TRF’s stock price hit by huge accounting glitches

TRF’s stock price has crashed by around 24% from Rs1,065.65 per share on 28 May 2010 to Rs807.15 per share today. Accounting errors disclosed in the company’s year-end result announcements on 31 May 2010 have triggered this fall

TRF Ltd’s stock price has fallen by around 19% following the company year-end results announcements. The stock price has fallen from a high of Rs1,065.65 on 28 May 2010 to Rs862 on 31 May 2010. Accounting issues raised due to certain reversals in revenue entries could have triggered the fall. The stock today closed at a further low of Rs807.15.

In the footnotes for its FY10 results, the company stated that certain contract costs, which were recorded incorrectly in the earlier years, were noted during the years ended 31 March 2010 and 31 March 2009.

Further, in a conference call held to discuss the company results, Ashim Roy, general manager, finance and accounts, TRF Ltd said, “You know sometime in financial year 2006-07 we have got a contract what we call ‘Navayuga’—the Krishnapatnam port contract. This is a contract with a division called port & yard equipment division, which operates from Kolkata. Sometime in the previous financial year (08-09) it was brought to light that there was some booking of turnover in 2007-08, which was not in line with the counting practice and we decided as a company that we must reverse those entries.”

For the total value of such entries reversed in 2008-09, the topline was affected by around Rs48 crore and the bottom-line was affected by around Rs13.37 crore.

Further, in the fourth quarter of 2009-10, while the final accounts were being prepared, the external auditors found another such entry.

“We believe that everything has been cleaned up and there is nothing like any more such entries lying anywhere. The 2008-09 year went by, 2009-10 whole year went by—quarter-to-quarter we had all technically audited accounts and so on. But by the time the year was ending and the final account was being prepared, one more such entry was noticed by our external auditors,” said Mr Roy.

The impact of this entry, reversed for 2009-10, has affected the company’s bottom-line by around Rs2.39 crore and the topline by around Rs11.5 crore. The company now plans to get an investigation done by a third-party agency. The deadline set for this third party to complete this investigation is one month.

Apart from announcing it briefly in the footnotes of the result announcements, the company has not disclosed to the Bombay Stock Exchange (BSE) these accounting irregularities. On being questioned whether any special communication has been made to the shareholders, Mr Roy told Moneylife, “We have already spoken about it in the conference call. We have disclosed it to the BSE in the results sheet. It has affected the company only by a few crores.” No written communication is being planned for the investors.

Commenting on the fall of stock prices after the result announcements, Mr Roy said, “The fall in stock prices should be short term. We have also conducted meetings with investors.”

TRF Ltd today closed at Rs 807.15 on the BSE, down by 3.73% from its previous close of Rs838.40 on Monday.

The mutual funds with major investments in TRF are Sundaram BNP Paribas Energy Opportunities (Rs24.21 crore), Sundaram BNP Paribas CAPEX Opp Reg-G (Rs9.10 crore), Sundaram BNP Paribas CAPEX Opp Reg-D (Rs10.36 crore), Franklin India Smaller Companies (Rs 14.44 crore), ICICI Prudential Emerging STAR Inst I  (Rs19.7 crore), ICICI Prudential Emerging STAR (Rs19.17 crore), UTI Energy (Rs9.06 crore).

An email request sent to Sundaram BNP Paribas remained unanswered till the time of writing the story. Templeton Franklin refused to comment on individual companies in the fund’s portfolio. Officials from UTI Energy were unavailable for immediate comments.


Domestic air traffic rebounds; grows 22% in Jan-May 2010

The number of passengers carried by domestic airlines from January to May this year was 211.38 lakh against 173.34 lakh in the same period last year, a growth of 21.95%, as per DGCA data

Air traffic growth rate in India rebounded to almost pre-recession levels showing a continuous growth recording a 22% rise in the first five months of this year, reports PTI.

The number of passengers carried by domestic airlines from January to May this year was 211.38 lakh against 173.34 lakh in the same period last year, clocking a growth of 21.95%, as per the data given by the Directorate General of Civil Aviation (DGCA).

Before the global financial downturn, Indian air traffic was growing by an average of about 25%.

The figures showed that in May, the total domestic passengers carried by scheduled Indian airlines stood at 47.85 lakh against 41.88 lakh in April.

Like before, Jet Airways and its subsidiary JetLite together carried the maximum number of passengers at 12.53 lakh, followed by Kingfisher and low-cost Kingfisher Red at 10 lakh. They were followed by Air India (domestic) at 8.47 lakh and all-business class airline Paramount at only 19,000.

Among the no-frill carriers, IndiGo bagged a major chunk of the air traffic at 7.53 lakh, followed by SpiceJet at 6.32 lakh and GoAir at 2.81 lakh.

In the same month, the highest seat factor or the average number of seats filled in each flight was recorded by no-frill airline IndiGo at 92.3%, followed by SpiceJet at 90.4% and JetLite at 85.4%.

Kingfisher registered a load factor of 83.2%, followed by Jet Airways at 82.5% and Air India (domestic) at 77.8%.

The percentage share of the carriers in the same month was led by Jet-JetLite at 26.2%, Kingfisher and its low cost subsidiary with 20.9%, Air India (domestic) 17.7%, IndiGo 15.7%, SpiceJet 13.2%, GoAir 5.9% and Paramount 0.4%, the figures showed.


India, China may see largest rise in PE investments in two years

The Global PE Barometer report revealed that 44% of the global PE investors surveyed want to either expand or invest in India, while 53% plan to do the same in China

India and China are expected to see the highest-ever rise in private equity investments from new and existing investors over the next two years, a survey by global private equity (PE) firm Coller Capital said, reports PTI.

As per the bi-annual survey of trends in private equity, investors—mainly from Europe—plan to boost their exposure to the Asia-Pacific region over the next three years.

"Of those, China and India will see by far the largest increase in PE investment from new and existing investors ...over the next two years," the Global PE Barometer report stated.

The report revealed that 44% of the global PE investors surveyed want to either expand or invest in India, while 53% plan to do the same in China.

Just 20% of the investors preferred Australia, even though most seemed to view it as the most attractive destination for buyout investments in the Asia-Pacific region.

According to an earlier industry report, investments of PE firms had risen fastest in 18 months to $2 billion in the January-March quarter this year. This was higher than their contribution of $620 million in the same period in 2009.

Despite the fall in returns over the past year, most PE investors across the globe are bullish on new investments.

Nearly two-thirds of the investors surveyed globally plan to increase their new commitments in private equity through 2010 and 2011, the survey found.

"It's natural to ask why investors are maintaining or strengthening their commitment to private equity after a big fall in returns. The simple answer is that private equity investment is a demonstrably skill-based activity for Limited Partners (LPs) and General Partners (GPs) alike, and the credit crunch and recession have been a useful—if painful—learning experience," Coller Capital CIO Jeremy Coller said.

LPs refer to a private equity investor who does not have a say in the management of the partnership, but reaps returns on his/her investment.

Among the investors surveyed, 51% made net returns of 10% or lower from their PE portfolios since they began investing in the asset class, compared to just 22% of limited partners two years earlier.

The barometer gives an overview of the plans and opinions of around 110 institutional investors in private equity (Limited Partners) across the North American, European and Asia-Pacific regions.


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