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Friday, July 18, 2014

Jayant Agro Organics: Auditors of Jayant Agro hold more than 1% in Jayant Agro.

Auditors who audit the books like what they see in case of Jayant Agro Organics. Best way to show your confidence is holding more than 1% stake in Jayant Agro by the auditors..

June 2014 Public holding more than 1% stake in Jayant agro:
1. Balwan Finance & Leasing Pvt Limited - 1,93,583 shares - 1.29% of paid up equity capital
2. ITOH OIL Chemicals Co. Ltd - 6,00,000 shares - 4% of paid up equity capital.
3. SShyam - 1,50,441 shares - 1% of paid up equity capital.

Now if we look for promoters of Balwan Finance & Leasing Pvt ltd. we get the following info..
Director Name: Sushila Tilokchand Ostwal
Director Name: Twinkle T Ostwal

Now if we look at the annual report March 2013.
Auditors are:
T.P Ostwal & Associates (Regd.)
Chartered Accountants.

Now T.P.Ostwal & Associates Senior partner is Tilokchand P Ostwal..

So there we have it .. one of the largest public shareholders of Jayant Agro is the Auditors of Jayant Agro itself.. Clearly the CA can see something other's cannot ..

One more Feather in the Cap of Jayant Agro Organics..

Conclusion: The Auditors who's job is to audit that the books are in order seems to be impressed by Jayant Agro Organics Financial.. so impressed are the auditors that he is willing to buy 1,93,583 shares (1.29% shareholding in Jayant Agro worth 2.43cr @126 not directly but through family holdings).


Anonymous said...

That is a clear case of conflict of interest here dont you think? Why would the auditors report anything fishy in the accounts if it is not in their interest. Is this even legal?

This in my opinion is a big red flag and definitely not a reason for buying the stock.

km said...

Dear Prahalad,

Its true its conflict of interest. I run a small private firm. My invitation for a shareholding interest in my company to my auditors was turned down purely for this reason. Its not allowed for Pvt ltd companies.

I dont know how it would be looked at if its done through a related entity.


What'sUp Prahalad said...

Dear KM ji & Anonymous ji:

as KM ji has already said.. its not legally possible.

As you can see its a completely different firm (investment vehicle) privately held..

looking at jayant agro as a company..
1. its got wafer thin margins ..
2. Profits and topline are not growing by leaps and bounds
3. valuations are also not very high 4-5PE..
yes if Jayant was a high flying stock.. which was growing by leaps and bounds financially and stock price wise.. we could talk about "hype" and fraud with cooked books..
Personally I see a closely held company.. if you see.. the march 2013 annual report.

top 104 investors hold 82.43% of the company shares.

top 676 people own 92.91% of shares..

Fraud most likely will happen when general public is holding majority of shares..

I am sure if there is fraud.. the personal investment of auditors would be the first to flee the sinking ship..

and shareholding would be:
promoters 25%

public 75%
Right now its like 676 family and friends own 92.9% of shares of jayant agro..
infact when the stock moves then every one of them will profit from it..

and maybe then the public will be invited by marketing it as a multibagger..

=happy investing

sumit jagtap said...

Dear sir, I am Chartered Accountant and as per companies act, the audit is void if the CA himself holding shares of the company of which he is doing audit.
for information please go through following snapshot of section 141(3) of companies act 2013.

The following persons shall not be eligible for appointment as an auditor of a
company, namely:—
(a) a body corporate other than a limited liability partnership registered under
the Limited Liability Partnership Act, 2008;
(b) an officer or employee of the company;
(c) a person who is a partner, or who is in the employment, of an officer or
employee of the company;
(d) a person who, or his relative or partner—
(i) is holding any security of or interest in the company or its subsidiary, or
of its holding or associate company or a subsidiary of such holding company:
Provided that the relative may hold security or interest in the company of
face value not exceeding one thousand rupees or such sum as may be prescribed;
(ii) is indebted to the company, or its subsidiary, or its holding or associate
company or a subsidiary of such holding company, in excess of such amount as
may be prescribed; or
(iii) has given a guarantee or provided any security in connection with the
indebtedness of any third person to the company, or its subsidiary, or its holding
or associate company or a subsidiary of such holding company, for such amount
as may be prescribed;

What'sUp Prahalad said...

Sunil Jagtap ji:

I am an engineer.. so actually I am the last person to know what the rules are.. having said that as you can see I have pointed out the details for every one... now the question is how to go about getting the promoters/management to respond..

maybe some one needs to buy 1 share of jayant agro and then raise it with the Company Secretary or the promoters/management.

having said that T.P Ostwal is a well established Chartered accountant Firm and I'm sure they knows what they are doing.. and looking at the data.. ownership is not direct and maybe cannot be linked..

so if you think its something you can pursue with jayant agro management pls feel free to do so.. I have provided all the information and its all public domain information..

I personally feel the Auditors know what the rules are and I'm sure they know they are perfectly within the law..

=happy investing