Audit firm qualifies Apollo Tyres accounts

Our Corporate Bureau
09 September 2002

New Delhi: The statutory auditor of Apollo Tyres Ltd (ATL) has qualified the financial statements of the company for the year ended 31 March 2002 over the accounting treatment adopted in writing off advances amounting to Rs 32.70 crore.

The company has written off advances aggregating Rs 32.70 crore to the profit-and-loss account. It has also transferred an equivalent amount to the profit-and-loss account from the general reserve, resulting in nil impact on the profit for the year. Had the write-off not been set off against the transfer from general reserves, the profit for the year before and after tax would have been lower by Rs 32.70 crore with a corresponding increase in the general reserve, said the audit firm Fraser & Ross report to the members of ATL.

The company had reported a net profit of Rs 36.81 crore on net sales of Rs 1,710.14 crore for the year ended 31 March 2002. ATL had recorded a net profit of Rs 25.42 crore on net sales of Rs 1,454.70 crore for the year ended 31 March 2001.

ATL, as principal guarantor and main promoter of Gujarat Perstorp Electronics Ltd (GPEL), had advanced Rs 32.70 crore to financial institutions and banks of GPEL towards one-time settlement of their dues as well as towards working capital requirements of GPEL in accordance with the draft rehabilitation scheme that was finally approved by the Gujarat High Court and the Board for Industrial and Financial Reconstruction during the year.

This amount of Rs 32.70 crore has been written off by ATL to the profit-and-loss account as the company is not hopeful of their recovery and an equivalent amount has been transferred from the general reserve.

The ATL board of directors have, in their directors' report, observed that the board had decided to write off the advance of Rs 32.70 crore by transfer from the general reserve instead of against the current year's profit. Since the write-off was an exceptional item arising out of the company's obligation as a promoter and principal guarantor of term loans of GPEL, accordingly the profits as stated in the accounts are correctly stated.