The company's audited statement of accounts for 1997-98 has thrown up a slew of qualifications by the auditors on several transactions and business practices adopted by the previous regime. In fact, the auditors, M Bhaskara Rao and Co, while strongly qualifying their report, have expressed their inability to even give an opinion on the likely impact of these transactions on the Rs 6.5-crore net profit on a turnover of Rs 392.56 crore reported for the year. According to them, the present management is not only reviewing all these transactions but is "initiating recovery proceedings."

Many of these transactions reflect possible diversion of funds from Raasi Cement toother companies in which the Raju family were either directly or indirectly interested. Raasi Cement during the previous fiscal had sold about 22,543 tonnes of clinker to Viswam Cements and Maatha Cements, concerns reportedly close to Raju family, at prices substantially below the average cost of production. The report, however, does not quantify the extent of loss to Raasi Cement on account of this transaction.

Other transactions with Maatha Cements include an interest-free advance of Rs 75 lakh for manufacturing slag cement which is yet to be returned despite the fact that the contract was terminated. For the same purpose, Raasi Cement had transferred material to the Maatha Cements, value of which according to the former's record was Rs 84.43 crore. But when the stock was verified physically, a shortage of materials worth Rs 49.05 lakh came to light.

Raasi Cement has also granted an advance to Sri Krishna Cement, a company in which the former managing director KV Vishnu Raju is a director, for meetingthe latter's capital expenditure. The outstanding amount of Rs 4.10 crore was classified under capital WIP in Raasi Cement's 1996-97 accounts and not as loans and advances.

Raju family seems to have liberally used Raasi Cement funds for their associate concerns and as on March 31, 1998, Rs 5.85 crore was due from them. The dues at one point of time was as high as Rs 10.87 crore. While Raasi Cement was asked to pay an interest of 24 per cent per annum for monies borrowed from group companies, no interest was charged on amounts lent to them.

In fact, BV Raju was paid Rs 17.55-lakh as interest for an unsecured loan to the paper division without the board's approval. Another case is purchase of coal by Raasi Cement from Sri Vishnu Cement for Rs 82.56 lakh, the company is now ascertaining whether the coal was received at all. The management, according to the annual report, is also looking into irregularities in the incentive scheme to some transport contractors involving Rs 5.49 crore.

The auditor has alsoopined that the internal-control procedures need to be streamlined in line with the size of the company and nature of its business.