(Source: Bloomberg)

Auditors Raise Doubts Over Reliance Naval And Engineering’s Future

Auditors of Anil Ambani-led Reliance Naval and Engineering Ltd. have raised doubts over the company’s ability to “continue as a going concern”.

In its notes to the company’s 2017-18 earnings statement, auditors Pathak HD & Associates listed cash losses, erosion of net worth, loans being called back by secured lenders, current liabilities being substantially higher than assets and winding up petitions being filed by few operating creditors to raise its doubts.

“These conditions indicate the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue as going concern,” the auditor said in the note.

The assumption of going concern depends upon the approval of the company’s bankruptcy-related resolution plan by secured lenders, its ability to raise finance, generation of cash flows in future to meet obligations and earning profits in future, it said.

The company yesterday reported widening of its net loss to Rs 408.68 crore in January-March quarter of 2017-18 fiscal year from Rs 139.92 crore net loss in the year-ago period. For the full year 2017-18, it posted a net loss of Rs 956.09 crore as compared to a loss of Rs 523.43 crore in previous year.

Also read: IFCI Files Insolvency Proceedings Against Reliance Naval & Engineering At NCLT

Revenue also fell to Rs 34.76 crore in fourth quarter of FY18 from Rs 250.84 crore in same period of previous fiscal. For 2017-18, the total income was lower at Rs 413.84 crore when compared with Rs 564.14 crore revenue in 2016-17 fiscal.

Reliance Naval and Engineering, which is primarily engaged in shipbuilding, cited global downtrend in the shipbuilding industry and delay in defence contracts as the reason for ‘temporary financial constraints.’

“All these have resulted in temporary financial constraints on the company, losses in the operations, erosion of net work and calling back of loans by the secured lenders” as well as leading to an approach for a resolution plan, the firm said.

The company said it has approached lenders for an appropriate resolution plan to make the operations viable and sustainable.

“Considering the strength of the company’s world class infrastructure, business plans and future outlook as assessed, the management is quite confident to reach at some workable solution to resolve financial position of the company and to continue as a going concern,” said a Reliance Naval statement.

Also read: NCLT Refuses To Stay Insolvency Proceedings Against Reliance Naval

The Anil Ambani-led firm said that it is participating in several business opportunities both in and outside India and is hopeful of getting business in coming years.

“Further, the promoters of the company have supported the company since management takeover by them in January 2016 and will continue to do so in future in their capacity as promoters,” the statement added.

The stock plunged more than 13 percent to Rs 23.40 on the National Stock Exchange after the auditor raised concerns.

Anil Ambani-led Reliance Group had in 2016 acquired controlling stake in Pipavav Defence and Offshore Engineering and renamed it Reliance Defence and Engineering. Last year, it renamed the firm to Reliance Naval and Engineering.