Madras Day is celebrated on 22nd August, with articles in the newspapers, talks taking place in various locations in the city, tours to key landmarks and other forms of revisiting the history of this city.
This column has also been infected by this fever!
As this column comments on corporate-related issues, the question that popped up is how to link the writings here with the city.
Should some historical details about some of the Madras corporates be strung together?
That is more the domain of historians, of which this city boasts aplenty.
Thus, it resolved to comment on some recent corporate actions/ inactions arising from some of the recent annual reports or other corporate decisions.
As a way of keeping up with the Joneses who take a tour around the city exploring the landmarks, this article mimics that approach and reaches a few interesting spots that help make a story each!
The first halt is at Santhome High Road!
The auditor’s report is not something one wishes to consume with the morning cup of coffee. Yet, the annexure to the auditor’s report in the instant case cannot miss anyone’s attention and the same is extracted below.
This company has carried out a revaluation of its fixed assets and has added Rs5,397.35 crore to its carrying value.
While transitioning to the IndAS system, the company had carried out a restatement of the value of its fixed assets and added Rs2393.12 crore to the value as on 1 April 2015, being the date of transition. In this process, it also created Rs2035.87 crore of IndAS transition reserve. As an additional fact, the upward revaluation happened only in the value of the land. All other fixed assets suffered only a downward adjustment.
Subsequently, it carried out the revaluation of land resulting in an increase in the book value of Rs242.82 crore and Rs191.60 crore in FY19-20 and FY21-22, respectively.
The current revaluation shows a steep jump in the valuation of all the fixed assets, including building, railway sidings, plant and machinery. There is reason to seek more clarity on this, at least on two counts.
The first, is that the company, as noted earlier, was revaluing land, periodically. Except for the first revaluation in 2015 due to the adoption of IndAS when it is understandable for the increase in value to be significant, the subsequent ones were only marginal.
The current revaluation shows a huge jump in the value of land alone. In the absence of the details of how this level of increase took place in a matter of just three years between FY21-22 and the latest year, the reader is left to wonder and speculate.
A cement business has lands, consisting of mines and factory premises, mainly in remote areas, where an astronomical price increase is not possible.
More puzzling is the major appreciation in the value of depreciable assets like the plant, etc.
The company, in the past, had explained that its higher cost of operations was due to its plant and equipment being obsolete. Given this, the appreciation in the value of the old plant and similar assets is also baffling. The directors’ report remains silent on the reasons and the rationale for this.
The comparative figures of pre- and post-revaluation are shown below for appreciation of the impact. Only the non-current assets are relevant for this.
It is also to be noted that the intangible assets were not revalued.
To appreciate why this possibly happened all of a sudden this year, the answer may be in the annual report of a different entity that is not a resident of this city!
Ultratech Ltd acquired the shares of The India Cements Ltd during the second and third quarters of FY23-24 and completed the formalities a few days before the new year of 2025.
Ultratech had paid Rs9,746.41crore for the acquisition. India Cements became its subsidiary in that process, triggering a consolidation of the accounts.
In the consolidation, to the extent the value of the assets in the books of India Cements was lower than the acquisition cost, goodwill would arise, requiring an impairment check on a periodic basis.
Raising the book value of the assets of the subsidiary is a handy way to obviate goodwill being recognised. Thus, just before the last tranche was bought to result in the control exceeding 51%, the other company may have been directed to revalue to such an extent to avoid the goodwill.
The extract from the notes of the consolidated accounts of Ultratech, given below, seems to hold the key to this puzzle.
The method of arriving at the fair value of India Cements’ net assets is shown here.
These numbers should be matched with the books of the subsidiary to appreciate the import of such a steep revaluation carried out in its books!
The item marked in blue is quite intriguing. Do figure this out, or pose the question to DeepSeek or ChatGPT!!
The history of The India Cements Ltd is very much entwined with that of the city for nearly eight decades. This company has the unique distinction of being the first corporate to make a public issue and get listed post-independence in 1947.
This ends the first leg of the city tour. The Madras Day celebrations extend for a week and hopefully, a few more in this series will appeal to the interest of the readers.
Keep guessing the next place to stop, or, better still, suggest your choice, with the details, of course, for the related story!
(Ranganathan V is a CA and CS. He has over 44 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as a senior advisor post-retirement, handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
