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Anomalies in HT’s radio biz leads to Rs 127 crore reductions in the company’s overall PAT

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After a whistleblower’s disclosure, the company’s FY19-20 consolidated financials were revised for all quarters

Reported irregularities in HT’s radio business (Fever 104 FM) has brought down the company’s profit figures for FY20. After revision of consolidated results for 2019-2020 the revenue of HT Media was restated by Rs 21 crore, EBITDA restated by Rs 7 crore and PAT was down by Rs 127 crore, primarily on account of impairment of intangible assets in the radio business.

Whistleblower complaint

As per reports shared with stock exchanges, an email dated 6 August 2020 was sent to Piyush Gupta, the Group CFO, by an employee. The said whistleblower put in the complaint after resigning from his post in the company.

Other allegations included internal tracking of pre-billing amounts not reflecting in the system software like SAP and potentially improper credit approvals, including forced/ credit approval under protest, at the instructions of the leadership.

Investigation and impact

After a preliminary fact-finding enquiry, the company thereafter engaged the services of Khaitan & Co to further investigate the whistleblower complaint. In order to thoroughly investigate and assess the financial impact, if any and to carry out forensic analysis of the relevant data, Khaitan & Co. was authorized to engage the services of PwC.

A thorough investigation including forensic analysis was conducted by the investigation team where the allegations were established to be correct. However, as per investigations, the anomalous practices were limited only to a stream of revenue of the radio business. The anomalies lead to overstatement in revenues and as a result, FY19-20 consolidated financials were revised for all quarters.

As per the un-audited financial results for the quarter and half-year ended on 30th September 2020, the total revenue reported for the company in FY19-20 was Rs 2330 crore while the restated total revenue stood at Rs 21 crore less than the figure at Rs 2,310.

The EBITDA reflected a change of Rs 7 crore being corrected from Rs 377crore to Rs 370 crore. The profit after tax (PAT) was reduced from a negative Rs 217 crore to a negative Rs 345 crore leading to a drop of Rs 127 crore.

As a result, the PAT margin was also reduced from -9% to -15% restated FY19-20 results.

HT Media responded to Exchange4media’s query regarding the same saying, “The investigation is conclusive that the aberrative conduct was limited to only one of the segments of the radio business.  The overall cumulative impact appears to have been aggravated by the financial stress on the SME businesses, which constitute predominant part of the local customer base of the local radio channels.  At the group level, it contributes less than 5% of the total revenue of the HT Group. The incident did not have any material impact on the financial position of the HT Group as a whole.”

“It is pertinent to point out that in view of the procedures adopted and initiatives undertaken by the Company for strengthening internal controls, procedures as well as communication with internal and external stakeholders with emphasis on ethical business practices, the auditors have issued an unmodified opinion for the half-year ended 30 September 2020. No adverse impact on the business of the Company is expected or foreseen as a result of the malpractice,” the statement further said.

Steps taken by the company

In the same response, HT Media also said that the company has acted with absolute transparency with respect to actions taken after the whistleblower’s complaint. It also reiterated that necessary public disclosures have been made, as and when required.

As a preventive and remedial measure, the company has started certain proactive initiatives on its own. HT Media has also set an internal milestone calendar set out in respect of the remedial and other actions, in the interest of strengthening governance and protection of investor interest.

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Tasmayee Laha Roy

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