The auditors have made several critical comments, which, if considered in line with the norms set by the Institute of Chartered Accountant of India, imply that the net loss for the year to March 31, 1999, would have been higher than the Rs 28.25 crore reported by the company.

The company is in a spot over excise related payments on after sales service provided by dealers. Total duty in respect of demands and showcause notices issued by the excise authorities increased by Rs 11 crore during the year to March 1999, to Rs 61.70 crore from Rs 50.14 crore in the previous fiscal.Against this, the company deposited a total of Rs 3.42 crore, of which Rs 58 lakh was paid during the year. The company noted that in the opinion of legal experts,the claims are untenable.

Meanwhile, an adjudication on a bonus related issue has dragged on for over 30 years now. According to the notes to the schedules for the year to March 31, 1999: ``Bonus for the years 1963-64 to 1967-68 at Hindmotor unit which is under adjudication (amount indeterminate).''

The company has noted that, ``no liability exists in this regard under the Payment of Bonus Act, 1965.''

Due to non-availability to allocable surplus and pending finalisation of agreements with the workers at the Hindmotor and Pithampur and Chennai car plants, minimum bonus under the Payment of Bonus Act 1965, has been provided.Hindustan Motors reported a turnover of Rs 1,492.06 crore for 1999, against Rs 1,327.18 crore in the previous year. Turnover for 1998-99 includes an other income component of Rs 11.59 crore of which Rs 6.05 crore has been written back since the liabilities and provisions made for earlier years are no longer required.

Under its gross block of fixed assets of Rs 333.25 crore, thecompany has taken into account Rs 14.35 crore technical know-how fees and another Rs 13.31 crore as interest.

Expenses incurred on account of its Rs 53.68 crore rights issue of last year, had been treated as deferred revenue expenditure and will be amortised over six years. Due to this change in accounting policy, the loss is lower by Rs 40.15 lakh. This has been noted by its auditors in their report to the shareholders.

Batliboi had noted among other issues, the company has not made provisions for its doubtful debts and claims aggregating to Rs 8.34 crore. The company responded to the non-provisioning by stating that final settlement of relevant matters are pending.

The auditors also noted that the company included Rs 15.15 crore as Modvat element in the closing inventories and treated it as part of the current year's profitability.

In line with the recommendations of the ICAI, this should have been carried forward for future adjustments.

Apart from this, Hindustan Motors has not made anyprovisions of Rs 14.24 crore gratuity liability, Rs 5.20 crore leave liability and non-provisioning of the future monthly compensation payments to the employees opting for the voluntary retirement scheme.

The management will be seeking the approval of its shareholders at the annual general meeting on September 8 to increase the aggregate ceiling on its borrowing capacity to Rs 750 crore from Rs 500 crore earlier.

Performance belies projections

For the second time in the last nine months, trends and performance of Hindustan Motors have been contrary to the management's projections. The company, in its offer letter for the Rs 54-crore rights issue last year, had projected a net profit of Rs 34.25 crore for the financial year to March 1999.

In the event, the company posted a net loss of Rs 28.25 crore for that year, attributing the setback to a ``severe recession in the automobile sector, particularly in the second half of the year accompanied by acute competition.''

The director's report to theshareholders dated May 21, 1999, noted that ``The company is confident that, with the expected improvement in the economy and the automobile market, the company would be able to show significant improvement in its working results in the years to come.''In the first quarter to June 30, 1999, Hindustan Motors posted a net loss of Rs 23.10 crore against a Rs 3.08 crore net loss in the corresponding period to June 30, 1998.