The Curious Case Of Vakrangee’s Trade Receivables

Vakrangee Ltd., which grappled with governance concerns, has seen the number of days it takes to collect money from clients spike fivefold.That followed business restructuring after Price Waterhouse & Co. raised concerns over its election books, bullion and jewellery businesses. The auditor eventually quit in May last year, adding to the selloff that has eroded nearly 90 percent of the company's market value.Vakrangee had trade receivables of Rs 1,319.62 crore for the year ended March 2019, according to its filings. That compares with Rs 1,307.89 crore in the previous fiscal.The company’s revenue collection period was 318 days or more than 10 months in 2018-19, according to BloombergQuint’s calculations based on its exchange filings. In 2017-18, it was 60 days..This increase came despite 76.8 percent decline in income from operations to Rs 1,508.23 in the year ended March. Ideally, receivables should fall if income from operations declines.Then what caused the spike?Vakrangee, in an emailed response to BloombergQuint, said its receivables are largely “retention money” for e-governance projects that would get released in the next 12 months. The company discontinued the e-governance business in 2017-18.So, the receivables relate to FY18 or years prior to that.Retention money is upfront payment for a government contract or a bid. But in accounting parlance, this is a deposit and not a receivable. In government contracts, trade receivable is part of the revenue withheld and disbursed on completion of the project.Vakrangee said in its statement to BloombergQuint that the retention money held for any project is 5-20 percent, which is released after the completion of the project to ensure quality.There’s a catch.If the trade receivables are from 2017-18, they should be part of the assets in the balance sheet at the end of that year.But Vakrangee had e-governance assets worth Rs 26.3 crore as of March 2018—nowhere close to the trade receivables of more than Rs 1,319 crore.In response to BloombergQuint’s query about this anomaly, Vakrangee said many of the e-governance projects were also executed through its kendras, or centres. Therefore, they were part of the kendra segment, the company said..How Vakrangee Turned From A Penny Stock Into A Rs 37,000 Crore Firm.BloombergQuint couldn't independently confirm that from the company's filings.Vakrangee, according to its presentation, has around 3,504 such kendras in 19 Indian states.In the statement to BloombergQuint, the company reiterated that the receivables will be realised in 12 months, a reason why its auditor classified them in “current head”. “We would like to highlight that our books of accounts are satisfactorily audited by our auditors and as well as our last three years’ books of accounts are inspected by Ministry of Corporate Affairs.”

The Curious Case Of Vakrangee’s Trade Receivables

Vakrangee has seen the number of days it takes to collect money from clients spike fivefold.

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