Mumbai: Despite the promise of `Make in India' and the rhetoric of defence modernisation, the fortunes of India's ship building industry continue to sink, with more and more companies slipping into the red.

The latest addition to the list is L&T Shipbuilding ltd.

The independent auditors of the L&T Shipbuilding ltd, a wholly-owned subsidiary of larsen&Toubro, have raised concerns about the company's continuance as a 'going concern' based on the financials of 2016-2017.

The report by Sharp&Tannan indicates that the company had substantial accumulated losses carried forward from the previous year and has incurred significant cash losses during the current and previous financial year.

That has resulted in substantial erosion of net worth as on March 31, 2017 and the company's "current liabilities exceeds its current assets as at the balance sheet date", according to the report.

The auditors said that these conditions indicate "the existence of material uncertainty" that may cast significant doubt about the company's ability to continue as "a going concern."

Replying to IANS queries, a L&T spokesperson said: "Notwithstanding the accumulated losses by L&T Shipbuilding limited due to gross under-utilisation of assets, fact remains that L&T is 97 per cent shareholder of the company and continues to financially support lTSB Balance Sheet to remain viable."

"Consequently, L&T Shipbuilding limited has never defaulted on statutory payments arising out of meagre borrowings from financial institutions and banks," the spokesperson said.

However, the auditors said financial statements have been prepared on a going concern basis, based on the communication of the holding company stating its intention "to continue to provide financial support towards project costs and other obligations of the company".

The auditors said that the management "has also carried out an assessment of the future operating cash flows of the company and is satisfied that there is no event or conditions that may cast a significant doubt on the ability of the company to continue as a going concern".

The auditors listed various reasons for its "concerns". The company had a negative net worth of Rs 829 crore in FY17 compared to Rs 341 crore in FY16. It had also incurred a loss of Rs 364 crore in FY17 compared to Rs 719 crore loss in FY16.

The auditors also pointed out that there is an excess of current liabilities over current assets to the tune of Rs 638 crore in FY17 against Rs 381 crore in FY16.

The company even had a negative net cash flow from operating activities of Rs 261 crore in FY17 compared to Rs 165 crore in FY16.

Out of total turnover of Rs 621 crore for FY 2016-17, Rs 429 crore (69 per cent) was towards sale and service income from L&T. Borrowings of the company had also gone up from Rs 3,306 crore in FY 17 compared to Rs 2,882 crore in FY16, adding to the debt pile up.

"The company's net worth is substantially eroded and it continues to make heavy losses year after year", said an industry analyst who did not want to be named. While the outlook for business in the near future remains uncertain, the company has received few substantive orders, in defence or otherwise in the recent past, he added.

"Given that the company is actually surviving on related party orders, its claims of having done large scale defence work is open to question," the analyst said.

The L&T spokesperson added: "L&T considers the investment in Kattupalli shipyard as strategic with long term interests in defence shipbuilding," the outlook for which is "very positive."