Blue Diamonds was a retailer favorite stock on the exchange mainly due to its price. Company raised funds through a rights issue in late 2014 and later was under scrutiny for not utilizing the proceeds for the stated purposes. Later an audit found out certain issues in its financials. After several board and management changes later, the company is controlled by related parties of Daya Group.
Annual report for 2016/2017 was released on 12th October which has something interesting to note. Bimputh Finance PLC (BLI) is a related party also controlled by the Daya Group and shares few directors in the board.
Profit vs. loss
BLUE reported a gross profit of Rs. 13m for year ended March 2017 as per unaudited reports released on 31st May 2017 and even along with June results reported on 15th August 2017. Two months later, audited reports show a gross loss of Rs. 23m with much lower revenue and higher cost of sales. This also results in a loss per share of 0.18/- for the year ended March 2017. Further, shareholder equity is Rs. 188m compared to Rs. 242m reported in the unaudited reports. Minor differences are common when audited reports are done but in this case it is more than 20%.
FD and loan over FD
Annual report also shows that BLUE has placed a Fixed Deposit with BLI for Rs. 15m at 15% interest for 5 years. Around the same day, company has taken a loan over that FD for 16.5% interest essentially providing profits for BLI. Previous month company had placed another Fixed Deposit at NTB for a similar tenure at 16% which is more than what it receives from BLI. Further, these are not clearly reflected in the unaudited statements but shown in the audited accounts.
