Reference to BIFR acts as trigger
Kolkata, Sept. 8
There was a scramble for exits in LML counter on Friday as the company for the first time announced reference to Board for Industrial and Financial Reconstruction (BIFR) after complete erosion of its net worth. Investors and traders have been very active in the past few days in the counter as the traded volume surged and prices improved.
The stock today closed at Rs 18.45, a gain of 21.8 per cent over a month's period. Traded volumes stood at 6.36 lakh shares against two-week average of 8.77 lakh shares.
The board of the company today considered the uncertainty surrounding generation of profits in near future and decided to reverse the provision of deferred tax asset and further stated that the net worth of the company as on August 31, 2006 has been completely eroded and consequently the company has become a sick industrial entity under Sick Industrial Companies (Special Provisions Act) 1985. The board accordingly approved the audited accounts of the Company for the period April 01, 2005 to August 31, 2006 and decided to make reference to BIFR.
Accounting Standard 28 (AS-28), which deals with impairment of assets, became applicable to LML from April 01, 2005.
The company had begun the process of identifying the impairment loss on its assets to determine the fair value of the assets in the quarter to June 30, 2006.
After some workmen struck work early in March this year at its Kanpur factory, the company declared a lock-out with effect from March 7, 2006. Earlier in February, the company said even though it had been working for restructuring of its business, including the possibility of bringing in a strategic partner, the company's production, sale and normal operations may be adversely impacted till the plan is implemented.
LML obtained approval from the Register of Companies (UP & Uttaranchal) for extending the financial year 2005-06 by six months to end it on September 30, 2006.The company provided interest till June-end as per the multipartite agreement it had executed with the term lenders such as IFCI, IDBI and Exim Bank.
Public holding in LML is placed at 31.11 per cent as on March 31, 2006. Singhania family-controlled (40 per cent holding as on March 2006) two-wheeler company had converted FCCBs held by Credit Suisse (Singpore) and Merrill Lynch Capital Markets Espana SASV into 2.21 crore shares in the period between June 1, 2006 and August 17, 2006, at price ranging between Rs 31.10 and Rs 38.08 per share of Rs 10 each. The company on June 31, however, had reported that the non-promoter holding has gone up to 67.91 per cent of the total shares of 4.61 crore.