Mumbai, May 3 (PTI) The auditors of engineering company Hindustan Construction Company (HCC) have questioned the ability of its already troubled subsidiary Lavasa Corporation to continue as a "going concern" as its consolidated net-worth has been fully eroded.
Presenting their report on the financial results of the company, auditors Walker Chandiok & Co has expressed their doubts on the HCC management which had filed the financial statements on a "going concern" basis.
In a note, the auditors mentioned that Lavasa has incurred losses and consolidated net-worth as on March has been fully eroded.
Lavasa, a subsidiary of HCC Real Estate, owes around Rs 5,000 crore to a group of lenders led by Union Bank of India apart from other financial institutions which have turned bad laons now. The company has also defaulted to debenture holders, the auditors noted.
Last September, banks led by Union Bank had invoked SDR on Lavasa loans of Rs 3,500 crore and unpaid interest of over Rs 2,000 crore but which failed. Union Bank had extended over Rs 1,200 crore in two phases in 2006 and 2008 to Lavasa.
Lavasa had reported a net loss of Rs 166 crore in FY17, against a profit of Rs 269 crore in FY16. Since FY06,
The auditors said Lavasa's non-current borrowings and other financial liabilities include balances amounting to Rs 537.16 crore and Rs 2,530.41 crore, respectively as of March 2018 which were classified as NPAs by lenders.
Lavasa's Rs 23,000-crore eponymous hill city project near Pune ran into rough weather in November 2010 when the Union forest and environment ministry asked the company to halt construction at the site citing violations, because of which its Rs 2,000 crore initial public offering got delayed.
The matter has since been contested legally and the Bombay High Court has in November 2011 had termed government order withdrawing clearances given to Lavasa as "ambiguous".
Lavasa has so far spent about Rs 3,700 crore on the project, for which it has, besides the bank loan, raised Rs 1,100 crore through bond issues.
Lenders of Lavasa had invoked strategic debt restructuring in September 2017. However, the process per se was scrapped by the Reserve Bank in a circular on February 12 this year, putting the financials in further peril.
The Lavasa management believes that amount payable on settlement will not exceed the liability provided in books in respect of these borrowings.
Clarifying its stand, HCC in a BSE filing said, "Lavasa continues to work jointly with the consortium of lenders towards a resolution process to the satisfaction of all stakeholders. The RBI circular of scrapping SDRs has required us to rework a restructuring solution along with bankers and potential investors."
Lavasa is in the process of formulating a resolution plan with the lenders and it is also in the process of reassessing its business plan in view of the expected growth opportunities and intends to significantly expand its business operations going forward, the company further said.
Its filing was in response to explanation sought by bourses on media reports that had said auditors had expressed doubts about ability of Lavasa to "continue as going concern".
Following the news, HCC shares plunged 25 per cent to Rs 17.55 on BSE today.
"As far as stock movement is concerned the same is market regulated and we would not like to speculate on the reasons for the fall in the stock price today. However, we believe selective reporting of the facts has resulted in an adverse impact to our share price," it said.
The company further said "HCC and all its subsidiaries, including Lavasa are in complete compliance of the regulatory requirements and all material information is disclosed as per requirements."
It also claimed that there is no impairment in the value of Lavasa's net assets of Rs 3,244.18 crore. Similarly no diminution in value of goodwill amounting to Rs 95.04 crore and non-controlling interest amounting to Rs 482.99 crore is considered necessary.
Meanwhile, HCC today reported a 4 per cent drop in standalone net at Rs 20 crore for the March quarter, though its income rose to Rs 1,511.47 crore from Rs 1,428.86 crore.
Consolidated net loss stood at Rs 1,090 crore for the year to March 2018 against a consolidated loss of Rs 982.60 crore in FY17. Consolidated income rose to Rs 10,188.54 crore in FY18 from Rs 9,947 crore.
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