Today's Writing Products - Amazing result!

Although I have never tracked this company, I am writing about this because;

1. This whole situation has a bit of entertainment value (Me and my friend Saurabh, who pointed this out to me over a cup of chai, had quite a laugh about it)
2. I am not finding decent companies at decent valuations to write about! :-D

Today's Writing Products is a BSE-listed company. It has recently managed to perform a herculean task. In its September 2011 quarterly results, the company has managed to report a net loss of Rs.68 crores, on net sales of Rs.15.5 crores (seriously! there is no decimal error here). I agree that making a loss of more than 4 times your sales is rather difficult, but Today's has managed to do it.
The operating business itself has reported a loss in the quarter. But whats more interesting are the 'exceptional items' in the result..

• In September 2010, the company had an inventory of Rs.52 crores. In the September 2011 result however, the company has written off Rs.25 crores worth of inventory, citing it as 'slow moving inventory'. This has been included in the 'Consumption of raw materials' in the September 2011 results. Hmm..
• In September 2010, the company had debtors of Rs.54 crores. In the September 2011 result however, the company has written off Rs.39 crores worth of debtors 'based on continuous evaluation of overdue debtors'. Hmm hmm..
• So thats a total write-off of Rs.64 crores. (Well, the market cap of the company is Rs.7 crores!) 

Here is what it looks like...

Ok, entertainment apart, a few questions come to mind..

1. Were the reported inventory numbers real? Typically, products such as Today's can go 'out of flavour' or become outdated/obsolete very fast. But the company does not write it off, thereby hiding losses. However, the inevitable large write-off materialises at one time or another. We all should remember this while analysing the Koutons and the Archies of the world.
2. The bigger question..were the reported sales real? The company could not recover money from debtors, and quite a large sum, not a small one! This obviously raises doubts.

While analysing companies, we all analyse numbers quite a lot. But its also important to look into the fact whether the numbers make sense. Whether the numbers are supported by proper tax payments, proper dividend payments and proper cash-flows.

Cheers and happy investing!

P.S. Today's is in a very sorry state. Deteriorating business, directors quitting, jazzy announcements which never saw the light of day, shares pledging, reducing promoter stake, corporate debt restructuring..it has it all. Better to not even look at it..