Crisil said in a report that uncertainties associated with implementation and commercial success of the company's large real estate projects were extremely high and the company would have to continue to rely on fresh inflows of high cost retail deposits to meet operational expenses as well as repayment obligations on existing deposits.

The Chandigarh-based Golden Forest, set up for the purpose of carrying out commercial plantation activities, has shifted focus to real estate development and was mainly engaged in acquisition of large land holdings in cities which it proposes to develop into residential and industrial townships.

The company, which has collected over Rs 700 crore through these schemes,plans to develop townships with facilities for industrial parks, commercial complexes, residential areas, farm houses, hotels, amusement parks and golf courses.

It envisages a time frame of five to eight years on the completion of these projects and the total project outlay was currently estimated to be Rs 3,800 crore, Crisil said in a report.

The ability of the company to complete projects on time and profitably achieve commercial sale appears highly uncertain, Crisil said addding that this was especially so in the light of absence of management track record in implementing such large projects in multiple locations. Crisil said the company has not yet sold any of its real estate properties resulting in low cash inflows from operation till date. The income from its agricultural operations was negligible, it added.

In the absence of clear accounting guidelines for such collective investment schemes, the company shows a portion of funds collected from investors as developement receipts and sets off a partof repayments against these receipts. As a result, reported levels of investor funds are not an accurate reflection of the actual outstanding liabilities on investor funds.

On a capital base of Rs 10 lakh, the company reported investor deposits of Rs 401 crore, as on March 31, 1997, resulting in high gearing levels.

The land bulk, evaluated by an independent valuer at Rs 1180 crore, does not give adequate comfort with respect to timeliness on repayments. Further, resource requirements for implementing these projects is substantial and this could put further strain on Golden Forest's adverse cash flow situation, Crisil said.