Auditors cast shadow on Resurgere Mines

Churiwala & Co raises questions on company’s accounts, quits; AGM today.

The auditors of Resurgere Mines & Minerals, which had raised Rs 120 crore from its Initial Public Offer (IPO) in August 2008, have resigned after raising several questions over the company’s accounts.

Churiwala & Company, the Mumbai-based company’s auditors, has not signed the accounts for the year ended March 31 and has also made several qualifications. Following this, Resurgere Mines had to reschedule its annual general meeting (AGM) to this Tuesday from September 30, to seek shareholder approval for adoption of accounts as of March 31 and to appoint new auditors.

In the notice of the adjourned meeting, Churiwala & Company in its qualifications to the accounts said Resurgere Mines did not give supporting documents for Rs 160.57 crore shown as capital work in progress, Rs 11.14 crore provided towards road development expenses and Rs 35.25 crore given as deposit for raising of iron ore. The auditors said the company did not provide supporting documents for the physical verification of the assets by the management and its internal control system was not consummate with the size of the company. Resurgere Mines did not supply an internal audit report for the quarter ended March 31, the auditors said.

Resurgere’s management has denied all these charges made by the auditors.

The shares of Resurgere, whose which last closed at 31 paise on the Bombay Stock Exchange have slumped by 96 per cent from their issue price of Rs 9, adjusted for bonus and split. The damage to investors’ wealth can be gauged from the fact that the market capitalisation has fallen from Rs 1,500 crore after the IPO to just Rs 61 crore now.

Despite the poor performance, chairman and managing director Subhash Sharma has had annual remuneration of Rs 1.04 crore since April 2007.

“The case of Resurgere Mines shows how companies have utter disregard for investors after raising funds. Even the basics of corporate governance haven’t been adhered to,” said Shriram Subramanian, founder and managing director at InGovern Research Service, a Bangalore-based proxy advisory and corporate governance research firm. “The company has been listed for hardly three years and regulators and other agencies should have better monitored the company,” he added.