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Our Corporate Bureau
Mumbai, Aug 22: Continental Coffee has suffered a 50 per cent erosion of its net worth after it posted net losses of Rs 17.9 crore in the 18-month period to the end of June 30, 1998.
The company will soon hold a meeting with its shareholders to apprise them of the erosion in net worth. In a notice to the Bombay Stock Exchange, the company cited the raids by the excise and tax authorities as reasons for the company's lacklustre performance in recent times.
Continental Coffee has, in its detailed note to the BSE, informed that it was raided by the enforcement wing of the commercial taxes department on October 30, 1996, for verifying certain coffee purchases made from Karnataka. On December 14, the company's offices were hounded by the central excise authorities, alleging evasion of duty, and all books and records were seized from the factories and the head office. Searches were also conducted on the residences of the senior management team including the company's managing director.
The company, says the Mumbai, Aug 22: Continental Coffee has suffered a 50 per cent erosion of its net worth after it posted net losses of Rs 17.9 crore in the 18-month period to the end of June 30, 1998.
The company will soon hold a meeting with its shareholders to apprise them of the erosion in net worth. In a notice to the Bombay Stock Exchange, the company cited the raids by the excise and tax authorities as reasons for the company's lacklustre performance in recent times.
Continental Coffee has, in its detailed note to the BSE, informed that it was raided by the enforcement wing of the commercial taxes department on October 30, 1996, for verifying certain coffee purchases made from Karnataka. On December 14, the company's offices were hounded by the central excise authorities, alleging evasion of duty, and all books and records were seized from the factories and the head office. Searches were also conducted on the residences of the senior management team including the company's managing director.
The company, says thenotice, again represented the matter effectively and convinced the authorities that there was no evasion of excise duty. But a period of five months was spent on this work and finally the books were returned to the company during the first week of May, 1997. "Thus the operations of the company were severely affected," the company said.
Subsequently, the excise authorities informed the banks of some variation in stock statements who in turn ordered a stock audit.
Out of the eight consignments -- a special grade of instant coffee supplied by the EEC -- six consignments were delivered late at the destination because of a strike at the Chennai port and consequential delay in transshipment in Colombo.
"Due to this delay, there was a deterioration in quality and the clients initially rejected the merchandise," the company said. However, on the company's pursuasion the clients agreed to accept the consignments at a substantial reduction to the actual price. The company approached the RBI and obtainedpermission for disposal of these consignments at a massive reduction which resulted in a loss of Rs 2.5 crore.
The company said that due to the liquidity problems arising out of the above reasons, it could not meet its commitments for interest on term loans etc, thereby incurring liquidity damages and further interest charges. The stock audit ordered by the bankers also brought out irregularities in the account, because of which working capital facilities were stopped. The liquidated damages at the rate of 2 per cent and monitoring charges etc added to the financial problems of the company.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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