Ceats auditors, N M Raiji & Co, have severely qualified the accounts of Ceat Ltd, the RPG group tyre major on account of non-provisions and doubtful investments made by the company.
In a long list of qualifications, the auditors have faulted the company for not maintaining proper records of stocks, for investing in debentures of loss-making subsidiaries and group companies not making provision for loans and debts, which in the auditors opinion are doubtful of recovery.
Due to this non-provision, profit for the year is higher by Rs 4.42 crore and reserves higher by Rs 8.39 crore. As per the companys own admission, changes in accounting methods have resulted in profit being higher by Rs 9.96 crore.
Regarding reconciliation and proper maintenance of records, the company has stated that it is taking necessary steps to improve operational controls and systems in line with expanded business requirements.
The auditors state they are unable to express any opinion regarding investments made in zero coupon and convertible debentures and deposits of subsidiary and associate companies amounting to Rs 95.03 crore.
The value of many of these investments has significantly declined and many of the companies have suffered losses. The company has also not received interest at regular intervals in unquoted debentures of Rs 24.40 crore.
Though Ceat maintains that these subsidiaries carry a long-term benefit to the company, auditors have indicated these investments were shaky in face of the companies making losses.
Reconciliation of finished goods stocks, analysis and explanation of stock differences, adjustments there against, process wastages and related inter-factory transfer differences are pending.
The impact, thereof, on the result for the year is presently not ascertainable, the report states.
Ceat had a bad year last year with sales dipping to Rs 1,317.14 crore and profit dipping to Rs 6.60 crore from Rs 17.71 crore. Without a hefty other income of Rs 113.7-crore, including profit on sale of investments to group companies, Ceat would have made a loss.
Rs 100 crore bond issue: Ceat Ltd plans to raise Rs 100 crore through bond issues in the domestic market to part-fund its expansion plans which include increasing tyre capacity by 8.5 lakh tyres per annum in Maharashtra. The company proposes to seek shareholder approval for the bond issue at its forthcoming annual general meeting in Mumbai on September 27. The company has two plants in Nasik and Mumbai in the state.
