PCH Financials- How they utilised IPO money?

Hawk Eye · 1 PCH Financials- How they utilised IPO money? Tue May 31, 2011 1:41 pm

Hawk Eye

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PCH Director Sarath Wickramanyake stated the objectives of IPO.
- Expanding the Linkages between partners
- Increase number of outlets
- Invest in BPO/KPO
- Invest in Internet Data centre
- retire Debt of the Company

NDB Investment Bank stated bottom line expected to grow 20% YoY after the IPO.

Looking at the Financials
First of all theres a mistake in the Balance sheet heading where the previous year figure comparison stated as 31st Dec 2009. in page 4

- The IPO money received 630 Mn.
- Investment in Subsdiary has only increased by 10 Mn, Dont know is this all the new subsidiary Invetments
-Long term debt reduced by 169mn and short term borrowings increased by 325 mn. therefore overall borrowings increased
-In the Company and Group Cash flow, Company has spent nearly 722mn worth of money in increasing the Inventory. Almost total of the IPO money

- The net cashflow is in a worst position now than before it was befor the IPO.

Are they really utilising the money in right way to achieve its stated objectives?

This what I grasp from the financials.

Experts opinion please.

widanage · 2 Re: PCH Financials- How they utilised IPO money? Tue May 31, 2011 11:56 pm

widanage

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I have Four Stories to share with you.

This it what I heard from a person known to me who is engaged in the import of ICT related items to the country. In other words I heard this story from a direct competitor (in certain areas) of PCH so I didn't take it at the face value. I had no reason to suspect his story see whether you can relate anything with the present financial position of the company.

Story No 1
At the time of the IPO the company's key figure owed around US$ 4.0+ Mn off the book (personal) to three Singaporean nationals. More than US$ 2.0 Mn to a single person, who is also a supplier to the importer known to me. The person was in SL during the time of the IPO and he was given around $1.0 Mn to fly back without making a noise.

Story No 2 (From the same person)
Most of you may aware that people under value things to lower the import duty. Lower CIF will result in lower duty and balance through illegitimate money transfer mechanisms (known as Undial). What I heard from my guy is, PCH started over valuing the imports. Which resulted legitimate money transfer out of the country to their personal creditors from company's money. My guy also had to pay high import duties on some of his imports because higher prices registered at the customs for some items.

Does this ring any bell with increasing inventory and the borrowings. (I did not look at the financials because its a waste of time)

Story No 3 (My story)
Knowing these facts I did not apply for shares in IPO and expected price to come below IPO price and then a real push (without a reason) in the market in medium term when promoters need to encash some of their shares (direct or indirect) to get money into their hands. I entered below IPO price and realized a non reasonable gain before I quit.

Story No 4
One of the HNWI from CSE beleaguered the investment banking fellows who managed the PCH issue saying that their actions will lead to lose investor confidence on the market. (This is from a trusted source who happens to be there at the incident)

Finally,
I could not substantiate the story no 1 & 2 at the time of the IPO. Now I think that the balance sheet of the company substantiate the story. I do not look at PCH at all at the moment. Still this may help you.

innam · 3 Re: PCH Financials- How they utilised IPO money? Wed Jun 01, 2011 12:53 am

innam

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@widanage
thank you for sharing your "stories". i'm sure the forum users will find it very useful.

although they are of the "hearsay" variety it is important that "investors" in the CSE get to know the negative rumblings alongside the positives (which in any case tend to get repeated hundreds of times).

Meta Trader · 4 Re: PCH Financials- How they utilised IPO money? Wed Jun 01, 2011 1:06 am

Meta Trader

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widanage wrote:I have Four Stories to share with you.

what a story . + rep

manula · 5 Re: PCH Financials- How they utilised IPO money? Wed Jun 01, 2011 10:00 am

manula

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Thanks for the update. sharing the news.

milanka · 6 Re: PCH Financials- How they utilised IPO money? Wed Jun 01, 2011 10:09 am

milanka

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widanage wrote:I have Four Stories to share with you.

Story No 2 (From the same person)
Most of you may aware that people under value things to lower the import duty. Lower CIF will result in lower duty and balance through illegitimate money transfer mechanisms (known as Undial). What I heard from my guy is, PCH started over valuing the imports. Which resulted legitimate money transfer out of the country to their personal creditors from company's money. My guy also had to pay high import duties on some of his imports because higher prices registered at the customs for some items.

.

Story number 2 – Quite possible , considering the high competition in IT hardware sales.