Independent auditors raise doubts about survival of L&T Shipping as firm's liabilities exceed its assets

Independent auditors of L&T Shipping Ltd, a wholly-owned subsidiary of Larsen & Toubro, have raised concerns about company's continuance as a going concern

IANS May 30, 2018 18:01:38 IST
Independent auditors raise doubts about survival of L&T Shipping as firm's liabilities exceed its assets

Mumbai: Despite the promise of 'Make in India' and the rhetoric of defence modernisation, the fortunes of India's shipbuilding industry continue to sink, with more and more companies slipping into the red.

The latest addition to the list is L&T Shipping Ltd.

The independent auditors of the L&T Shipping Ltd, a wholly-owned subsidiary of Larsen & Toubro, have raised concerns about the company's continuance as a ‘going concern' based on the financials of 2016-2017.

The report by Sharp & Tannan indicates that the company had substantial accumulated losses carried forward from the previous year and has incurred significant cash losses during the current and previous financial year.

That has resulted in substantial erosion of net worth as on 31 March, 2017 and the company's "current liabilities exceed its current assets as at the balance sheet date", according to the report.

Independent auditors raise doubts about survival of LT Shipping as firms liabilities exceed its assets

Representational image. Photo courtesy: company website

The auditors said that these conditions indicate "the existence of material uncertainty" that may cast significant doubt about the company's ability to continue as "a going concern."

An email sent to the company by IANS on the issue remained unanswered, despite reminders.

However, the auditors said financial statements have been prepared on a going concern basis, based on the communication of the holding company stating its intention "to continue to provide financial support towards project costs and other obligations of the company".

The auditors said that the management "has also carried out an assessment of the future operating cash flows of the company and is satisfied that there is no event or conditions that may cast a significant doubt on the ability of the company to continue as a going concern".

The auditors listed various reasons for its "concerns". The company had a negative net worth of Rs 829 crore in FY17 compared to Rs 341 crore in FY16. It had also incurred a loss of Rs 364 crore in FY17 compared to Rs 719 crore loss in FY16.

The auditors also pointed out that there is an excess of current liabilities over current assets to the tune of Rs 638 crore in FY17 against Rs 381 crore in FY16.

The company even had a negative net cash flow from operating activities of Rs 261 crore in FY17 compared to Rs 165 crore in FY16.

Out of total turnover of Rs 621 crore for FY 2016-17, Rs 429 crore (69 percent) was towards sale and service income from L&T. Borrowings of the company had also gone up from Rs 3,306 crore in FY 17 compared to Rs 2,882 crore in FY16, adding to the debt pile up.

"The company's net worth is substantially eroded and it continues to make heavy losses year after year", said an industry analyst who did not want to be named. While the outlook for business in the near future remains uncertain, the company has received few substantive orders, in defence or otherwise in the recent past, he added.

"Given that the company is actually surviving on related party orders, its claims of having done large-scale defence work is open to question," the analyst said.

Updated Date:

also read

Uttar Pradesh Assembly polls: Amid outflux of leaders, BSP's saving grace may be sound alliances, seat allocation
Politics

Uttar Pradesh Assembly polls: Amid outflux of leaders, BSP's saving grace may be sound alliances, seat allocation

An alliance with Asaduddin Owaisi-led AIMIM would help the party cultivate voters from the Muslim community, comprising around one-fifth of the state’s population

Christie's to hold sale of creations by designer L’Wren Scott; collection to include pieces worn by Mick Jagger, Penelope Cruz
Entertainment

Christie's to hold sale of creations by designer L’Wren Scott; collection to include pieces worn by Mick Jagger, Penelope Cruz

Scott was known for her elegant creations in lush fabrics; among her many influential customers was former first lady Michelle Obama.

Netflix to release Taapsee Pannu's murder mystery Haseen Dillruba on 2 July; see teaser
Entertainment

Netflix to release Taapsee Pannu's murder mystery Haseen Dillruba on 2 July; see teaser

Directed by Vinil Mathew of Hasee Toh Phasee fame, Haseen Dillruba also stars Vikrant Massey and Harshvardhan Rane.