Whistle Blowers and Barking Dogs: Pay Heed

Thursday, February 05, 2009

I have been barking about the stock market in India and globally for a long, long time...if you have been listening, then you are safely invested in fixed term deposits at a Bank, have no equities and no mutual funds. There are good companies out there; but the short sighted accounting wizard owners of some companies are ruining the environment for good companies.

How else do you explain the situation in India today? Forget the Satyam/Raju saga...I am sure there are a few others out there that will be exposed, hopefully not of the same scale. I am talking about the real estate companies...

If you have followed my blog, there are innumerable "barkings" and warnings re : Realty companies. Parsvnath reported earnings are down 95%, Unitech is down 85%, DLF is down 75%. This is sheer nonsense...their earnings are not down on this scale, it is their previous earnings which are obviously wrong.

These companies are dominated by their owners..I hate to tar everyone with the same brush...but isn't Satyam/Raju's fraud as a result of a dominating owner...who determined the accounting process.

So, while I continue to suggest 2500 Nifty as a fair value to buy the Indian economy and market clearly the risks on the downside have risen dramatically...it is the trust factor. There will be very few investors willing to make quick decisions on India investments and before they do there will be questions which management in India will have a difficult time answering.

Which brings me to some anecdotal evidence...in 5 star hotel restaurants around Delhi/Gurgaon there have been many large teams sitting down to dinner together...many foreigners, some quite young. As I observed some of these dinners, it was clear that the foreigners were not the typical investment banker/private equity types..some of them looked geekish. It turns out that these teams are not scouting new investments, but have been sent to audit the value of their current investments...a result of the Raju debacle.

Which brings me back to the title of this post...to bring back trust clearly we need to blow the whistle on shady accounting practices and shady marketing of results. So a whistle blower is required...

If anyone has a story to tell which is compelling regarding malfeasance at any company...send me a message and i will publish it on this blog without any reference to the sender.

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