Channel stuffing

Pushing more product into distributors than they can sell, so the sales are booked now and the problem arrives later. Revenue and profit rise in the quarter; the goods sit in a warehouse belonging to somebody who has not paid.

Its signature is a fourth quarter that carries far more than its share of the year, with receivable days jumping at the same time. A consumer company booking ₹1,400 crore of its ₹4,800 crore annual revenue in the March quarter is at 29%, against the 25% an even year would give. The question you want answered is whether the March quarter carried a similar share in earlier years.

Where a company reports primary sales to distributors, secondary sales from distributors to retailers and offtake to consumers, the gaps between them are the direct measurement. Most don't, so the proxies have to serve.

Then the bill arrives. Sales are weak the following quarter, returns rise, and discounts appear.