Wednesday, November 16, 2011


Like women’s fashion, there are words and phrases which come into our daily lives at light speed and disappear equally fast. Very few stick around to become part of our long term vocabulary. I have experienced this in all facets of life over the years whether in College/Corporate world/ Indian movies or in the investing space.

I of course rue words and phrases which are dear to me disappear gradually from the popular vocabulary. For Ex the word “Zulf” was so intrinsic to Hindi romantic songs but has been gradually replaced by the crude “Baal”.

When I was in management school the word “ Paradigm” had just emerged as the new paradigm of corporate lingo and everything kept moving to newer paradigms. Paradigm though still used fairly extensively has now been replaced by a more easy to pronounce “ Plane”. We all now seem to moving onto different planes and of course try to land on the “Same Page”.

The investing world also has its fair share of words and phrases that come and go like flavours of the month. It was with much amusement that I was recollecting just about 6 – 12 months back one of the most popular pair of words that most TVanchors and pink newspapers were mouthing was “ Coupling” and “ Decoupling”. I am sure most of you have a wry smile about this one.

Readers would recollect we used to be “Coupled” one week and miraculously used to get “Decoupled” the next week and again get coupled the next week. It was like speed dating and I thought it would have been easier to track Liz Taylor’s everchanging marital status than figuring out where our markets were in their love affair with global markets.

I of course am not so sure whether we are currently coupled or decoupled though our correlation or the lack of it with the global markets remain the same.

A new phrase that I m increasingly hearing for the last 6 months and has entered the Tv anchors lingo is “Risk Aversion”. It would be interesting to see how long “ Risk Aversion” lasts or will it also disappear gradually if markets go up.

To end, a nice phrase from the English romantic poet William Wordsworth

The mind that is wise mourns less for what age takes away; than what it leaves behind.

Sunday, November 13, 2011

Interesting Accounting - Jyothy Laboratories

I was listening to the current quarter concall of Jyothy Laboratories and came across some interesting accounting.
In the month of May 11, Jyothy Laboratories announced the acquisition of Henkel’s stake in its Indian subsidiary Henkel India, gaining a foothold in the detergent market. Henkel India has been losing money for sometime and Jyothy has initiated action in turning the business around. As part of the exercise Jyothy has borrowed money on its balance sheet and lent that money to Henkel to manage debt on its books.
In the current quarter Jyothy has borrowed over Rs 460 crores ( 4600 Rated Taxable Zero Coupon Non Convertible Debentures  of a face value of Rs 10 lacs) by issuing short term debentures to the bank and lent the same to Henkel India. The debenture has been issued for a period of 91 days and will be redeemable at a premium of Rs 26,801.47 per debenture.
Now comes the interesting part. Jyothy in its current quarters results has booked other income of 14.82 crores. Nearly about 12 crores of it is interest paid by Henkel India to the parent for the money that Jyothy has lent to it. It is a significant amount considering the fact that Jyothy’s PBT for the quarter is Rs 16.93 crores.
But guess what, there is no corresponding interest expense booked in Jyothy’s accounts against the income that they are booking. On the concall the management said that since it is a zero coupon debenture which is being redeemed at a premium, the company is allowed to write of the redemption premium ( which is essentially interest) from the reserve and surplus. So magically they are booking interest income in the profit and loss account and expensing it out in the balance sheet.

Not really Ujjala bright and clean I must admit