Nakumatt files for bankruptcy

[system]

@Prometheus

Money isn’t about how much you are making. It is also about how much you move. A healthy business is one which moves as much money as it can while staying positive. How? Getting loans and spending that money elsewhere to make a positive profit while still paying back the interest and principal on the loans. Every single business, including banks, work like this. Bank borrows money from depositers and pays them back at an interest. Their core business would be to lend this money elsewhere at a higher rate than what they are paying their depositers. Getting to a large cashflow position takes time, so at times, it is easier to acquire an ailing business with a higher cash flow base.

But tell me, if you acquire nakumatt with its 30bn debts, how do you recover that money? Why start by paying debts even before you make money from the business? Same with banks- inherit depositors money that only exists in the books. You start by paying from your own pockets before even making a cent. How is that good for business?

[Prometheus]

@Thagichu

But tell me, if you acquire nakumatt with its 30bn debts, how do you recover that money? Why start by paying debts even before you make money from the business? Same with banks- inherit depositors money that only exists in the books. You start by paying from your own pockets before even making a cent. How is that good for business?

Payment plan. You don’t pay everything upfront. Do an evaluation on what’s urgent vs time sensitive such that you don’t lose market share. For Nakumatt, this would be making sure their leases in prime spots are paid for and secure. Then work on what is salvageable. With banks, pay depositers with less than 1m then come up with payment plans for the rest, as you collect on loans from your debtor… Paying these debts is the cost of acquiring an entity with large cashflows. Nakumatt is 30 yrs old. Chase Bank is about 20yrs. If you were to get their market share, how long will it take if you start an operation now? What would that cost viz a viz paying out part of the debt?

[system]

@Prometheus

Payment plan. You don’t pay everything upfront. Do an evaluation on what’s urgent vs time sensitive such that you don’t lose market share. For Nakumatt, this would be making sure their leases in prime spots are paid for and secure. Then work on what is salvageable. With banks, pay depositers with less than 1m then come up with payment plans for the rest, as you collect on loans from your debtor… Paying these debts is the cost of acquiring an entity with large cashflows. Nakumatt is 30 yrs old. Chase Bank is about 20yrs. If you were to get their market share, how long will it take if you start an operation now? What would that cost viz a viz paying out part of the debt?

Still not convinced. How much profit was nakumatt (with its client base and reputation and prime leases) making in an yr? And how much time will you need to recover that profit so that you start at zero? This would mean that Nakumatts goodwill (or is it badwill in this case) is 30bn. Still not convinced.

And think of a bank. Who would honestly take their money to Chase bank when they kaushad you the first time? Even potential customers would point at it like a grave.

[Prometheus]

The point isn’t profit. It’s how much you can move. People who know this know what to do with it.

@Thagichu

Still not convinced. How much profit was nakumatt (with its client base and reputation and prime leases) making in an yr? And how much time will you need to recover that profit so that you start at zero? This would mean that Nakumatts goodwill (or is it badwill in this case) is 30bn. Still not convinced.

And think of a bank. Who would honestly take their money to Chase bank when they kaushad you the first time? Even potential customers would point at it like a grave.

[system]

@Prometheus

The point isn’t profit. It’s how much you can move. People who know this know what to do with it.

Its pointless to move stuff without profit. But as you said, people who know this know what to do with it

[sani]

Deferred tax assets.

[system]

@sani

Deferred tax assets.

They can’t recognise them

[Kana_Kega]

@Thagichu

But tell me, if you acquire nakumatt with its 30bn debts, how do you recover that money? Why start by paying debts even before you make money from the business? Same with banks- inherit depositors money that only exists in the books. You start by paying from your own pockets before even making a cent. How is that good for business?

From a purely finance perspective, that really isn’t an issue. The real question should be, how long would it take you as an investor to recoup your cash? I bet it would take no more than 7 years seeing as Nakumatt still holds a lot of stock, still has tangible and intangible assets and still holds sizeable market share. Nakumatt has always had people willing to come in and provide the cash and acquire some equity but the owners were not too keen on that. Ultimately (and ironically) that could very well be how the Nakumatt story ends

[Swansea]

@Thagichu

Still not convinced. How much profit was nakumatt (with its client base and reputation and prime leases) making in an yr? And how much time will you need to recover that profit so that you start at zero? This would mean that Nakumatts goodwill (or is it badwill in this case) is 30bn. Still not convinced.

And think of a bank. Who would honestly take their money to Chase bank when they kaushad you the first time? Even potential customers would point at it like a grave.

Please read up on Warren Buffet and his Berkshire Hathaway company and how it made him one of the world’s richest men. It is predicated on the same concept.

[system]

I hope they go bankrupt never to return.

[kah_tony]

I have a feeling that when Nakumatt is taken into administration they will find a can of worms similar to Imperial Bank. How does a big retailer go down in a span of 5 years after a rally of expansion. I think that is why this muhindi did not want people to buy into the company and he gets minority stake. They sat still with big offers coming in and watched the ship sink.