Price Waterhouse quits as auditor of Eveready over inter-company deposits

Sources said the difference of opinion was on recoverability of inter-corporate deposits given to group firms and corporate guarantees given on behalf of group entities
Price Waterhouse & Co Chartered Accountants LLP has quit as Eveready Industries’ auditor, saying it has been unable to obtain sufficient audit evidence of inter-company deposits and its recovery. In its place, Singhi & Co Chartered Accountants has been appointed.

“Price Waterhouse & Co has expressed its inability to continue as the auditors of the company,” said Eveready in a notice to the bourses.

While approving the company’s annual financial report, Price Waterhouse & Co had said the holding company had given advances to the tune of Rs 62 crore to a company to get the leasehold rights of a property. The deal had to be executed by the end of the last financial year; and Eveready had the right to claim refund and cancel the agreement if it failed.

“However, neither the deed has been executed nor the refund claimed,” Price Waterhouse & Co said in its auditor’s report.

Sources said the difference of opinion between Price Waterhouse & Co and Eveready was on the recoverability of inter-corporate deposits given to group companies and corporate guarantees given on behalf of group entities. These amount to Rs 512.26 crore.

“We were able to get a good auditor on board immediately,” a company source said.

Future of tea biz

In a separate filing with the bourses, Eveready said its board has proposed to enter into an asset-transfer or licence agreement with Madhu Jayanti International for transfer of the packet tea licence and other related trademarks for Rs 6 crore.

Earlier, Eveready had entered into an agreement with another WMG entity, McLeod Russel, to boost the packet tea business. However, the latter has been selling its estates to pare debt and lenders have been invoking company shares pledged with them.

Company sources said the proceeds from this sale will be used to boost the faster-growing categories such as appliances and lighting. It will also help improve the earnings before income tax deduction and amortisation (Ebidta) margin and reduce working capital needs of the company.

In the last financial year, the packet tea business of Eveready stood at Rs 68.3 crore but it incurred an Ebidta loss of Rs 11.3 crore. Eveready reasoned that it was not able to pump in money to promote the tea brands and it stood at an uneconomical scale.

Eveready has also been scouting for a strategic partner for its batteries business. Sources said some developments are expected on this front in the next 45 days.

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