Congress social media handle uses lies and ignorance to target Piyush Goyal

Gun for hire, leftist portal ‘The Wire’ had recently published a hilariously under-researched piece on how Union Minister Piyush Goyal had allegedly sold one of his companies for an inflated price and had not declared the same in his filing with the PMO. The Wire was wrong on both counts (and more) and we had demolished that piece here.

In line with the recent trend, where The Wire writes lies, and Rahul Gandhi repeats the lie, this time the official handle of the Indian National Congress has taken the responsibility of being the fool. In a series of tweets with the hashtag  #GoyalMustResign, the social media handle asked many questions which, they must have felt, were enough grounds for Goyal to resign.

In fact, the tweets of the Congress handle reveal only either the utter lack of knowledge or the severe lack of integrity in the Congress. The premise of all the tweets is this:

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The total assets of Goyal’s company were Rs 14.24 crores and the Net Worth was Rs 12.5 crores as on 31-03-2014. Then how did Goyal manage to sell his company for almost Rs 50 cr within a few months?

The handle then imputes that the only “asset” which could make up for this difference was Goyal himself, and hence he must resign.

Any financially knowledgeable person would probably wonder whether to laugh or cry at this kindergarten level analysis. The Congress is correct in saying that the total assets and the net worth of the company were Rs 14.24 crores and Rs 12.5 crores respectively, but they fail to realise that these are only the book values of the assets and liabilities.

Sound accounting practice mandates that only historical costs i.e. the actual costs incurred are accounted in the books of any enterprise, thus all assets and liabilities are recorded at such costs. Further, Fixed Assets such as building are subjected to depreciation, which further reduces the carrying cost of such assets in the books of accounts.

On the other hand, sound valuation principles demand that the value to be considered for any asset or liability should be the fair market value, i.e. the value it would fetch in the open market. Obviously, this will almost always vary with the book value, especially in case of assets such as land, building, shares etc.

The Rs 12.5 crores quoted by the Congress is the book value and the Rs 50 cr valuation of the company is based on the market value of the assets. We had access to the valuation report of the company, prepared by an independent expert, and it clearly states that values of all assets and liabilities have been restated to reflect the “market value”.

Based on publicly available data, it is clear that a majority of the assets held by Goyal’s company are either real estate assets or investment in shares of other companies. It is well known that the real estate market has provided huge gains in the last decade or so. Also, after the 2008 financial crisis i.e. in the last 10 years, even the share market has yielded phenomenal returns.

Thus both the main asset classes of the company are of the nature wherein the book value (i.e. the cost minus depreciation if applicable) would be significantly lower than the market value. Hence, it was but natural for the net-worth as determined from the balance-sheet (which reflects book value) to vary significantly from the net worth determined by market value.

It is up to the reader to decide whether one may call the Congress foolish or malicious in its intent.


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