By CL Jose
Company hints at more tariff hikes to stay afloat
THIRUVANANTHAPURAM/February 15-2022: KSEBL, the state’s (Kerala) lone power distributor, is likely to resort to more tariff hikes in the coming years in order to keep its head above water, and to ‘technically’ remain as a ‘Going Concern’.
Talking to businessbenchmark.news, an accounting expert said the company has smartly dodged the possible flagging of ‘Going Concern’ assumption by its auditors, by explaining in the ‘notes’ to the accounts that it can rightfully rely on tariff revisions and wriggle out of the current financial conundrum the company is mired in. It said the hikes can be passed on to the consumers as it is entitled to do so.
When an auditor conducts an examination of the accounting records of a company, he/she has to review its ability to continue as a ‘Going Concern’ and if the assessment raises substantial doubt regarding the company’s ability to continue in the future, a ‘Going Concern’ Qualification must be included in the opinion of the company’s financial statements.
The ‘Going Concern’ Qualification is of great concern to lenders, since it is a major indicator of the inability of a company to pay back its debts.
Experts argue that KSEBL doesn’t have options other than effecting more tariff hikes given the sorry state of its finances.
It’s been reported by the media that KSEBL is all set for a tariff hike from April 1 onwards, but the way the management has pre-empted the auditors’ possible critical stand points to the fact that KSEBL won’t stop at one tariff hike in the short to medium term.
Pathetic finance
KSEBL, which has a share capital of Rs3499.05 crore, has heaped accumulated losses to the tune of Rs14,588.58 crore and is now sitting on a negative net worth of Rs11,089.53 crore as on March 31, 2021, up from Rs8,605.38 a year ago.
The total borrowings as of FY21 end stood at a whopping Rs15,716.79 crore. Seemingly, oblivious to these stark realities, the KSEBL management went on to effect a salary raise to its employees that saw the total salary expenditure of the company soar by 85 per cent in one go, from Rs2513.10 crore to Rs4629.74crore.
Lots of lapses
The observations made by the auditors of KSEBL on the accounts of the financial year 2020-21 are severe enough to raise eyebrows in a state, which is going through a rough patch financially.
The public utility department-turned corporate entity, which the KSEBL is now, seems to be basking in the hangover of its long government-pampered years.
No records on properties?
Auditors have stated that KSEBL has not made available the records relating to the landed properties held by it, including the title deeds, present ownership details etc. for audit.
“Therefore, we are unable to comment on the existence, ownership and possession of such landed properties held by it,” they added.
Auditors further noted that the company has not provided for depreciation on property, plant, and equipment valued at Rs10,712 crore since 2013-14, resulting in the understatement of depreciation of Rs565.59 crore for 2020-21 and overstatement of carrying value of property, plant, and equipment by Rs4,193.13 crore.
“The company has not been following the practice of physical verification of its fixed assets on a regular basis and hence identification of discrepancies is not possible.”
No count on cash
In respect of the cash & cash equivalents, the company has not provided proper reconciliations of various bank account balances reported in the accounts.
”Such un-reconciled balances and long outstanding differences could result in overstatement or understatement of balances under “Cash and Cash Equivalents” and the balances under respective corresponding accounts,” the auditors further noted.
