KOCHI: The sheer scale of the alleged financial irregularities involving Cochin Minerals and Rutile Ltd (CMRL) raises a question that goes beyond the individual payments now under investigation: how could a company whose books show only about Rs68 crore in cumulative net profit over 15 years be linked by the Income Tax Department to alleged fictitious expenses of about Rs185 crore during the period?
This is not an examination of the political allegations surrounding the payments. It is a closer look at what the numbers say about the economics of the company and the scale of the transactions alleged by investigators.
The Rs185 crore figure is nearly 2.7 times CMRL's cumulative net profit over the period. The comparison does not establish that the alleged expenses represented money taken out of the company. But it throws up a striking mismatch between the scale of the alleged transactions and the earnings capacity reflected in CMRL's own financial statements.
The numbers become even more revealing when the company's earnings history is examined year by year.
CMRL's profits were modest in the early part of the period. It reported cumulative net profit of about Rs20.8 crore between FY2010 and FY2013. The next four years, FY2014 to FY2017, saw cumulative losses of about Rs45.2 crore.
The company returned to profit thereafter, recording cumulative net profit of about Rs27.1 crore between FY2018 and FY2022. But one year stands out dramatically: CMRL reported a net profit of Rs56.43 crore in FY2023, followed by Rs8.59 crore in FY2024.
Cumulative net profit
Thus, despite the Rs56.43-crore profit in FY2023, the company's cumulative net profit over FY2010-FY2024 works out to only about Rs68 crore.
Indeed, if FY2023 is viewed separately because of its extraordinary contribution, the cumulative profit in the other 14 years was only about Rs11 crore. FY2023 therefore accounts for more than four-fifths of the 15-year cumulative profit.
That makes the central question harder to ignore: what explains the apparent gap between the relatively modest profits generated by CMRL's reported business and the much larger financial flows alleged by investigators?
The question is particularly relevant because CMRL's publicly available financial disclosures provide relatively limited detail with which to reconstruct the economics of its mineral-sand business. Unlike several other significant Kerala-based unlisted enterprises, CMRL does not routinely place the same breadth of operational and financial information in the public domain.
The comparison matters because companies such as Cochin International Airport Ltd (CIAL), Kannur International Airport Ltd (KIAL) and Kochi Metro Rail Ltd publish annual reports and provide substantially more information about their financial and operational performance. CIAL, for instance, publishes multi-year financial highlights covering turnover, profit before tax, profit after tax and dividend, besides making its annual reports available.
Economic scale of CMRL's business
This does not mean CMRL is legally required to disclose every piece of information published by these entities. Nor does sparse disclosure itself establish wrongdoing. But it makes it harder for outsiders to independently answer a basic question: what is the actual economic scale of CMRL's business and where does the value generated by that business accrue?
That question assumes greater significance in light of the allegations concerning fictitious expenses.
The next step is therefore not to assume where the alleged money went, but to follow the underlying economics of the business: the mineral sand procured, the quantities processed, the products generated, the quantities sold, the prices realised, and the identities of major suppliers, customers and related parties.
If those flows can be reconciled with CMRL's books, the apparent mismatch may have an explanation.
If they cannot, the question becomes considerably more consequential.
The figures by themselves do not establish that CMRL's founder and Chairman Emeritus, S.N. Sasidharan Kartha or anyone else personally benefited from transactions outside the company. That would require separate documentary evidence.
But they do establish a numerical question worth asking: when investigators allege about Rs185 crore of fictitious expenses against a company that earned only about Rs68 crore over the comparable 15-year period, what was the economic source and destination of the money?
That is a question the financial numbers alone cannot answer — and one that CMRL's relatively limited public disclosures make difficult for outsiders to investigate independently.endently.
