There are more Gensols on Dalal Street. You just need to learn how to find them

For all those who think Gensol is the first or the last instance of promoters siphoning off money from a company for personal use, think again. Among all the companies that went under the IBC hammer, there were many where promoters had taken money out through multiple shell companies.
Some of these companies are listed on the SME Stock Exchange, but there are many that are listed on the main stock exchanges as well and could be future Gensol. Identifying them is not easy; but it is not difficult either, provided you know what to look for.

When you look at any company, be clear what is more important. Is it net profit? Or is it the cash flows?

While the street always prioritizes net profit, which a company declares, the real thing to study is the cash flow statement. It is here that the truth lies.

A look at the cash flow statement of Gensol clearly underscores this point. While the company was claiming to be making profits, its cash flow statement was telling a different story.

So, how to find the clearly identifiable red flags and gaping holes? It can be done by looking at two things and relating it to a third. First, study the balance sheet and the profit-and-loss account. And then relate it with the cash flow statement.

Are you interested in finding out whether you have a Gensol in your portfolio? We will help by showing you how to read and relate the three most important things: The balance sheet, the profit-and-loss statement, and cash flow statement.

Please join the ET, Value and Valuation MasterClass.
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Here we will focus on simple yet very effective ways to figure out which balance sheets to believe and which not.

Remember one thing: Whenever money is siphoned off from a company there will be a few stakeholders in that system who know what is happening. Do you believe that those higher up in the finance department of Gensol did not know that money was being used for purposes it should not be used for? But they kept quiet, probably to save their jobs. As an investor you should know how to protect your money.

To some, it might appear to be too long a time to spend on a subject like investing. But remember: Where the market is concerned, people who invest their time before they invest their money are more likely to be successful.

To spend your weekend to learn the art of reading cashflow statement
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