Ahsan Habib

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Local electronics giant Walton is, arguably, going through a purple patch.

For instance, earlier this week, it flagged off shipments of 26,000 air conditioners to India’s Hyundai and also inaugurated its sprawling lift manufacturing plant, both of which are firsts for Bangladesh.

There appears to be no end to its ambitions.

But, funding is needed to achieve those goals, which is why the trailblazing homegrown electronics manufacturer has decided to turn to the capital market to raise Tk 100 crore.

There is tremendous excitement around Walton Hi-Tech’s debut on the Dhaka Stock Exchange, which is why it is reasonable to assume it would be commanding a good premium. However, a deep dive into its financial reports doesn’t paint a clear, rosy picture.

Walton Hi-Tech Industries showed a staggering 290.6 per cent surge in profits and 89.4 per cent jump in its turnover in the 2018-19 financial year -- just before its listing on the stock market.

In the 2017-18 financial year, the company’s profits and turnover had dropped 52 and 14.4 per cent year-on-year respectively.

A chartered accountant preferring anonymity asked: “Is this high jump in turnover really because of demand from consumers? What was the miracle last year that it witnessed such an incredible growth?”

On closer look it appears Walton shifted large volumes of products in its last financial year -- but on credit to distributors, for the most part.

Curiously, despite the higher profits and turnover in the 2018-19 financial year, the company’s closing cash and cash equivalents dropped 9.78 per cent to Tk 102 crore, according to the prospectus.

At the same time, overall trade and receivables trebled to Tk 1,184 crore, which means the sales were made mostly on credit.

And, most of the sales were to Walton Plaza, a sister concern of Walton Hi-Tech Industries. Walton Plaza buys products off Walton Hi-Tech to sell to sub-dealers and end users.

In the last financial year, Walton Hi-Tech’s sales to Walton Plaza rose 138.6 per cent to Tk 1,602 crore.

After the sales, Walton Hi-Tech’s receivables from Walton Plaza stood at Tk 1,048 crore, which was Tk 440 crore a year earlier.

“Walton’s sudden sales on credit, especially in the listing year, are doubtful sales,” said Mohammad Mohiuddin Ahmed, executive director of the Financial Reports Monitoring Division at the Financial Reporting Council.

If the company shifts the products to its distributors, it is fine -- legally.

“But, it seems Walton Hi-Tech has done it with an ill intention, which is to get a high premium,” Ahmed said, adding that whether the spike in profit came from genuine consumer-driven sales would be clear over the next few years.

The bidding to discover the cut-off price for Walton Hi-Tech’s initial public offering began yesterday and will conclude on March 5.

Institutional investors participate in the bidding after analysing a company’s financial reports and business prospects.

Walton Hi-Tech is aiming for a hefty premium, which is the amount over the face value of the share.

The company’s prospectus shows its turnover rose to Tk 5,177.3 crore in the 2018-19 financial year, which was Tk 2,732.9 crore in the previous year. So, its turnover rose about Tk 2,444.35 crore in a space of 12 months.