Avoid Temptation Foods and Compact Disc India - Fraud, Fake companies

Temptation Foods - Amazing valuation

I was shocked when I found a company with the balance sheet of temptation foods selling so low - almost close to its EPS. Although it is possible to find several stocks current market which are 'value for money' a company which has such a decent growth as Temptation Foods and which is selling at a P/E of around 1.2 - makes me feel suspicious. Ok, let me be honest, this time, I was less suspicious and more excited at first about the investment opportunity. However, as I continued finding our more about Temptation Foods - I have decided to stay away from this stock. Here are two quick reasons:
  1. Temptation Foods had manipulated it balance sheet to show that it holds 11% stake in Kohinoor Foods, when it actually held 5% stake. A SEBI notice regarding this sent the stock plummeting to hit the lower circuit. Consequently all FII's have dumped this stock, and rightly so.
  2. The company now wants to double the equity by issuing warrants at Rs. 36. The EPS of the company is Rs. 25. There is no way the management can justify a price as low as Rs. 36. This is clearly a dubious money-making attempt of the management of Temptation Foods India.
I would like to add a note that probably Temptation Foods is not a fake company. Which means it seems to actually have products in the market (unlike Compact Disc India mentioned below). However, with the given management, it is a wise decision to avoid investing in this stock. Remember, a fraudulent management can really leave the investors in a shock (remember what Satyam's managers did to that company?). You will hear a lot of things about Temptation Foods - for e.g. it being the next possible acquisition target for Nestle etc. While this may or may not be true- with this kind of managers, I would get rid of this stock - NOW!.

Compact Disc India - a step further in Fraud

Compact disc india looks even a bigger fraud than Temptation Foods. From what I read, this looks like a completely fake company !

The promoter of this company - Suresh Kumar has a dubious record. Mumbai police has written to SEBI about Suresh Kumar floating fake companies to make money. The details are summarized very well in Tarkeshwar's blog. So I won't elaborate further.

Please avoid Compact disc india if you love your hard earned money !

Jul 6, 2010

5 comments:

Brijwanth July 21, 2010 at 6:24 PM  

Thanks for your suggestion

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