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Going concern status: Auditor of debt-ridden Aban Holdings raises red flag

Sajan C Kumar
Chennai-based Aban Offshore has reported a consolidated net loss of Rs 386.41 crore in Q1FY20

The auditor to the debt-ridden Aban Offshore, a key player in the offshore drilling sector in the private sector, has raised concern over the ability of the company to continue as a going concern, mainly based on the review report of the company's subsidiaries, by another audit firm.

The auditor, P Murali & Co, pointed out a review report by another auditor Nexia TS Public Accounting Corporation, Singapore, on the consolidated results of Aban Holdings, Singapore, along with its subsidiaries and associates which recorded that the Aban Group has defaulted on payment of their borrowings, which have fallen due, and has breached the covenants of their borrowings that give the lenders the right to demand the related borrowings be due and payable immediately.

According to Nexia, the lenders have issued recall notices to the Group. Though management had reclassified these borrowings of the Group, with original repayment terms beyond 12 months from the balance sheet date as current liabilities, the Group has not concluded on any re-negotiation, obtain replacement financing or raise funds through any fund raising exercise as discussion are still on-going with the lenders.

Nexia said the ability of the Group to continue in operational existence in the foreseeable future and to meet their financial obligations as and when they fall due are dependent on the actions and measures such as obtaining replacement financing and it is uncertain whether the Group will raise further funds through any fund raising exercise.

Referring to Nexia report, P Murali & Co, in its review of Aban Offshore, pointed out that the said ‘conditions’ indicate the existence of material uncertainties which may cast significant doubt on the Group’s ability to continue as going concern.

Nevertheless, the board of directors believes that the use of the going concern assumption on the preparation of the interim financial information of the Group for the three-month period then ended is still appropriate after taking into consideration of the above actions and measures, the review said.

"Therefore, we are unable to conclude as to whether the going concern basis of preparation of the accompanying interim financial information of the Group is appropriate," the auditor said. According to reports, as on June 30, 2019, the Group is in net current liabilities and net liabilities positions of $2.3 billion and $897 million, respectively.

Chennai-based Aban Offshore has reported a consolidated net loss of Rs 386.41 crore in Q1FY20, against the net loss of Rs 312.77 crore in the corresponding quarter last fiscal. The company’s total income stood at Rs 138.46 crore compared to Rs 343.27 crore.