New Delhi, March 5 : Infrastructure conglomerate GMR Group has not accounted for diminution of GMR Chhattisgarh Energy Ltd's (GCEL) value to the tune of Rs 2,250 crore according to its auditor's note in its financial results for the December-ended quarter.
It said that, if the management had accounted for the diminution, the loss after tax and minority interest cumulatively, up to December 31, 2018, for GMR Infrastructure would have been "higher by Rs 2,250 crore with a consequential impact on the consolidated reserves of the group as at December 31, 2018".
"Based on the valuation assessment carried out by an external expert during the year ended March 31 2018, there exists further diminution in the value of Rs 2,250 crore for the group's investment in GCEL and certain other entities (associates or joint ventures) as at March 31, 2018," auditor S.R.
Batliboi and Associates LLP said in the note.
"The aforesaid accounting treatment is not in accordance with the relevant accounting standards," it said.
However, a GMR Group spokesperson said, "GMR Group's amount referred to pertains to our energy plants which are under SDR (Strategic Debt Restructuring) arrangements and majority of it pertains to GMR Chattisgarh Energy Ltd where a change in control too is involved.
"Any diminution in the value of investment based on estimates would be pre-mature pending outcome of SDR, and hence have been allowed to be recorded as qualification to give a true and fair view of the financial position.
GMR believes in true and fair presentation of facts in financials and has always abided by the highest standard of transparency in reporting."
A company source said that as the banks have taken control of the Chhattisgarh project, its valuation separately is not possible.
So it has decided not to reflect the impairment, if any, in its books. The same would be accounted once banks award the project to the identified bidder under the resolution process.
The auditor based its qualified opinion on a valuation report submitted by external experts, according to the auditor's statutory limited review of the third-quarter earnings.
GMR Infrastructure, the parent company of GMR Chhattisgarh, had invested Rs 1,149.96 crore in the company.
The valuation report relied by the auditor suggests that the entire value of the investment needs to be diminished.
The auditor had raised similar concerns in the financial statement for the year ended March 2018 and the first and the subsequent quarter.
GMR Infrastructure's plants were among the 32 stressed power assets with Rs 1.8 lakh crore worth of loans at risk.
The Reserve Bank of India's circular of February last year had tightened the debt restructuring timeline.
Despite the financial stress, power companies have not been taken to the insolvency court so far, due to the status quo ordered by the Supreme Court.
GMR Infrastructure reported a consolidated loss of Rs 561.04 crore during the October-December quarter, and a loss of Rs 1,015.04 crore during April-December 2018.
The energy arm of the GMR Group has been suffering financial stress on several accounts.
The auditor's note said that GMR Energy (GEL), GMR Vemagiri Power Generation Ltd (GVPGL) and GMR Rajahmundry Energy Ltd (GREL) have ceased operations and have been incurring significant losses with a consequential erosion of net worth resulting from the unavailability of adequate supply of natural gas.
GREL has rescheduled the repayment of project loans due to implementation of the SDR scheme to convert part of the debt outstanding into equity and is in the process of implementing the resolution plan as per the RBI circular.
"Continued uncertainty exists as to the availability of adequate supply of natural gas which is necessary to conduct operations in these entities at varying levels of capacity in the future and the appropriateness of the going concern assumption of these entities is dependent on the ability of the aforesaid entities to establish consistent profitable operations as well as raising adequate finance to meet short term and long term obligations," said the auditor.