LIC Nomura auditor’s report highlights slips

Call it a double whammy if you will — capping a year that saw it lose over 70% of its assets under management, LIC Nomura Mutual Fund Asset Management Co has now drawn flak from its auditors for accounting slips.

The errors relate to payment of taxes as well as accounting of fixed assets, says the report by auditors S V Ghatalia and Associates. “…there have been serious delays in a few cases of payment of tax deducted at source on rent, directors’ sitting fees and payment to contractors,” it said. “Fixed assets have been physically verified by the management during the year and material discrepancies were identified on such verification.”

When dealt with in the books of accounts, these added `59.48 lakh to the Profit and Loss Account, said the report.
The pending taxes were worth Rs2.04 lakh.

A spokesperson for the mutual fund said the points raised were part of auditor’s comments for the last financial year, and have been explained or rectified.

The asset management company recorded losses of Rs87.44 crore for the year ended March 2011, compared with a Rs110.71 crore profit in the previous fiscal.    

This includes a hit of Rs112.79 crore on its debt funds following a decision to reimburse investors after a change in valuation norms for debt securities left its portfolio with heavy losses.

LIC Nomura lost 72.36% of its assets under management last fiscal, from Rs40,507 crore as of April to an average Rs11,195 crore during the quarter ended March, and has fallen further to Rs7,075 during the September quarter, pushing it down from being the seventh-largest mutual fund to the 17th.

LIC Mutual Fund, set up by the Life Insurance Corporation of India in 1989, had entered into an agreement to sell 35% of its stake to Nomura Asset Management Co of Japan in July 2009 in a deal valuing the AMC at Rs880 crore, or 2.7% of its assets under management at that point.