Another diamond firm having unit in Surat SEZ in spotlight

Surat: Yet another diamond company having a unit in Surat Special Economic Zone (SurSEZ) may add to the trouble of Punjab National Bank.
Sources in the government approved agency stated that PNB had given responsibility to a third party to carry out financial assessment of the listed company in question, operating a diamond polishing unit in SurSEZ. When concerned officials went to the spot, they found that the unit was non-functional with worn-out diamond emery wheel machines and a staff of five people.

“We went to the company’s unit and were surprised. The diamond emery wheels were in a rusted condition as if they were not used for years. We could find five people inside the unit, who were wearing masks on their faces to hide their identities,” an official, who was a part of the survey team, said.

He added, “We submitted a negative report to PNB and mentioned all the facts and details. To our surprise, we learnt that the company still managed to get credit sanctioned from the bank. How this happened we don’t know?”

The said company faced revenue trial after income tax department filed an appeal in the Income Tax Appellate Tribunal (ITAT) in Jaipur in a case relating to deduction of Rs 12 crore under Section 10AA of the I-T Act in respect to its diamond manufacturing unit in Surat.

The I-T department found that the company was engaged in trading of diamonds and jewellery and had no fixed assets except factory land as on 2007. The company was doing purchase and sale of goods and no manufacturing or processing was done as there were no machines or manufacturing set-up.

Sources said finances of listed diamond jewellery companies suggest that the industry is in deep financial trouble. The industry’s combined net sales were down 15.9 per cent year-on-year (y-o-y) during the first half of the current financial year, while net profit (adjusted for exceptional items) was down 18.9 per cent y-o-y during the period.

The industry is now technically insolvent with market capitalization of many companies now lower than their debt outstanding. The listed companies’ combined market capitalization is now Rs 41.6 billion against their current gross debt of Rs 94 billion.

Despite repeated attempts, company owners were not available for their comments.