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C.R. Sukumar

HYDERABAD, July 3

THE audited financial accounts of MosChip Semiconductor Technology Ltd for the fiscal ended March 31, 2003, which were taken on record by the MosChip board here on Monday, were qualified by the company's statutory auditors.

On a turnover of Rs 50.69 lakh, the company ended up with a loss of Rs 7.27 crore during the fiscal under review as against an income of Rs 51.89 lakh and a net loss of Rs 4.38 crore in the previous fiscal.

In terms of consolidated accounts, the company incurred a net loss of Rs 8.71 crore on a turnover of Rs 10.03 crore during the fiscal under review. However, these consolidated results were based on audited financial statements of the company and unaudited financial statements of the wholly-owned subsidiary based in the US.

According to the auditors, the company has made an investment of Rs 30.92 crore in its wholly-owned unlisted US-based subsidiary company - MosChip Semiconductor Technology, formerly known as NetMos Technology Inc.

"The investment is being carried at cost. The difference between the investment amount of Rs 30.92 crore and the net worth amount of Rs 63.23 lakh of MosChip Semiconductor Technology, USA, at book value, as on March 31, 2003, has not been charged to the Profit & Loss account," the auditors pointed out.

Responding to this, the MosChip Managing Director, Mr C. Dayakar Reddy, said: "The board is of the opinion that the difference between the investment amount and the networth amount of MosChip Semiconductor Technology, USA, at book value, as on March 31, 2003, is not a reflection in the diminution of the value of the investment."

According to Mr Reddy, the fair market value of MosChip USA, which was based on expected future cash flows over several years and other intangible assets such as intellectual property development and owned by it, the international distribution network, customer base and foundry relationships, was much higher than its net worth at book value.

"The book value does not capture the real intrinsic worth of an investment. The decline in fair market value of investment in MosChip USA, if any, is temporary in nature and hence no provision has been made in the books of accounts."

However, Mr Reddy has admitted that if the company were to write off the difference as indicated in the audit qualification, "the net loss would have been higher by Rs 30.28 crore" for the fiscal ended March 31, 2003. This would have taken the total net loss to Rs 38.99 crore on a consolidated basis as against Rs 8.71 crore announced by the company.

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