JSW Steel refutes Credit Suisse report on debt understatement

Our Bureau Mumbai | Updated on March 12, 2018 Published on July 09, 2012

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.

Published on July 09, 2012

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.