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Accounts of 226 firms fail Crisil test

Janaki Krishnan & Freny Patel in Mumbai

A recent study by rating agency Crisil shows its calculation of the profits of 226 Indian companies, some of them blue-chip firms, are at variance with the profits reported by these firms for the year 2000-2001. However, the firms did not violate any accounting norms.

Crisil managing director R Ravimohan told Business Standard: "We are talking to the regulators, the Department of Company Affairs and the Securities and Exchange Board of India, on how to make this data available to them and how thereafter it can be disseminated to retail investors."

The product, Cris Finalyssis and Data Slicing System, covering 639 companies, is aimed at banks, mutual funds, investors, stock brokers, and all those who track companies' financials.

However, the accounting system adopted by many Indian companies is not illegal and is very much within the accounting framework.

"These corporates are following the letter of the law, though not its spirit," said Madhu Dubhashi, chief executive officer of Global Data Services of India Ltd, a subsidiary of Crisil, which has done the study.

"The accounts of all the companies analysed by us are accepted as following the accounting standards. Our views are only from an analytical angle and do not in way imply misreporting in the accounts," Dubhashi added.

By the numbers they have presented, corporates were able to get a better valuation and credit rating. Ravimohan did not rule out the possibility of the DCA questioning corporates on the accounting norms they have adopted.

While none of the corporates can be hauled up for financial jugglery, Dubhashi said, "It could negatively affect the interest rate at which these corporates borrow funds from the banking sector."

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