Wednesday, March 2, 2011

Sharp India Ltd - How blatant can one be?!

We often crib about how promoters and managements of Indian listed companies never think of minority shareholders, take minority shareholders for a ride, think only of enriching themselves, etc.etc.

Now if you are, lets say, an Essar Group company :-) , you will do all the above in a nice, quiet and complicated way, which a majority of your shareholders will not even understand or come to know! (sarcasm intended)

But if you are Sharp India Ltd., you will do something which is not so sophisticated, complicated and hush-hush. Leave the niceties aside, screw the minority blatantly!

Well, here is what these Sharp people have done.. (Thanks to Khyati Shah for pointing this out!)

On 15th Feb, 2011, the company submitted a notice of postal ballot on the BSE's website. Let me just put up a grab from the notice..

Click to enlarge

So basically what Sharp has done is to convert the listed company into merely a manufacturing outfit. Sharp India Ltd will do all the manufacturing and sell its products to Sharp Business Systems (I) Ltd., which is a 100% subsidiary of Sharp Corp, Japan! Sharp Business Systems will then sell the final product to the consumer.

Why should this trouble Indian shareholders?
Lets say that Sharp India used to manufacture a colour TV for Rs.15000/- and sell it to the consumer for Rs.20000/-.
Now what may happen is that Sharp India will manufacture the TV for Rs.15000/- and sell it to Sharp Business Systems for lets say Rs.16000/-. Then, Sharp Business Systems will sell it to the end consumer for Rs.20000/- as before.
So the cream of the margins and profit is enjoyed by Sharp Business Systems, which is a 100% subsidiary of Sharp Corp, Japan. This money never comes to the Indian shareholders, who might be left holding shares of just an outsourced manufacturing operation type company. "Redefining the role of Sharp India Ltd" indeed!
And I am quite positive that the resolution will be passed with the requisite majority, as always!

Whether things will progress as detailed above? I cannot claim that I know it for sure, only time will tell. But the changed structuring of the organisation surely seems to suggest so.

All hail the promoter!
God save the minority!

Cheers and happy investing!

(P.S. : After checking the market price of the stock out of curiosity today, I found it to be in the upper circuit!)


barney stinson said...

hi neeraj,
kudos for your sharp insight,willingness and wit for unmasking how promoters screw the minority investors( thanks to ms.khyati as well).i have been a victim of this myself as my affair with temptation foods would demonstrate(one of their secretaries , i think in fact threatened to report me to the police for asking routine common sense questions!!!!!)...a truly sorry tale....thankfully , being the extremely lucky fool that i am , i escaped with a small profit.
promoters screwing minority shareholders has unfortunately become a routine part of the investing landscape and we ,especially the value investors have really got to look out for each other.IT WOULD BE REALLY AWESOME IF YOU COULD SHARE SOME ACCOUNTING RED FLAGS OR SOME OTHER VITAL SIGNS TO CHECK IN A STOCK IN SOME OTHER POST.

Neeraj Marathe said...

Hey Barney..
Legend.......dary name man!
Interesting adventures with temptation foods i must say..btw, did u chk out their 2008 AR? really tempting!!
On a more serious note, i agree that a lot of promoters do take the minority for a investors, we shud watch out for this a lot..
i will surely try and put some accounting or other red flags when time permits..
thnx for the 2 stocks..

Anonymous said...

this is called sharp practice !

Robin Thomas said...

How the "brokers" are advising their clients.
FortShare recommending Sharp -

Neeraj Marathe said...

:-) Thnx Robin

Anonymous said...


So true

Am a shareholder. And have initiated action


Neeraj Marathe said...

Glad to hear that Arvind..
do lemme know how things pan out..all the best!