-add under the same roof is the correct strategy then why is the average ticket size flat over FY13-18? Why aren’t its customers increasing the size of each purchase?


Shankara Building Products: Annual Figures Riddled with Loose Ends

India

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PC Jeweller Ltd. manufacture, retails, and wholesale jewelry.  The Company sells jewelry through its showrooms and over the Internet.  PC Jeweller offers a wide range of products including gold jewellery, diamond jewellery and other jewellery including silver articles, with a focus on diamond jewellery and jewellery for weddings.

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India Motor Parts & Accessories Limited distributes automobile spare parts and accessories. The Company operates through a branch and dealer network countrywide. IMPAL deals in engine group component systems, fasteners, suspensions, axles, auto electrical, wheels, steering linkages, and instrument c lusters.

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Kathmandu Holdings Ltd. provides clothing and equipment for the travel and adventure market. The Company operates retail locations throughout Australia and New Zealand.

NISSAN TOKYO SALES HOLDINGS CO., LTD sells new and pre-owned passenger cars and commercialvehicles produced by Nissan Motor mainly in central Tokyo area. The Company also sells car parts and provides maintenance service. NISSAN TOKYO SALES HOLDINGS also operates office building rental, car leasing service, and insurance service.  The Company's subsidiaries sell Jaguar and Renault cars.

Bell-Park Co., Ltd., is an independent primary dealer of Softbank mobile telephones and the related service subscription contracts.  The Company also markets land line and ADSL services and provides employment services.

Formosa Optical Technology Co., Ltd. manufactures and markets eye glasses.

Beijing Digital Telecom Co., Ltd. is a communication company that services The People's Republic of China.  The Company is a distributor of communications terminals and related services. It also retails mobile communications and digital products.

Hallenstein Glasson Holdings Limited owns and operates retail stores that sell men's, women's, and young men's apparel products and sportswear. The stores are located throughout New Zealand and Australia.

CHIYODA CO., LTD. operates specialty store chains including shoes stores, toy stores, and also casual clothe stores nationwide.  The Company sells its shoes under a number of store chains including The SHOES, Kutsu Chiyoda, and SHOE PLAZA.

Glorious Sun Enterprises Limited, through its subsidiaries, retails and exports casual wear apparel.  The Company also manufactures casual wear products and trades fabric.

HARD OFF CORPORATION Co., Ltd. operates a chain of secondhand goods stores based in Niigata.  The Company buys and sells PCs, audio & visual products, cameras, musical instruments, watches, CDs, and game software.  HARD OFF operates its own stores and also franchise stores.

Singer Thailand Public Company Limited assembles and distributes Singer brand household appliances such as sewing machines, refrigerators, televisions, washing machines, stereos, VCRs and gas stoves.  The Company has its own retail network and offers installment financing to its customers.

Shankara Building Products Limited retails home improvement and building products. The Company offers steel pipes and tubes, roofing sheets, hollow blocks, primers, tiles, plywood, kitchen sinks, and welding accessories. Shankara Building Products markets its products in India.

Shankara Building Products L (SHANKARA IN)

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Shankara Building Products L (SHANKARA IN)

Shankara Building Products: Some Shaky Building Blocks

Analysis of financials of Shankara Building Products L (SHANKARA IN) leaving us in awe over the audacity of the auditors, the risky levers of...

Nitin Mangal

Shankara Building Products: Annual Figures Riddled with Loose Ends

Retail revenues have quadrupled over FY12-18 without virtually any spend in advertising and promotion. This despite company entering many new...

Bhaskar Chakraborty

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)