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Bartronics: What's cooking?

A recent article by R. Balakrishnan at Money Life caught my attention. It’s about Bartronics, a share I recently traded.

Against total sales of around Rs. 64 crore in the full year, the year-end debtors stand at over Rs71 crore! And the balance sheet says that debtors’ outstanding for less than six months is Rs49 crore. Interestingly, by seeking its quarterly results for the full year, I find that in the last two quarters of the year, Bartronics had notched up sales of Rs35 crore. Against total sales of Rs35 crore in six months to March 07, the company’s debtors’ outstanding for less than six months is Rs49 crore. Funny arithmetic indeed!

I have verified from the Bartronics Annual Report (2006-07) that Balakrishnan is correct – they do have these numbers in their annual report. Simply put: They have said they “sold” 64 crores worth of goods, and the need to still receive 71 crores from their customers. More than a year’s turnover as receivable! That’s reeks of either government contracts (which Bartronics has) or something funny. No wonder operating cash flow is negative!

Balakrishnan perhaps saw a misprint because the capital allocation is quite clear in the link above. There are 8 lakh stock options, 46 lakh promoter warrants (at 130) and 32.5 lakh institutional warrants (at 110). A total of 87 lakh shares will be added to the current 1.78 crore, meaning real outstanding shares are considered to be 2.65 crore (or will be as of Dec 2008). That brings the EPS for the FY down to 5.54.

One other problem: They mention that they didn’t spend anything on R&D in the year, but also admit that they must do research in order to be competitive. Uhm.

The stock’s done well, and it’s been some fantastic momentum. I think management should answer these questions (I will mail them myself) – if not, this is a bubble stock. To its credit, there is a new smart card facility coming up. And the first Q 2007 results have been very good, up nearly 100% year on year. So while it doesn’t look overvalued to me, it’s not exactly cheap either.

But be careful, if you own this share. The financials don’t quite seem to add up.

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