So if you have used Tinder & Twitter or either of it, you already know about #OnTinderAtTinder. So basically you have nice looking pic on app but in real life you look totally different and its not just limited to female, males do equally indulge into same. Just try it or ask your work colleague ;). Anyway point is, nice looking pic entices you and when you in meet in real life , you are in for a surprise. In Stock market language that's kind of Value Trap, you look at the stock, you see the "attractive valuation" you buy it and then after holding for long time you understand you have got into Value Trap. Valuation were not attractive but cheap and some times stock deserve to to trade at cheap valuation. RS Software is probably Value trap, read on to know more.
This has to be very costly typo or whatever it is, not sure who is responsible for this error – auditor, company officials or somebody who made that particular excel or some secretary who mailed wrong file or did mistake in calculation or company software (so company who made that software would be responsible) etc etc.
So this company called RS software has been in limelight for giving phenomenal return – 279% over 33% by Nifty over last 5 years…that’s pretty awesome (period from 2011 till 2014)
However then came correction, stock corrected from high of ~396 to ~120.
And on 23-jan-16 company declared its 3QFY16 results, given below
Just look at that line item number 14, showing share of profit /loss of associates – Rs2,009 lakh or Rs20cr effectively wiping up of all the loss company had reported during the quarter. (wrong result copy on BSE)
Now comes the best part or the part where somebody would lose his job & correction in market cap.It happens that it was typo, it was suppose to be just Rs20 lakh or Rs0.20 cr, meaning loss continues (corrected result copy on BSE).
As of today company has a market cap of around Rs180cr and cash of Rs125cr....one is probably looking at a value trap.
So long time ago in early days in my career, I remember during one meeting with a company a senior analyst was enquiring with company management about internal controls, risk management, auditors etc and management was like,” ya we use state of the art system” and analyst probed further like what softwares do you use? I was like what does that mean?…what do you mean by that? And bingo management was pretty much caught off guard and they said we use all original softwares by microsoft ,sun, oracle etc etc the best of the best. And if you know how organization are run, one ought to have ERP, to avoid such (above one mistakes) typos and frauds that anybody may try to commit knowingly or unknowlingly. Needless to say installing an ERP doesn’t guarantee that such thing would not happen.If you understand this software you would know that these don’t allow power to be in single hand. Hence committing fraud always needs more than 1 person, moment the number increases chances of fraud reduces, because not everybody has black heart. Hence we have infosys , HDFC, Unilevers, Asian Paint and many such good names.
