Auditor questions Godrej Soaps real estate loans

CALCUTTA, JUNE 19: Loans granted by Godrej Soaps have come under the scanner of its statutory auditor Kalyaniwalla & Mistry, who made ...

CALCUTTA, JUNE 19: Loans granted by Godrej Soaps have come under the scanner of its statutory auditor Kalyaniwalla & Mistry, who made certain comments in their report annexed to the latest balance sheet for year ending to March 31, 2000.

Godrej Soaps, which is mainly a manufacturer of soaps, toiletries, detergents and chemicals, achieved a 24 per cent growth of its brands in value terms. It is the black with a Rs 60.99 crore net profit in fiscal 1999-2000 on a Rs 787.44 crore turnover. It had posted a net loss of Rs 29.93 crore in the previous fiscal on turnover of Rs 909.81 crore

According to the auditor’s report, the company made a Rs 6.60 crore provision on loans of Rs 12.93 crore granted in connection with a proposal on property development. The company says that loans of Rs 8.11 crore were given to a company on which Rs 4.82 crore of interest is due that has not been repaid as per the terms set out.

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The issue of the property is now before the courts and Godrej Soaps has made a provision of Rs 6.60 crore on the interest accrued on the loans since April 1, 1997. The company feels that the balance amount is recoverable in due time.

But the auditors say: "We are unable to form an opinion whether the diminution in value of investments is other than temporary and regarding the realiability of the loans".

It has also granted Rs 34.88 lakh interest free advance to a company, the auditors have noted. Inter-corporate deposits of Rs 21.37 crore were advanced to companies that are either defaulted in interest payment or have not repaid the principal. The management says that, ICDs have been given to Godrej Photo-me Ltd, Hybrigene Biotechnology Pvt Ltd and Swadeshi Detergents Ltd that have huge accumulated losses and "have not repaid the deposits/interest thereon on the due dates".

However, the company adds that since long term interest are involved and in the backdrop of proposed restructuring of operations, the deposits are considered good and so no provision has been made.

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The company improved its performance in fiscal 1999-2000 over that of the previous year, by cutting down on costs and debt repayment. It reduced expenditure cost by close to 12 per cent on its turnover in fiscal 1999-2000.

It repaid certain debts and brought it down the total debt to Rs 34.26 crore in 1999-2000 from 46.44 crore in the previous year.

Net interest payout declined on account of interest earning going by about 49.12 per cent while the interest payout going down.

Godrej Soaps has made a Rs 8.60 crore provision for depletion in long term which have been noted by the auditors.

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The company has a massive contingent liability of Rs 57.39 crore that has not been acknowledged. The excise authorities have confirmed Rs 32.78 crore of duties and penalties on account of toilet soaps sold to Procter & Gamble Godrej Ltd, during their joint venture. However, the company has disputed the demands and is in the process of filing appeals before the appellate authority.