Reliance Infra shares tumble 5 pc on bourses after red flags by auditors

After red flags raised by auditors of Reliance Infrastructure over financial results as well as "significant doubt" over the group's ability, the company's shares tumbled about 5 per cent Monday to close at Rs 56.50 apiece.

The Anil Ambani-led group reported a net loss of Rs 3,301 crore for the quarter ended March 31 on Friday on a consolidated basis. The company had recorded a profit of Rs 133.66 crore in the corresponding quarter of the previous financial year, according to a BSE filing.

On an annual basis, it had incurred a loss of Rs 2,426.82 crore for 2018-19. It had reported a profit of Rs 1,255.50 crore in 2017-18.

The company's auditors BSR & Co LLP and Pathak HD & Associates remarked in their note: "The Group and its associates and joint venture incurred a net loss (after impairment of assets) of Rs 2,426.82 crore during the year ended 31 March 2019" and pointed out anomalies saying that "the consequential impact of these events or conditions, along with other matters...indicate that a material uncertainty exists that may cast significant doubt on the Group's ability, particularly in relation to the above, to continue as a going concern".

The company in a statement attributed the net loss to one-time impairment of Reliance Naval and Engineering (RNaval) saying it is "largely a result of one-time impairment of Reliance Naval and Engineering Ltd acquired in 2016 which was already NPA".

The auditors remarked, "The consolidated financial statements of RNaval have been prepared on a going-concern basis, notwithstanding the fact that RNaval continues to incur cash losses, its net worth has been fully eroded, it has defaulted in repayment of principal and interest to its lenders, loans have been called back by secured lenders, non-current assets are significantly impaired, current liabilities exceed the total assets of RNaval".

They said these conditions indicate the existence of a material uncertainty that may cast significant doubt on RNaval's ability to continue as a going concern. "The appropriateness of the going concern assumption is critically dependent upon RNaval's ability to raise requisite finance/generate cash flows in future to meet its obligations," the auditors added.

The statutory auditors of RNaval issued their report on May 28 providing their conclusion on the financial results of RNaval for the year ended March 31 and have commented on the material uncertainty related to going concern in respect of RNaval.

Apart from RNaval, the company has also attributed losses to impairments booked in Reliance Power (RPower), its power generation arm.

The auditors said RPower group incurred a loss of Rs 2,951.82 crore (parent company's share in the net loss is Rs 1,059.70 crore) and, as of that date, Rpower group's current liabilities exceeded its current assets.

Pointing various anomalies, the auditors' remarks said these "indicate that a material uncertainty exists that may cast significant doubt on RPower group's ability... to continue as a going concern".

The company did not respond regarding the comments of the auditors.