JSW Steel has strongly disagreed in a public announcement that it has understated debt by at least Rs 11,900 crore.
Responding to an equity research report by Credit Suisse published on July 6, JSW said all its documents and financials complied with the extant laws and regulations.
The company said its annual financial statements were in accordance with the Indian Generally Accepted Accounting Principles (GAAP).
This included conformance with the latest Schedule VI of the Companies Act. Its financials were audited by a reputed firm of chartered accountants, JSW said.
The research report had raised three issues. First, acceptances were up from Rs 6,800 crore in FY11 to Rs 7,500 crore in FY12.
JSW said acceptances of Rs 7,500 crore constituted trade payables and were related to raw material purchase. It had followed this disclosure practice consistently since inception, the statement said.
The report observed that securitised receivables were up from Rs 2,600 crore in FY 11 to Rs 3,100 crore in FY12.
JSW said Rs 3,000 crore of the Rs 3,100 crore bills discounted were covered by letters of credit and bank guarantees. These were without recourse to the company and customers were liable to pay on the due date. Hence, JSW had disclosed it under contingent liability.
A letter of credit is an undertaking by a bank on behalf of a buyer to a seller to make payments on compliance with the terms and conditions stipulated in the letter of credit within a specified time limit.
A bank guarantee is an undertaking by a bank to make a payment in case the buyer does not fulfil the obligations under the transaction.
A letter of credit ensures the smooth flow of a transaction, while a bank guarantee is invoked by a seller only when a buyer defaults.
The last point in the research report said the company had lost Rs 1,200 crore due to rupee depreciation as it had not hedged it liabilities.
JSW said the foreign currency liabilities were translated and reported according to the spot and forward exchange rates prevalent as on the date of closure of financial statements.
The Rs 1,200 crore translation loss was based on the June 2012 exchange rate. Exchange rate of June 2012 cannot be applied for foreign currency liability outstanding as on March 31, 2012, said JSW.
The company further said the latest debt outstanding for June 2012 needed to be calculated and would be reported along with the June quarter results.