Indostar has finally submitted it’s quarter and year ended March 31, 2022 results.
(It’s pertinent to remind here that currently the Company has been going through a self initiated independent review wrt to the credit process/ operational lapses.)
As is typical in such scenarios, everyone wants to play safe and auditor of the Company (Deloitte Haskins and Sells LLP) has now raised doubt on Indostar’s ability to continue as a going concern.
Reason for auditor’s doubt?
- Significant asset liability mismatch in the next 12 months – the total liabilities exceed the total assets maturing within 12 months by~ Rs 2,206.04 crore casting doubt on company’s ability to meet it’s repayment obligations; and
- Default on borrowing covenants that may further prepone debt repayment obligations – for certain borrowings, the gross non-performing asset (GNPA) and/or net non-performing asset (NNPA) ratios have exceeded thresholds.
Both these factors together create significant short term funding requirements for the Company and hence the doubt on it’s ability to continue.
Is there a reason for worry?
Technically yes.
However, given Indostar’s ownership by Brookfield and Everstone, I personally don’t think survivability would be a challenge. I personally expect restructuring with the lenders and/ or fresh funds infusion by the promoters/ others.
Operationally, however, I have no reason to get excited pending clarity on the ongoing investigation.