Avon Corporation is in the business of manufacturing weighing machines. It went public in 2008 and is listed on the BSE. The company has displayed apparently impressive growth in revenues and profits with modest leverage. The good news ends there. A closer examination of the listing prospectus and subsequent annual reports indicates that the company has bled cash from operations over the last seven years. Profits seem to be tied up in ‘Other Debts’ and ‘Advances to Suppliers’. One is forced to ask why the company’s debtors cannot pay in time for relatively small-cost items such as weighing machines and what the necessity is for such large advances to suppliers. Moreover, there is no mention of the significant class of raw materials used in manufacturing – as is common practice with other public companies. Apart from this, management appear to have diversified into an unrelated business of desigining ‘Activity Monitoring Software’. Neither the extent of this activity nor its
An Individual Investor's Perspectives On The Indian Financial Markets