Karachi, November 22, 2024 – An independent auditor’s report prepared by Feroz Sharif Tariq & Co. has revealed that Dewan Farooque Motors Limited (DFML) has defaulted on the repayment of long-term loans from financial institutions amounting to Rs 1.097 billion. Additionally, short-term financing facilities totaling Rs 4.096 billion have expired and have not been renewed by banks.
The 2024 annual financial report of DFML, released on Friday, highlighted significant financial issues related to the company. According to the report, DFML has approached its lenders with a restructuring proposal, as described in Note 1.1 to the financial statements. However, the lenders have initiated legal proceedings to recover Rs 6.884 billion by attaching and selling the company’s hypothecated and mortgaged properties, as disclosed in Note 20.4.
The auditors also pointed out that the company has not made a provision of Rs 1.120 billion for markup during the year, citing the restructuring proposal. “In our opinion, since the proposal has not yet been accepted by the lenders, and instead, they have filed suits against the company, the provision for markup should have been made in these financial statements,” the report stated.
The report added: “Had the provision for markup been made, the loss after taxation for the year would have been higher by Rs 1.12 billion, markup payable would have been higher, and shareholders’ equity would have been lower by Rs 9.314 billion.”
Attention was also drawn to the company’s accumulated losses of Rs 5.087 billion as of June 30, 2024, along with a net current asset shortfall of Rs 5.475 billion and a total asset shortfall of Rs 3.679 billion, excluding the unprovided markup.
The report noted DFML’s operational history, highlighting that operations were suspended from November 2010 to November 2013 and reclosed in February 2014 due to working capital constraints. The company has also failed to ensure timely debt repayments and has not renewed short-term financing facilities, leading to a lack of balance confirmations from financial institutions.
The auditors expressed concern over material uncertainties, stating these conditions cast significant doubt on DFML’s ability to continue as a going concern.
In contrast, the directors’ report maintained that DFML’s financial challenges are temporary and will reverse in the foreseeable future. The company has resumed manufacturing operations and is also producing electric vehicles on a toll basis for an associated entity. Management remains confident that the debt restructuring process will conclude successfully in the next financial year, which will improve the company’s financial standing.
