The Hindu Business Line : MosChip auditors qualify accounts

THE auditors of MosChip Semiconductor Technology Ltd have qualified the accounts of the company for the financial year-ended March 31, 2004 with regard to investment of Rs 30.92 crore in its wholly-owned unlisted subsidiary MosChip Semiconductor Technology USA, formerly known as NetMos Technology Inc, USA.

The auditors stated that the investment was being carried at cost and the difference between the investment amount of Rs 30.92 crore and the net worth amount of Rs 1.34 crore of MosChip USA, at book value, as on March 31, 2004, had not been charged to the profit and loss account.

However, according to the company's board and the statement of Managing Director, Mr C. Dayakar Reddy, "the difference between the investment amount and the net worth amount of MosChip USA, at book value as on March 31, 2004 is not a reflection in the dimunition of the value of the investment. The fair market value of MosChip USA, which is based on expected future cash flows over several years and other intangible assets — intellectual property developed and owned by it, the international distribution network, customer base and foundry relationship, is much higher than the book value."

The book value, the board maintained, does not capture the real intrinsic worth of the company's 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, the board opined 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 29.57 crore.

The company had accumulated losses of Rs 26.83 crore as on March 31, 2004. The board, which met last week, also cleared the allotment of shares on rights basis.

For the quarter-ended June 30, 2004, sales were Rs 67 lakh and a registered a loss of Rs 2.38 crore as against net sales of Rs 26 lakh and net loss of Rs 1.67 crore for the corresponding quarter last year.

For the year-ended March 31, 2004, sales income was Rs 26 lakh and a net loss of Rs.11.99 crore.

The company has launched 11 new products during the financial year 2003-04 and these are under evaluation by potential customers.