The share price of Rolta India Ltd has suffered a 20 per cent markdown today on rumours that the company was involved in accounting irregularities.
The stock of the company closed lower by 18.71 per cent at Rs 119.50 after fluctuating in a wide range of Rs 118.10 to Rs 146.40.
The combined volume of trades on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) stood at 2.98 crore shares, which account for almost 47 per cent of the total paid-up equity.
In a clarification to the BSE, the company said, "We have recorded a sales turnover of over Rs 3,00 crore in the financial year 2001. These include Rs 76.03 crore of costs of self-assembled and /or integrated capital equipment transferred to our divisions."
It further said, "Rolta is a hi-tech company. Over the years, the company has acquired substantial expertise, which it utilizes for in-house development, integration and customization to its advantage. It would have incurred substantially higher cost besides long delivery-cycle for procuring similar systems from external sources. This inter-divisional sale represents direct cost of material, labour and overheads, and no profit element is involved and hence the bottom line is not affected. The same has been capitalised as computer plant under the head, fixed assets, and depreciation has been provided accordingly.
Apart from the above, addition to gross block also includes other directly procured standard computer parts, peripherals networking etc, which have been cost effectively procured from the market. Thus, the total addition to the gross block is much higher than the amount of inter-divisional sales. During 2000, the inter-divisional sales was Rs 45.09 crore and, during 2001, it increased to Rs 76.03 crore due to the major expansion programme."
"The company has correctly and rightly reflected this addition to fixed assets in the cash-flow statement, since it involves outflow of cash by way of payment for material and overheads. The company has been following this practice uniformly in the past and proper disclosure have been made in the annual accounts every year. This practice is also followed by other major corporates in India," the company said to BSE.
"The Company has exhaustively covered the point on debtors in the management discussion and analysis section of its Annual report 2001. The Company's overseas projects executed from its facilities in Mumbai are typically spread over one to three years. The payments for such projects are milestone based and major portion of these are received when project gets accepted and approved.
Even in the domestic market the Company is dealing with various Government/Semi-Government agencies, in offering turnkey solutions and services and these contracts involve a significant amount of value-addition and are spread over long periods resulting in long payment cycles. The Company factors these delays into the pricing of its solutions and services since the business is conducted with established and credit worthy customers. The Company's prudent client selection is reflected in the fact that there were no bad debts arising in the year 2001 or earlier years," the company stated in the communication to the BSE.
