Unusual move: Arrow Greentech reports negative sales for Q4

Plastic products company Arrow Greentech has declared unusual results.

The company's results show it had negative revenue from operations worth Rs 6.4 million. It had negative other income worth Rs 3.9 million.  Its total income was a negative Rs 10.3 million.

Business Standard spoke to two chartered accountants. Both said reporting negative sales was an unusual move. One chartered accountant said sales could be reversed if products had been returned. But this is not a regular occurrence.

“It is very rare,” he said.

The second person said the way the reversals had happened suggested that the management booked the transaction in the absence of sufficient confirmation from the client. It suggests lack of clarity on the agreement between the two, he added.  

“This means the terms were not clear. In the absence of that, they recorded revenue,” said the person.

The company is involved in manufacturing water-soluble film, and green packaging. The company's website says it has manufacturing facilities in India and the United Kingdom (UK).  Its UK subsidiary is called Arrow Green Technologies (UK) Ltd. It is listed on the BSE and the National Stock Exchange.

The company said in its result it had accounted for revenue during the year. This had to be reversed because the client did not accept the services later. This resulted in a reversal that wiped out the company's revenues and resulted in a negative figure, claimed the company.  

“The subsidiary company had accounted for intellectual properties revenue worth Rs 50 million during the current year. Due to technical reasons, the client, with whom revenue was affected, did not accept the services,” went the note.

This meant the earlier revenue figure required adjustment.

“ Hence, said revenue has been reversed during the current quarter ended March 31, 2018 and pursuant to which, gross revenue from operations reported during the last quarter of the year is negative,” the note added.

The company still ended the year with a profit of Rs 1.7 million. This is a 99.5 per cent decline over the previous year’s profit of Rs 346.4 million. The last quarter contributed significantly to the fall.  The company had a total loss of Rs 107.5 million. It had a profit of Rs 100 million in the same quarter last year.

The company’s stock is down 19 per cent since it announced results on May 29. It has a circuit limit of 10 per cent. This means the stock can only rise and fall 10 per cent in a given day.

The company and its auditor did not respond to questions about the results.