An overhang in auditing environment after IL&FS fiasco, says Reliance Infra

A day after auditors raised a long list of concerns on Reliance Infrastructure’s (RInfra) financial reporting, company officials called it an overhang in the auditing environment after the IL&FS fiasco. A top official said the company was on track with its debt reduction plan through monetisation of its road assets.

“This is an overhang from the general environment for auditors like IL&FS. They are behaving differently than they were behaving earlier,” said Punit Garg, executive director and chief executive officer for RInfra. “These were the same auditors and nothing has changed between third quarter and the fourth quarter, which would make them think in that direction,” he said.

Anil Ambani-promoted Reliance Group is facing one of its worst debt woes, with lenders invoking pledge shares in some of the group companies. Garg, however, is confident RInfra will meet its debt-free status (at a standalone level) by 2021.

The timeline is an extension from what group Chairman Anil Ambani envisaged last year. In a press conference in August, Ambani had said, “RInfra will be a zero-debt company next year.” 

On Saturday, Garg said the debt-free plan was linked to the sale of the company's road portfolio, which may be completed in this financial year or may spill over 

to the next. As of March 2019, RInfra had a standalone debt of Rs 6,000 crore and a consolidated debt of Rs 15,000 crore, according to the company. Consolidated debt was reduced from Rs 31,000 crore as of March 2018.

RInfra has already entered into a sale agreement with Cube Highways for one of its road projects for Rs 3,600 crore. “The proceeds from this sale should come in the September quarter. We plan to exit the road portfolio (nine projects) in the current financial year. We are on the verge of announcing few more road portfolio sale in the next 60 to 70 days,” Garg said, adding that the company did not plan to exit its airport and metro business.

For the March 2019 quarter, RInfra reported a consolidated loss of Rs 3,301 crore, against Rs 133.6 crore reported in the same period a year ago. It took a one-time exceptional expense of Rs 8,481 crore, which included a Rs 4,500 crore impairment for its defence business and the remaining for invocation of pledged shares in Reliance Power and impairment loss reported at Reliance Power.  

“We have taken advantage of our Mumbai power distribution sale and done a one-time impairment for Reliance Naval of Rs 4,500 crore for the entire investment in the company, there is an opportunity of a write-off from that amount as and when we are able to do a debt resolution,” Garg said.