Construction crews work on a high-rise luxury apartment block. (Photographer: Pankaj Nangia/Bloomberg News)

Unitech’s Auditor Points To Rs 963-Crore Bigger Loss

The auditor to Unitech Ltd. has said the developer would have reported Rs 963 crore more in losses in the nine months through December 2018 had it accounted for the reduced value of its investments, loans, receivables and unpaid interest on public deposits.

The company reported a loss of Rs 301.6 crore for the nine-month period, according to its exchange filing. For the quarter ended December, it reported a loss of Rs 97.77 crore compared with a profit of Rs 18.08 crore a year ago. Quarterly revenue plunged nearly 86 percent year-on-year to Rs 52.21 crore.

Investments In Subsidiaries

R Nagpal Associates, the auditor, said in its qualified opinion accompanying Unitech’s third-quarter results that many of its subsidiaries had accumulated losses and suffered substantial or full net worth erosion. There is a clear indication that the decline in the carrying amount of investments is other than temporary, it said in a note to the financial statement.

The company, along with long-term investments in subsidiaries, has also issued loans and advances to them, the auditor said.

The management hasn’t adequately or sufficiently accounted for the imminent diminution in their value, according to the note. It said the loss for the nine months through December would have been Rs 725.38 crore more had the management accounted for it.

The management said in the financial statement for the nine-month period that the diminution is temporary and “sufficient efforts” are being made to revive the subsidiaries. Based on future projects with subsidiaries, no provision or impairment, other than already accounted for, is necessary to be recorded, it said.

Trade Receivables

Trade receivables amounting to Rs 184.01 crore were outstanding for a significantly long time, the auditor said, adding that it’s unable to ascertain whether all of these are recoverable.

Based on its assessment and review procedures, the management ought to provide for diminution of these receivables, the auditor’s note said. The loss for the nine months through December would have been higher by Rs 184.01 crore had the management accounted for it, according to the note.

The management said as per its internal assessment and evaluations, a significant portion of the trade receivables is still recoverable and hence no diminution was considered necessary.

Pending Interest Payment

The auditor also pointed out that the company hasn’t provided for interest of Rs 53.48 crore on public deposits payable for the nine-month period. Had the provision been made, its loss would have increased by that amount, it said. The management didn't comment on it.

BloombergQuint has emailed queries to Unitech and the report will be updated when the company replies.