Problem Statement

(Time Limit: 2 hours)

Shri Robert Vadra, the son-in-law of a powerful political family, set up five companies with  paid-up capital of Rs. 50 Lakh, according to the Registrar of Companies. Shri Robert Vadra then whiled away his time playing golf and body building, earning no income from any legitimate business activity (except by way of interest on bank-balances, which can be considered negligible).

According to the returns filed by Shri Vadra with the Registrar of Companies, DLF extended Shri Vadra an unsecured, interest free loan for Rs. 65 crore between 2007-10.  Shri  Vadra then went on a buying spree with this seed money, lapping up under-priced DLF properties. These included, 7 apartments in Magnolias purchased for Rs.5.2 crores, 50% equity share in DLF owned Hilton Hotel, and a 10,000 ft. pent house in DLF Aralias.

The market value of these properties is Rs.500 crore now and  was worth Rs.300 crores at the end of 2010.

However, DLF contradicted these figures and furnished its own numbers. The real estate giant contends it had given Rs.50 crore to Shri Vadra as a business advance to purchase some plot. A second advance of Rs. 15 crore to purchase another shady plot from Shri Vadra did not result in a satisfactory conclusion and this money was fully refunded.

DLF further stated that all properties conveyanced to Shri Vadra’s companies were at the then prevailing market rates and also termed as bullshit baseless the statement that they had sold 7 apts in Magnolias for a total consideration of only Rs.5.2 crores.

a)      Reconcile the statements of DLF and the Registrar of Comapnies to prepare the balance sheet of Shri Vadra’s companies at the end of 2010 and the corresponding P&L for 2007-10 period (50 marks)

b)      If not possible to reconcile, at least prepare two separate balance sheets (5 marks)

c)       Compute cash flows to Shri Vadra’s companies between 2007-10

d)      Compute Return on Capital Employed (ROCE), Return on Equity (RoE), Return on Assets (RoA) for Shri Vadra’s company during the 2007-10 period.  (2 marks)

Note: 5 marks for neatness of presentation