Home / Companies / The curious case of Ricoh India’s balance sheet

New Delhi: A look at the publicly available accounts of Ricoh India Ltd, the company in which auditors have raised questions about accounting inconsistencies, reveals several odd or inconsistent entries.

Consider, for example, a sudden surge in balance of cheques on hand.

The total value of cheques which have not been encashed increased by almost 17 times in a year from 2.17 crore in 2013-14 to 40.43 crore in 2014-15, according to the company’s balance sheet.

The Companies Act, 2013, allows showing cheques on hand in the balance sheet under the head “cash and bank balance", but the usual industry practice involves preparing a bank reconciliation statement (BRS) to adjust the bank balance. In the same period, Ricoh India’s cash and bank balance increased from 38.34 crore to 70.39 crore.

The company mentions in its statement in the annual report that “the increased collection activity at the end of the current year ended 31 March 2015 helped to augment cash and bank balance". However, the company’s debtor/accounts receivables turnover ratio, or how many times a business can turn its accounts receivable into cash during a period, signalled otherwise.

Ricoh India’s debtor’s turnover ratio (excluding lease receivables) declined to 2.76 in the current year from 3.96 in the previous year.

So, if a debtor to sales ratio is 6, it would mean that the debtors would buy and repay six times in the said period and the company’s credit sales would liquidate in 60 days from the date of sale on an average.

In Ricoh India’s case, the number of days to convert credit sales into cash has increased from 91 days in 2013-14 to 130 days in 2014-15.

“This means there is a delay in collection and so company’s (number of) debtors are rising in its balance sheet, showing its assets in good health. The debtor’s turnover ratio is poor and may be the company is not writing off the debtors," said an accountant, who also requested not to be named.

Further, the company has “balance receivables" from its fellow subsidiary company, Ricoh Asia Pacific Operations Ltd, to the tune of 139.77 crore in the year 2014-15 which was only 16.75 crore in the previous year.

The absence of any sales in the past two years to Ricoh Asia Pacific raises the question as to what transactions are giving rise to the huge sum standing in accounts receivables.

For Ricoh India, net profit almost doubled to 33.90 crore for the year ended 31 March 2015 from 17.23 crore in the previous year.

However, in the recently announced results of the company for the six months ended 30 September 2015, the company reported a net loss of 146.98 crore.

In reply to a detailed questionnaire, a spokesperson for Ricoh India said that the financial statements for the quarter ended 30 September 2015 “have been prepared based on all information currently available with us, as well as the preliminary findings of the investigation, a summary of which is included in the disclosure to BSE".

The company is in the midst of a detailed internal investigation basis concern areas highlighted by the auditors and the findings of the independent agency’s review, the spokesperson said.

“Given the challenges of the present situation, we are unable to share any further financial details until the completion of the ongoing internal investigation," the spokesperson added.

Mint reached out to the company’s new managing director and chief executive officer, A.T. Rajan, at his office on Friday.

Rajan declined to meet citing prior engagements.

While it is clear that the company is engulfed in a financial fraud, the magnitude of the fraud is unknown.

“It may take weeks, months," said a person aware of the matter who did not want to be named.

The problems at Ricoh came to the limelight when the company failed to submit its financial results for the June and September quarters to BSE.

The stock exchange, in its notice, said Ricoh India, along with other four listed firms, would be shifted to the “Z" group, with effect from 28 March due to non-compliance with listing norms for two consecutive quarters. BSE stopped trading in Ricoh India shares from 26 May.

The results were finally submitted on 17 May 2016.

Following the March notice, the company’s stock fell to a 52-week low of 243.20 on Thursday, before trading was suspended.

Manoj Kumar, managing director and chief executive, along with Anil Saini, senior vice-president and chief operating officer, and Arvind Singhal, chief financial officer, were directed to go on a paid leave from 30 March 2015, following which Kumar resigned from the company’s board.

Ricoh Japan holds more than a 70% stake in the company, and has been trying to gain greater financial and operational control.

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