Pal-Peugeot Understated 96-97 Losses

PAL-Peugeot Ltd, the ailing joint venture between Premier Automobiles and Peugeot of France, understated its losses for 1996-97 by Rs 11.72 crore, companys auditors Lovelock & Lewes have said in their report.

The company, according to its latest annual report, had recorded a loss of Rs 97.44 crore for the 15-month period ended September 30, 1996. Its turnover for the period was estimated at Rs 368.37 crore.

While substantially qualifying the balance sheet of the company, the auditors have said that if PAL-Peugeot had valued its inventories at cost and not at net realisable value worked out on the basis of the cars sold after the year-end, the inventory valuation would have been lower by Rs 11.72 crore. Consequently, the loss for the period would have been higher by Rs 11.72 crore, the report states.

 

The company has made no provision in the accounts in respect of interest payable to/receivable from PAL on account of balance purchase consideration and current account respectively.

The net interest receivable from PAL in respect of current period subject to such adjustments if any is estimated at Rs 7 crore. The net interest payable to PAL in respect of the previous period not provided is Rs 16.8 crore, the auditors report states.

Consequently the loss for the period and the net assets position as at the period end are overstated by Rs 7 crore and Rs 9.77 crore, and the debit balance in the profit and loss account as at the period-end is understated by Rs 9.77 crore, the report states.

The annual report also reveals the company plans to raise Rs 200 crore through a combination of loans and a non convertible debenture issue, to meet its immediate financial needs. The company will seek shareholders approval for an enabling resolution to raise the amount at its AGM on June 27.

The company, which reported a loss of Rs 97.44 crore earlier this year, is negotiating with some financial institutions and banks for financial facilities for the projects it is undertaking. These loans are to be secured by mortgage and charge on the movable and immovable properties of the company. HSBC has already sanctioned a loan of Rs 10 crore to the company. Despite being strapped for cash, the company plans to provide corporate guarantees for other companies up to the limit of Rs 250 crore. The limit fixed earlier was Rs 125 crore.

PAL-Peugeot is also seeking to amend the articles of association of the company at its AGM. The changes proposed include a clause for directors appointment. Currently two-thirds of the directors are appointed according to the principle of proportional representation by cumulative voting provided that 50 per cent of the directors are proposed by each of the partners of the joint venture.