Rubber Chemical Ltd.

By Group - 5
 Analysis Outcome for the
Company
 Delay in import license reason is fake.
Even if you had got it late, why didn’t the
promoter not complete the project?
 This is either fictitious or lots of money is
held up by way of receivables either of
which is bad!!
 Other income has increased. This is the
main reason why profit has increased and
not because of sales!!
 Reasons for Cost Overrun

 East Germany going Capitalist

 Transition to Dow Chemicals as the provider for
technical knowledge
 Pre Op Exp increase is more than Capital Cost. Implies
that no project has been happening after 1992!!
 No other expense has increased except Pre op
expenditure
 Since more debt has come, net worth of the company
has become negative.
 Promoter has no incentive to continue the project since
all cash inflow will go towards servicing the debt.
 Project has been completed by 1992, as
increase in preliminary is more than
increase in land &building and plant &
machinery cost
 No increase in tangible assets
 Turnover declined in 1995, current assets
increases absorbed by receivables why?
 Market is bad
 Company showing fictitious asset
 Interest getting capitalized – increase in
cost
 Term loan is shown in current liabilities
 No money left for completion of project
 From 96 CA decreased and then we see
project capital cost increasing
 So got term loan but used for other
purpose – Diversion of funds
 Loan – Diverted to other person – That
person put in as equity
 Sales went down because there is no
working capital and not because of market
condition
 BIFR – said project is unviable
 NCA negative after 96
 IGPL
 Concentrate on view of project:
 Should we finance or not finance
 Reasons