Auditors raise concerns over UB Holdings extending money to KF

Auditors of UB Holdings (UBHL) have flagged their concerns over extending money to Kingfisher Airlines and other group companies without any provision to recover the losses made from that.
UBHL has invested in many subsidiaries and associate companies and extended corporate guarantees in favour of the lenders or creditors of the defunct Kingfisher Airlines (KFA), which was later invoked by the lenders, said an audit qualification report submitted by the company.
"The company has extended corporate bank guarantee of Rs 87,072 million in favour of lenders/lessors/creditors of the KFA, an erstwhile subsidiary of the company," the report said.
"This may result in loss to the company. No provision has been made in the accounts for such a possible loss."

UBHL, whose majority stake has been owned by Vijay Mallya, has also invested in subsidiaries and an associate company, it added.
"The carrying value of such investment is Rs 1,472 million. There are significants decline in the carrying value of these investments. The company has not provided for such declines," the report said.

It also added that certain subsidiaries of UBHL owe Rs 754 million.
"Net worth of these companies is eroded, impairing the recovery of such loans and advances. The company has not provided for the possible loss on this account," it said.
Moreover, Rs 8,074 million is shown as dues from a contributory trust managed by a financial firm that has sold the company's investments pledged with it and appropriated part of the sale proceeds against dues from KFA.

"Further, the said trust still holds custody of 59,150,000 shares in KFA belonging to the company," it said, adding that UBHL has petitioned before the City Civil Court of Calcutta and Karnataka High Court.
"Should the company fail to get the relief as sought, there would be losses."
Besides, certain aircraft lessors and vendors of KFA have invoked the corporate guarantee given by UB Holdings.
"The total amount invoked and outstanding as on March 31, 2016 is Rs 15,275.40 million... Also consortium of KFA bankers has invoked the company's corporate guarantee and demanded payment of Rs 62,033.50 million due from KFA along with the interest," it said.

UBHL has also shown Rs 358 million as due from a banker who has unilaterally encashed the company's deposit lying with it.
"The possible loss of account of this development has not been recognised in the financial statement," the report added.
Moreover, UB Holdings has also sought a legal view over the direction from the Securities Appellate Tribunal to comply with market regulator Sebi order for disclosure of the impact of audit qualification from 2012-13 onwards.