Winsome Diamonds in death wheeze: Auditors

The auditors have discovered lack of confirmation of balances from 14 overseas buyers as claimed by Winsome Diamonds

Auditors of the crisis-ridden Winsome Diamonds and Jewellery Ltd have raised doubts on the ability of the company to continue as a going concern. Even refinancing loans appears difficult due to the drastic decline in the company’s sales in the last six months.

R C Reshamwala & Co, which audited Winsome’s 18-month financial statement, said, “The company’s operating results have been materially affected due to various factors, including non-availability of finance in view of the consortium bankers recalling the financial facilities granted. These events cast significant doubts on the ability of the company to continue as a going concern since the volume of business has also dropped significantly in the last six months.”

The auditors qualified the 18-month result report released today by the Winsome Diamonds, which has been in the news over the past year after guarantees devolved on banks as the company faced payment issues.

In respect of trade receivables amounting to Rs 4,759.24 crore, the auditors discovered lack of confirmation of balances from 14 overseas buyers as claimed by Winsome Diamonds. Various attempts have been made by the management and lenders for recovery but have not yielded concrete results.

Winsome Diamonds claims to have exported precious metals and gemstones to 14 jewellery companies in the United Arab Emirates that were trusted business partners for several years. But all of them claimed inability to pay their dues last year, resulting in Winsome Diamonds defaulting on Rs 4,258 crore of guarantees to various Indian banks.

Jai Kumar Kapoor, a company director, said, “The board has decided to file suits against 14 buyers in Sharjah soon.”

Winsome Diamonds posted a net loss of Rs 249 crore for the quarter ended September 2013, against a net profit of Rs 18.39 crore in the corresponding quarter of the previous year. For the 18-month period ending September 30, 2013, the total loss was Rs 426.27 crore.  Net sales dived to a mere Rs 2.49 crore for the quarter from Rs 2,321.96 crore during the quarter ended September 30, 2012.

Meanwhile, the consortium of lenders led by Punjab National Bank, has seized stocks of diamonds and pearls worth Rs 39.35 crore from Winsome Diamonds in Mumbai and Surat. The company generated “nil” business from bullion sales during the quarter ended September 30, 2013.

“In the absence of any positive steps taken by the management, non-recovery of trade receivables on due date, non-payment of liabilities, including statutory dues, financial difficulties faced by the company due to recalling of bank finances and in view of multiple uncertainties, the ability of the company to carry on is a big concern,” said the auditors’ report.