A report from Glaucus Research indicated that Rolta India fabricated its reported capital expenditures in order to mask materially overstated EBITDA.
The research report said the company does not produce free cash flow and cannot repay offshore bondholders without refinancing and advised investors to sell the company's bonds due 2018 and 2019.
Hiranya Ashar, Joint MD of International Operations & Group CFO, Rolta says the report is completely baseless and all the facts mentioned in the same are totally incorrect.
Below is the verbatim transcript of Hiryana Ashar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: Did you read the Glaucus research blog and what have you got to say?
A: I did go through this report and this seems to be absolutely baseless report. The facts which are given in this report are not correct and also the way it has been compared is also not, the right comparison is apples to oranges. For us this report is completely baseless and as you said, coming from someone organisation which is not even heard of. So, we completely decline whatever is written in this report.
Latha: Did they reach out to you? What is the basis of whatever they have said? Have you spoken to them at all?
A: No. It has just come about less than hour ago. We have just gone through the report and have not been able to go through the report in totality. But, on the prima facie whatever they have written seems to be absolutely baseless.
Sonia: I am just going through the report at this point and they put a really serious allegation where they are saying that Rolta fell into a predictable pattern of acquiring computer systems and then disposing such systems at a loss. So, you disposed off about Rs 21 billion; that is close to USD 400 million of computer system and in exchange received only Rs 77 million. This resulted in wasted cash or cash loss exceeding more than USD 490 million. What would your own response be to this?
A: At the end, the same thing; the facts are not correct. First of all, these are computer systems and it has a life. So, a computer system after three or four years will certainly be sold. But what they have written is we have sold at a loss which is incorrect because what they are comparing is the original purchase price with the sell price but not the book value with the sell price and there is no loss which has been incurred. In fact if you see these some of these systems have been sold at a minor, very small loss and in fact sometimes even a profit because the book value is being completely depreciated. The facts are not correct.
Sonia: So, have you sold these systems at a loss? If yes, what is the amount and did you hide it from the investors?
A: Of course not. So, computer systems does get sold after they reach a period of three, four, five years when they are not in use and they get replaced with another system but the amount of loss which they have mentioned is actually incorrect because what they are comparing the original cost versus the price which it is sold and not the book value. So, we have not sold it at a loss and in fact in some cases there have been some minor profit as against the book value. And the analysis itself which is given in this report is incorrect.
Latha: Are any bonds coming up for redemption anytime now? Your foreign bonds?
A: No, not at all. Our bonds are due in 2018 and 2019. It is a long way from now.
Latha: And you will be able to finance those payments.
A: Absolutely. In fact when our foreign currency convertible bonds (FCCB) also came up for maturity we repaid FCCBs on time and we were one of those few companies. We could repay on time without any default or restructuring. So, our credit history has been absolutely clean and we have always been fully committed to our investors in terms of repayments.
Latha: Did any of the bond holders or rating agencies contact you in the last hour? You are saying that this report is only one hour old.
A: Yes, this report is one hour old. I have been getting many calls and I have been even responding to some of the investors.
Sonia: Just one final question before we let you go. There is another serious allegation that they have made where they have said that the capital expenditure (Capex) on building that you have done is very suspicious because your techno park was built way back in 2006, but between then and now, you claimed to have spent more that USD 250 million on buildings. What would your own response be to that? Has this expense actually been done or is it just another false allegation?
A: Again a false allegation without going into facts and details of what it is hitting somewhere 10,000 miles away. A person who has not even visited us. So, technology park was just the first part which we built in 2006 but after that we have built two more centres and one centre is as late as 2014 where in 2014 that centre got completed and in fact our research and development (R&D) team will be moving in that centre somewhere in next month.
Sonia: So, there is absolutely no fabrication of any of the capex spends.
A: Absolutely not.
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