GMR Infra auditors say group failed to account for `2,250-crore impairment loss

GMR Infrastructure’s auditors SR Batliboi & Associates have observed in the auditor’s report that the group has not accounted for an impairment loss of Rs 2,250 crore in the accompanying consolidated Ind AS financial results for the quarter and year ended March 31, 2018. “In our opinion, the aforesaid accounting treatment is not in accordance with the relevant accounting standards. Had the management provided for the aforesaid impairment loss, the loss after tax and minority interest for the quarter and year ended March 31, 2018 would have been higher by Rs 2,250 crore with a consequent impact on the consolidated reserves as at March 31, 2018,” auditors said.

The impairment loss, auditors said, was on account of GMR Chhattisgarh Energy (GCEL) and certain other entities, which have been incurring losses. Based on the valuation assessment carried out by an independent expert, there exists an impairment of GMR Infrastructure’s auditors SR Batliboi & Associates have observed in the auditor’s report that the group has not accounted for an impairment loss of Rs 2,250 crore in the accompanying consolidated Ind AS financial results for the quarter and year ended March 31, 2018. 2,250 crore on March 31, 2018, auditors noted. GMR posted a consolidated net profit of Rs 13 crore from continuing operations on account of a tax credit of Rs 38.29 crore for the three months ended March 31, 2018, according to a filing with the Bombay Stock Exchange on Thursday.

Otherwise, the company reported a Rs 25.29-crore loss from operations before tax expenses and non-controlling interests in an operating environment that continues to be challenging. For the full year ended March 31, 2018, the infrastructure development company’s consolidated net loss from continuing operations widened to Rs 1,082.65 crore.

The auditors have also raised concerns over the appropriateness of the going concern assumption for GMR Energy (GEL), GMR Vemagiri Power Generation (GVPGL) and GMR Rajahmundry Energy Limited (GREL). “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”. The auditors also mentioned that accordingly they are unable to comment on the carrying value of the group’s assets (including advances) in these gas based entities as at March 31, 2018.

GEL and GVPGL, joint ventures of GMR Group, have ceased operations and have been incurring losses with a consequent erosion of net worth resulting from the unavailability of adequate supply of natural gas. GREL, meanwhile, has rescheduled the repayment of project loans with the consequent implementation of the strategic debt restructuring (SDR) scheme to convert part of the debt outstanding into equity and to undertake flexible structuring of balance debt for improving viability and revival of the project pending linkage of natural gas supply, auditors observed.

Meanwhile, in notes to the profit and loss account, GMR’s management has noted that the carrying value of the company’s investment in GEL is appropriate and no further adjustment has been made in the consolidated financial results for the quarter and year ended March 31, 2018.

Earlier this week, GVK Power and Infrastructure had also that it is in talks with lenders to reach a one-time settlement (OTS) for two group companies —GVK Industries (GVKIL) and GVK Gautami Power (GVKGPL) which have been incurring losses due to uncertainty regarding availability of gas to power plants.

With primarily the energy business remaining a drag, the consolidated income from operations for Q4FY18 fell by a sharp 21% on a year-on-year basis to Rs 2,060.06 crore. The earnings before interest, tax, depreciation and amortisation (Ebitda) for the quarter also more than halved to Rs 413 crore on a y-o-y basis. Consequently, the Ebitda margins also nearly halved to 20% compared with 35% for the January-March 2017 period.

For the full year ended March 31, 2018, GMR recorded a fall of over 8% in income from operations to Rs 8,529 crore, while Ebitda for the year stood at Rs 2,186 crore, lower by over 32% compared with last year. GMR’s net debt increased to Rs 14,730 crore as on March 31, 2018 against Rs 14,340 crore as on September 2017. The increase is primarily due to the issuance of dollar bonds in Hyderabad airport (GHIAL) of $350 million. Also, the company’s leverage ratios were impacted due to reduction in aero revenues at Delhi Airport.