Olam (SCB)

Olam: SCB Credit Research note coming to the actual allegations (which are not detailed at this stage). The two issues of high leverage and revaluation gain has been raised many times. Even at the latest analyst meet, there were questions around the way they book profits on acquisitions and valuation of assets. House think revaluation is an opaque process and they are being aggressive in booking the gains through the P&L (in the latest qtr, these gains were $10.1mn or 24% of net income). However, to be fair to Olam, their disclosure levels on a lot of other counts is far better than some of their peers. But then commodity trading is inherently a difficult business to understand, account and value – so there have been multiple allegations in the past about the company. For now, we will have to just wait and see what the Muddy Waters report contains.