RCom Fudged Revenues, Says DoT Auditor

by CXOtoday Staff    Oct 14, 2009

A Department of Telecommunications (DoT)-appointed independent auditing agency has alleged that Reliance Communications (RCom) has indulged in massive over-reporting and manipulation of revenues

According to the auditor, Parekh & Co, RCom fudged revenues to over report revenues by Rs 2,915 crore, as well as evading revenue share for licence and spectrum fee to the tune of Rs 315 crore to the telecom regulator, Trai.

The audit concerned revenues for fiscal years 2006-07 and 2007-08.

RCom’s actual revenues for fiscal year 2007-08 were Rs 12,298 crore while the company declared revenues of Rs 15,213 crore, an inflation of Rs 2,915 crore, as per Parekh & Co s findings. The EBITDA and EBIT earned by the company were much lower than the figures approved by Kotak. BSR & Co (KPMG) and Chaturvedi & Shah are statutory auditors of RCom. 

RCom fudged Rs 617 crore in revenues by way of double accounting of the same revenues in two different accounting years. Rs 379 crore was fudged by way of selling expired prepaid card to two companies namely, Macronet Private Limited and Inference Systems Ltd. Another Rs 300 crore was inflated through a transaction with Macronet.

Inference has a registered office within ADAG campus in Navi Mumbai and is an ADAG company.

Parekh & Co said there are evidences of cross-booking between Reliance Communications and its subsidiary, Reliance Communications Infrastructure. In all, RCom violated nine accounting standards, it alleged.

DoT had appointed the independent auditor after a study conducted by Kotak and UBS pointed out the discrepancy in RCom s revenue reporting to Trai and investors.