Gautam Thapar-led CG Power and Industrial Solutions on Tuesday disclosed to the exchanges that some unauthorised transactions had been carried out by certain employees of the company resulting in understating of liabilities, advances and net worth.
This resulted in the company’s shares tanking 20% to ₹14.75 on Tuesday.
The 13-hour board meeting to consider the annual results of the company began at 3 p.m. on Monday and continued till 4 a.m. on Tuesday after the board was briefed by the company’s Risk and Audit Committee (RAC) about certain findings that may have potential implications on the financial position of the company.
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Liabilities understated
In a serious case of alleged misappropriation and misrepresentation of financial statements, the RAC had said the total liabilities of the company and the group may have been potentially understated by approximately ₹1053.54 crore and ₹1,608.17 crore respectively as on March 31, 2018; and by ₹601.83 crore and ₹401.83 crore respectively as on April 1, 2017.
“To ascertain and establish completeness of the liabilities, an initial exercise was conducted by making enquiries with lenders, current and past, for any additional claims from them in respect of either the company or its subsidiaries. Subject to appropriate legal examination of all such liabilities, these amounts have been either recorded as liabilities or disclosed as contingent liability in the management compiled financial information,” the company said in a filing with the exchanges.
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The RAC had found that advances to related and unrelated parties of the company and the group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore respectively as on March 31, 2018; and by ₹1,479.34 crore and ₹1,331.47 crore respectively as on April 1, 2017.
“Certain assets of the company were purportedly provided as collateral without due authority. The company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorisation,” CG Power said in a statement. The irregularities were detected when the Operations Committee under the chairmanship of one of the independent directors of the company, which was constituted in March 2019 to seek refinancing and as a part of conducting financial analysis in this regard, found some unauthorised transactions.
“These [transactions] were purportedly carried out by identified company personnel (both current and past) including certain non-executive directors, certain key management personnel and other identified employees... without proper authorisation,” it said.
“The moneys so obtained were, without due authorisation, routed out of the company, either by itself or from its subsidiaries or ostensibly unrelated parties to certain related parties.”
The panel also found that the net worth of the firm was potentially understated due to unauthorised and inappropriate write-offs and charges debited to the Profit & Loss statement of the company during the year ended March 31, 2018, and April 1, 2017.