Himachal Futuristic Communication Ltd (HFCL) has been qualified by its statutory auditor for not making a provision for Rs 632 crore in the accounts for 2000-01.
The New Delhi-based statutory auditor, Khandelwal Jain & Co, maintained that the "consequential impact on assets, reverses and profit for the year 2000-01 was not ascertainable" on the extent of realisability of advances given to a subsidiary for strategic investments and share application money to a company.
When contacted, HFCL chairman Vinay Maloo said C K Ghosal, finance officer, would comment on the issues. Calls to Ghosal's mobile went unanswered.
Had the amount been provided for in the annual report for 2000-01, the company's bottomline would have been eroded.
Against a profit before depreciation and tax of Rs 193 crore as reported in the year, the company's loss before depreciation and tax would have been Rs 439 crore had the entire provision be made.
The auditor's qualification came to light following the report of the Joint Parliamentary Committee probing into the 2001 securities scam, which mentioned that HFCL was one of the companies which experienced irregular movements in share prices.
The HFCL annual report for 2000-01 revealed that the telecom equipment maker advanced Rs 482.60 crore to its wholly owned subsidiary, HFCL Trade Invest, for strategic investments in the field of entertainment, information technology, telecommunication and e-commerce.
Out of Rs 482.60 crore, HFCL gave advance of Rs 448.29 crore to the beleaguered Classic Credit for "acquisition of shares as strategic investments in A B Corp, Global Electronic Comm Services (since amalgamated with Global Tele-Systems) and Shonkh Technologies International.
The annual report also stated that HFCL provided Rs 150 crore as advance share application to Digital Super Highway.
The company admitted that "on account of various ongoing litigation against Classic Credit, the position of acquisition of shares\refund of money is not ascertainable."
However, the company added, "it is pursuing the matter actively and pending crystallisation of the above position, no provision made for doubtful recovery, if any, in respect of the above advances."
On making no provision for providing share application advance, HFCL said that "the entire amount is realisable\recoverable and hence, no provision has been made."
HFCL posted a net profit of Rs 131 crore in 2000-01 on turnover of Rs 1,294 crore.
