Dca Report Reveals Serious Lapses By Shaw Wallace
In a statutory report submitted in response to Shaw Wallace unions' petition to the CLB on "oppression and mismanagement" by the SWC brass, the DCA has come down heavily on the management for sacrificing the company's interests on every front. Significantly, DCA almost echoes the staff petition on the allegation of "oppression" against the company's
officials.
The report says: "...(the) financial mismanagement...has led to a very severe cash crunch which has endangered the company's solvency...it is thus clear that the affairs of the company are being conducted in a manner...which is prejudicial to the company and public interest."
The report, which examined the liquor major's last four years' accounts, dwells on four broad aspects:
unviable loans were given to subsidiaries at rates lower than those at which the company borrowed, and for longer terms;
the business activities of these subsidiaries did not justify pumping in so much money;
unnecessary and disproportionately huge brokerage fees were paid out while arranging finance or share sellout deals (in one case, substantial amounts were deposited with a stockbroker in whose name there were no transactions recorded at his stock exchange); and
its entry into non-core businesses such as selling televisions only to save ailing Jumbo group subsidiary Orson Electronics, which heightened the financial crisis in SWC itself.
When contacted, Shaw Wallace did not wish to comment immediately on the issue. "You have asked our comments on several issues...we will have to take a detailed account of each of these. That will take some time," said an SWC spokesman.
He, however, said referring to the "judgements" passed by outsiders: "We strongly feel that since business and investment decisions are based on the management's overall view and vision, a third-party judgement may not be appropriate. If there were a standard code of running all businesses then there would be no competitive businesses at all.
"The success of a business is judged by the results it achieves, in that light, Shaw Wallace management is happy with most of their business decisions...the proof of the correctness of most of these decisions lie in our success in the marketplace."
But the 38-page DCA report along with a huge annexure does not spare any words to paint a picture of abject failure. The report reveals details of huge inter-corporate deposits taken and lent to subsidiaries and the subsequent waiver of interest on such deposits and loans.
The report dwells on huge bad debts and advances written off; details of borrowed funds which were lent further without ensuring adequate return; and payment of "unnecessary" consultancy and brokerage charges.