The auditors of McNally Bharat Engineering Company have raised concerns over the BM Khaitan-controlled Williamson Magor Group entity’s continuance as a “going concern” unless its debt restructuring proposal receives a favourable response.
The two auditors, Deloitte Haskins & Sells LLP and V Singhi & Associates, in their report have stated that McNally Bharat and one of its subsidiaries failed to repay loans and settle other financial and non-financial liabilities, including statutory liabilities.
Giving an “adverse opinion”, the auditors have pointed out that the company has a net loss of over ₹783 crore, while its current liabilities exceed current assets by nearly ₹461 crore.
“The ability of the group to continue as a going concern is solely dependent on the acceptance of their debt restructuring proposal, which is not wholly within the control of the Group,” the auditors maintained.
McNally Bharat, the audit report said, recognised deferred tax assets aggregating ₹579.4 crore as on March 31, 2019. But “considering the material uncertainty related to going concern that exists, the threshold for certainty for recognising the deferred tax assets has not been met,” it further says.
The auditors say that “consequently, the deferred tax assets are overstated and losses for the year is understated by ₹579.4 crore.” The accumulated deficit in the company is also understated by the similar amount, the report says.
Other issues raised by the auditors relate to ‘recognition of fair value gain’ amounting up to ₹875 crore.
McNally has reported a consolidated loss of ₹783 crore for FY19.