The auditors of the crisis-ridden Deccan Chronicle Holdings Limited (DCHL) have raised serious doubts over the company's ability to continue as a 'going concern' in light of the various uncertainties hanging over the company. These doubts have been expressed in the audited report of DCHL that was presented at the company's hurriedly finished annual general meeting (AGM) on Thursday.
"In view of the dispute on cancellation of franchise by the Board of Control for Cricket in India (BCCI) for the Indian Premier League, scaling down the operation of Odyssey outlets, some of the lenders and creditors filing a petition for winding up of the company, pending adjustment of intangible asset under development - brand and capital work in progress - advance for the purchase of property and other related factors indicate the existence of uncertainty that may cast doubt on the company's ability to continue as a going concern," the DCHL auditors said in their report.
In a damning observation, the auditors have noted that in the absence of adequate information they were unable to comment on whether the term loans availed by the company were prima facie used for the purpose they were obtained for.
In their report, the auditors C B Mouli & Associates have made key observations concerning the manner in which the financial statements of the company have been prepared, the restructuring of operations and reinstatement of liabilities and assets of the company, lack of clarity on assets transferred to lenders pending settlement of dues with them and the inability of the company's management to furnish details regarding outstanding loan liability, overdue payments among other things.
The key concern that the auditors have raised is over the manner in which the company has carried out restructuring of operations and reinstatement of liabilities and assets, where DCHL has cited the valuation report of unnamed "independent valuers" for intangibles and brands and had pegged the value of the `Brand' at around Rs 3,700 crore.
"Cancellation of IPL franchise by the BCCI and some of the lenders and creditors filing a petition for winding up of the company indicate the existence of uncertainty that may cast doubt on the company's ability to continue as a going concern."
The company has also stated that the `Brand' valued to the extent of dues of Rs 2,905.32 crore has been shown as `intangible assets under development - Brand' and the company management has declared that these would have the value at least to the extent of the amount shown and no impairment was anticipated for the period ended September 30, 2012.
The company currently publishes newspapers under four brands - `Deccan Chronicle', `Andhra Bhoomi', `Financial Chronicle' and `The Asian Age'. But the trademarks of all these newspapers were mortgaged with IDBI Bank for a term loan of Rs 250 crore and after failure to recover its dues from the company, IDBI Bank has recently been trying to sell them in a bid to recover its dues.
In the outlook, the company has already said it plans to demerge its print business and reorganize its debt subject to the approval of its creditors, lenders, shareholders, other statutory authorities and the courts.
In their notes, the auditors also said that according to the information and explanations given to them the management had reinstated the borrowings from banks and others in the notes to accounts but in absence of sufficient information they (auditors) were unable to comment on the default on repayment to the banks, financial institutions and debenture holders.
The auditors also said the company's internal audit system needs to be strengthened in commensurate with the size of the company and the nature of its business. (Times of India)
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