Day: October 1, 2013

Subodh Kumar Agrawal is the President of the Institute of Chartered Accountants of India.He is also serves on the board of Guj Nre Coke .

Now, the auditors of the Australian Subsidiary (Guj Nre Coking Coal Ltd)  is Grant Thornton.Unlike Indian auditors( see here & here), they seem to have integrity.They refused to give an opinion on the accounts for the year, citing doubts over company’s ability to survive as a ‘going concern’, and inadequate information about its ability to repay debts.

The Australian unit has reported a loss of A$112 million and faces a working capital deficit. It has breached loan covenants, owes money to creditors and has not provided any evidence to indicate that it has the ability to raise money to replace existing debts, the auditor says.

The firm owes about A$27.8 million to its ultimate parent and there are doubts whether that money can be recovered. There are similar issues over contingent liabilities, the audit firm has said. Gujarat NRE Coking Coal has to pay A$487.8 million of debts within the year.-from ET

 

Now what is shocking is that the true state of affairs of the Australian Subsidiary were hidden from Indian shareholders.The consolidated statements year-ended March 2013 have been prepared only on the basis of unaudited accounts of the subsidiary, which actually accounts for 63% of assets of the Kolkata-based NRE Coke.

Now as per regulatory filings made by Guj Nre Coke to Indian Stock Exchanges,

The Consolidated Audited Financial Statement of the Company for the financial year 2012-13 were reviewed by the Audit Committee at its adjourned meeting held on 30th May’2013 and the same were adopted by
the Board of Directors at its adjourned meeting held on the same date.The above Audited Consolidated Financial Statements has been prepared based on the available Management Approved Financial
Statements of all the Australian Subsidiary Companies including Gujarat NRE Coking Coal Ltd., which has also filed the same results to the Australian Securities Exchange (ASX).

Now, Indian shareholders can be forgiven for thinking that even the overseas subsidiary accounts were audited.Notice the clever wording “Management Approved Financial Statements of Australian Subsidiary Companies”

So which genius headed the Audit Committee which did this masterful coverup?Well, none other than the much respected and much loved ICAI President Subodh Kumar Agrawal !

So, repeat after me, dear readers,”Investors in Indian Equities believe the audited accounts at their own peril “!