Higher Provisions Taint Gtc Show

A higher provisioning of Rs 69.3 crore led to GTC Industries dismal performance for 1995-96, when its net worth of Rs 100.91 crore was wiped out by a net loss of Rs 114.08 crore.

Though GTC claims its poor performance is due to the liquidity crisis leading to high cost of funds, a closer perusal of the annual report for the 18-months period ended September 1996, gives a different picture altogether.

Net sales from manufacturing activities fell by three per cent, but the culprit here is higher provisions for excise cases, doubtful loans and loss on sale of investments.

These provisions were made by the com pan for previous years and were provided only for 1995-96 accounts. GTCs losses would have been higher if bad debts of 1995-96 were also included.

GTC provided for Rs 41.73 crore in 1995-96 on account of certain court decisions relating to excise matter of earlier years.

The company made another provision of Rs 13.59 crore for doubtful loans and advances and forked out Rs 7.86 crore as interest charges to Gujarat Industrial Investment Corporation for deposits placed by them earlier with Gujarat Heavy Chemicals on behalf of GTC.

It made a provision for loss on sale of investment of Rs 2.23 crore and had to absorb the impact of dealers claims for luxury tax of Rs 3.89 crore on sale of cigarettes in some states.

The companys losses would have been higher by another Rs 19.22 crore if the company had made provisions for 1995-96 relating to future payment of gratuity of Rs 4.52 crore.

Advances and sundry debtors of Rs 7.72 crore classified by the company as good, are in auditors opinion, doubtful of recovery and required a provision.

Dividend of Rs 7.2 crore for the accounting year ended March 1995 was neither paid nor transferred to a special account with a scheduled bank.

Though net sales in manufacturing declined by three per cent, income from trading activities fell by 72.5 per cent.

Sales of both manufacturing and trading together fell by 19.1 per cent.

Net income from cigarettes and processed tobacco declined by 2.6 per cent on annualised basis to Rs 413.27 crore.

Sales by trading activity declined sharply by 72.5 per cent to Rs 20.36 crore.

GTCs performance compares poorly with the performance of other industry players like ITC, Godfrey Phillips and VST Industries.