Shriram EPC’s investment in Sree Jayajothi Cements continues to weigh it down as the net worth of the cement company has been partially eroded.

Shriram EPC, which did the engineering contract for the cement company, opted to take a majority stake in the 3.2 million tonne cement unit in Kurnool to recover its dues from the promoters, the Rajapalayam-based Jayajothi Group.

According to the company’s announcement on the NSE, Shriram EPC has invested over Rs 366 crore in the cement unit including Rs 108 crore as equity and Rs 256 crore, indirectly through a group company, in Optionally Convertible Debentures. Sree Jayajothi also owes it over Rs 308 crore. There is also the accrued interest of Rs 13 crore on the Debentures as of September 30.

However, Shriram EPC has a plan to recover its dues and the diminution in value is considered temporary, according to the company’s announcement.

At the Shriram EPC annual general meeting in September its managing director, T. Shivaraman, in an informal chat with media persons said a private equity fund is likely to invest Rs 400 crore to set up a captive power plant in the cement unit and pay the erstwhile promoters. This will improve Shriram EPC’s liquidity. The deal is to be finalised by the year end, he had said.

Shriram EPC’s stake includes 19 per cent directly and 49 per cent through the Group company Spark Environmental Technology.

For the second quarter, Shriram EPC reported a net profit of Rs 4.26 crore on a total income of Rs 376.84 crore. In the corresponding period the previous year it reported a net profit of Rs 6.28 crore on a total income 216.43 crore.

(This article was published on November 8, 2012)
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