HYDERABAD : Statutory auditors of debt-ridden GMR Infrastructure have set off alarm bells again, with S R Batliboi & Associates LLP stating that some of the accounting entries, related to the firm’s assets, were not in accordance as per accounting standards. In other words, GMR may have over reported equity and financial assets of its airports business by Rs 3,560 cr each. If these were accounted as per norms, it could have had a consequential impact on the segment’s assets.
Incidentally, airports business is the lone segment steadily churning profits unlike the group’s other loss-making sibling entities. Recently, GMR said it may hive off the airports division to unlock shareholder value and capitalise on the $100-billion airports business opportunity. During the quarter ended March, GMR acquired Class A Compulsory Convertible Preference Shares (CCPS) of its subsidiary GMR Airport Ltd for Rs 3,560 cr from private equity investors.
Subsequently, the CCPS were converted into equity shares of an equivalent amount. The Group has recognised other financial asset of Rs 3,560 cr by adjusting other equity towards the proposed sale of equity shares, even though transaction remains pending as on March. “In our opinion, the aforesaid accounting treatment is not in accordance with the relevant accounting standards.
Had the management accounted for the aforesaid obligation as per the relevant accounting standards, other equity would have been lower by Rs 3,560.00 cr and other financial assets would have been lower by Rs 3,560.00 cr with a consequential impact on segment assets of airport sector as at March 31, 2019,” the auditors noted. Last year too after an independent assessment, auditors flagged off the lost diminution value of GMR’s investments in its loss-making subsidiaries pegged at Rs 2,250 cr.
Had GMR accounted for such loss in value, its net loss in FY18 would have been higher by Rs 2,250 cr. The auditors appeared uncomfortable with the tax dispute pertaining to GMR Male International Airport. Meanwhile, with subsidiaries GMR Energy Ltd, GMR Vemagiri Power Generation Ltd and GMR Rajahmundry Energy Ltd ceasing operations and incurring losses, the company signed a resolution plan with lenders. “The carrying value of the investments in these entities is significantly dependent on the achievement of key assumptions around availability of natural gas, future tariff and the outcome of the sale of the Barge mounted power plant,” the auditors noted.