Only disinvestments, subtle accounting changes, and Other Income helped the company stay in the black.

By Dilip Maitra

He is trying to clean up its act. A reading of the balance-sheet of the Rs 318-crore Triveni Engineering (Triveni) suggests that CEO Dhruv Sawhney, 53, used a year when sales were next-to-stagnant to restructure the operations of his company-and its balance-sheet. Apart from getting out of unrelated diversifications, Triveni also started providing for loss-making investments and bad debts.

1996-97 (Triveni's year-ending is still September 30) wasn't a good year for the sugar-manufacturer: although its net profits rose by 6 per cent to Rs 9.62 crore, Triveni's operations incurred a loss of Rs 14.59 crore. According to the balance-sheet, it was only the Rs 22.64 crore of Other Income, and subtle accounting changes-which contributed another Rs 3.07 crore-that helped Triveni stay in the black.

What really came to Sawhney's rescue was the sale of Triveni's 49 per cent stake in GEC-Alsthom Triveni-a joint venture now fully-owned by Alsthom (formerly GEC-Alsthom)-which had been floated to undertake the turnkey construction of 6 - 150-mw steam-turbines. Last year, the 4.90 lakh shares issued to Triveni at Rs 10 per share were sold by it to GEC-Alsthom (Holdings) India and GEC-Alsthom Mauritius at Rs 428 per share, netting the company a neat profit of Rs 21.68 crore.

And Triveni also earned a net profit of Rs 87.65 lakh by selling off 2 of the 5 oil-drilling rigs it owns during the year. Part of Sawhney's strategy to stick to Triveni's core businesses-steam-turbines, sugar, and project engineering-the restructuring is bound to continue into 1997-98. Especially because, as the company's spokesperson says, ''the conditions of rig-deployment have substantially changed due to limited demand.''

In fact, this has forced Triveni to change its accounting policies which, fortunately, helped it show higher profits. For instance, instead of following the usual practice of charging an expenditure to the P&L Account, Triveni deferred a sum of Rs 3.07 crore on two counts. In the first case, the payment of the principal amount of Rs 1.79 crore for two leased rigs was transferred to the Deferred Lease Rental Account. Justifying this, the company says: ''It is an acceptable method of accounting to charge only the finance cost (the interest paid) to revenue. This arrangement would also ensure that the rigs, when reverted to the company after the expiry of the lease, are reflected at the estimated market price.''

Similarly, an additional expense of Rs 1.28 crore incurred by Triveni due to ''rig-idle time'' (between two contracts, when the rig is unutilised) was deferred. That, according to the spokesperson, was done to reflect the change in the business environment in which securing ''long-duration contracts on a continuous basis'' is not feasible and, hence, ''short-duration contracts would be a reality.''

To Sawhney's credit, it must be pointed out that Rs 8.75 crore of Triveni's gross profits of Rs 21.58 crore have been used to write off the fall in the value of its investments (Rs 1.08 crore), to provide for non-performing assets (Rs 1.17 crore), and for bad debts (Rs 6.50 crore). Therefore, even if the next year proves to be just as bad in business terms, Triveni will still have a better balance-sheet to show for it.

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