WOCKHARDT LIMITED — (15
months ended 31st March 2010)
From Significant Accounting
Policies :
Derivative Financial
Instruments :
The Company uses derivative
financial instruments such as option contracts and interest rate swaps to hedge
its risk associated with foreign currency fluctuations and interest rates.
As per the Institute of
Chartered Accountants of India (ICAI) Announcement, accounting for derivative
contracts, other than those covered under AS-11, are marked to market on a
portfolio basis, and the net loss is charged to the income statement. Net gains
are ignored.
From Notes to Accounts :
32. Corporate Debt
Restructuring (CDR) Scheme is effective from April 15, 2009. The outstanding
liabilities of the Company are being restructured under the aegis of Corporate
Debt Restructuring (CDR) Scheme. As required under the Scheme, the Master
Restructuring Agreement (MRA) and other necessary documents have been executed
and effected. The CDR Scheme comprehensively covers the FCCB liabilities and
crystallised derivatives/hedging liabilities.
35. CONTINGENT LIABILITIES
NOT PROVIDED FOR :
(e) Certain
derivative/hedging contracts have been unilaterally cancelled by the banks. The
Company has treated the demand of ‘8,483.22 million (previous year — ‘4,895.24
million) as a contingent liability and has not acknowledged the same as debt,
since the liability cannot be currently ascertained even on a best-effort basis
till the final outcome of the matter.
The Company is of the view
that these are contingent liabilities as these arise from past events and
existence of which will be confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within control of the Company and
therefore, has not acknowledged these claims against Company as debts.
36. Winding-up petitions are
filed by certain lenders/banks in the Bombay High Court and the Company has
filed affidavit in reply. ICICI Bank, as empowered by CDR and Employee Union
have filed intervention application against the winding-up. The matter is sub-judice
and outcome of which cannot be currently ascertained.
From Auditors’ Report :
5. Without qualifying our
opinion, we draw attention
(a) to Note 32 of the
financial statements, wherein as explained, the Company’s outstanding
liabilities are being restructured under the aegis of Corporate Debt
Restructuring Scheme (CDR) with effect from April 15, 2009 and as required
by the Scheme, the Master Restructuring Agreement (MRA) and other necessary
documents have been executed and are effective.
(b) to Note 36 of the
financial statements, wherein as explained, certain lenders have filed
winding-up petitions against the Company in the Bombay High Court and the
Company has filed affidavit in reply. The matter is sub-judice and outcome
of which cannot be currently ascertained.
The Company’s ability to
continue as a going concern is dependent on the Company being able to
successfully implement the actions proposed in the CDR Scheme and outcome of the
winding-up petitions in favour of the Company.
6. (a) With regard to
outstanding derivative contracts as on March 31, 2010, the premiums
aggregating ‘1,843.79 million are unconfirmed and we are informed that the
relevant documents are being put in place. The consequential effect of
subsequent adjustment/s — if any — on relevant assets and liabilities and
loss for the period is not ascertainable.
(b) In respect of
crystallised derivative losses of ‘11,303.80 million forming part of
‘exceptional items’, we have relied on appropriate written representations.
7. As explained in Note
35(e) to the financial statements, the Company had, on certain derivative
contracts with banks, stopped payment of margins called by the banks. The banks,
based on the Early Termination clause in the agreement, terminated these
contracts and claimed an amount of ‘8,483.22 million, being the loss incurred on
termination of such contracts, which the Company has disputed and not
acknowledged as debt. No provision has been made in the accounts for the above
amount, which has been considered as contingent liability. The consequential
impact upon relevant assets and liabilities and loss for the period is not
ascertainable.
8. In our opinion, and to
the best of our information and according to the explanations given to us,
subject to the matter included in paragraph 6 and 7 above, the effect of which
cannot be currently ascertained, the said accounts give the information required
by the Act in the manner so required and also give a true and fair view in
conformity with the accounting principles generally accepted in India.
