Reliance Infrastructure falls as auditors raise red flags on Q4 results (updated)

Swan Defence and Heavy Industries

17/06/2019 18:17

* Co posts loss of 33 bln rupees for quarter ended March
2019
    * Writes off investment of 65 bln rupees in naval, power
arms
    * Auditors cast doubt around company's accounting
methodology 

 (Adding company comments)
    By Abhirup Roy and Promit Mukherjee
    MUMBAI, June 17 (Reuters) - Shares in Reliance
Infrastructure Ltd  RLIN.NS  closed nearly 5% lower on Monday,
after its auditors raised red flags around its latest financial
results and cast doubts over the manner in which the firm had
accounted for several transactions.
    The company, a construction, power and defence conglomerate
that is part of business tycoon Anil Ambani's Reliance Group,
late Friday reported a consolidated loss of 33.01 billion rupees
($472.56 million) for the quarter ended March 2019. 
    The loss was mainly attributed to a 45 billion rupee
write-off related to its associate Reliance Naval & Engineering
Ltd  RELV.NS  and a 20 billion rupees impairment booked in
Reliance Power, its power generation subsidiary.
    Auditors BSR & Co, and Pathak H.D. & Associates pointed out
several anomalies and a lack of clarity in instances of related
party transactions and accounting methodology.
    Losses incurred by the company and subsidiaries and certain
loans for which the company is a guarantor show that some
"material uncertainty exists that may cast significant doubt on
the group's ability... to continue as a going concern,"
according to the auditors' report posted on the company website.
 
    In response to a Reuters query, Reliance Infrastructure said
the group has already announced the sale of one of its road
assets in north India that will bring in 19 billion rupees of
cash.
    The company also said it stands potentially to get
substantial funds from pending regulatory claims and arbitration
proceedings. 
    The company did not respond to specific queries around the
auditors' concerns.
    Ambani and his companies have lately faced greater scrutiny
from auditors and rating agencies, even as bankers and creditors
have pressured his firms to pay back dues. 
    Last week PwC resigned as the auditor of group company
Reliance Capital Ltd  RLCP.NS , saying it did not receive a
"satisfactory response" to its queries on certain observations
in its assessment of the annual financial results.

    ($1 = 69.8534 Indian rupees)

 (Reporting by Abhirup Roy and Promit Mukherjee; Editing by
Rashmi Aich and David Evans)
 ((abhirup.roy@thomsonreuters.com; + 91 22 6180 7067; Reuters
Messaging: abhirup.roy.thomsonreuters.com@reuters.net))