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Hindustan Steelworks Construction Ltd (HSCL), the public sector infrastructure builder, is poised to record a net profit in its books in 2010-11, first since 2002-03, when its recovery process began after a spell of net loss accumulation and net worth erosion.
Though the company has been registering higher operational profits in successive financial years, it could not report a net profit as the financial restructuring package had not been cleared by the Government.
Mr Malay Chatterjee, Chairman and Managing Director, HSCL, told Business Line that the process of formalising the Government clearance of the revised financial restructuring plan, at present, had reached an advanced stage. “Final stamp of approval is likely to come before this month-end,” he added.
The modified rehabilitation package involves conversion past Government loans (both Plan and non-Plan loans) into equity, Plan loan interest waiver, and also turning accumulated interest burden on non-Plan loan into equity.
According to Mr Abhijit Ghosh, Finance Director of HSCL, the seal of approval would allow the company to record net profit and also increase the equity base.
Rehab package
The hammered out rehab package entails conversion of HSCL past non-Plan loan of Rs 513 crore into equity. The accrued interest on this sum would be waived by the Government.
The Plan-loan of Rs 67.62 crore and the accumulated interest of Rs 31.12 crore would also become part of the enhanced equity.
Under the final restructuring plan, unlisted HSCL will add Rs 580.24 crore to the existing equity base of Rs 117 crore.
The Government has also agreed to provide guarantee to its bankers including SBI, Vijaya Bank and ICICI Bank on HSCL's past borrowings.
The company, however, will repay the total borrowed sum — Rs 518 crore — to the banks in 10 years from the time of package approval.
In 2009-10, it recorded an operating profit of Rs 69.09 crore against Rs 64.63 crore in 2008-09. During the three quarters to December 31, 2010, HSCL registered 36.37 crore. Its current order book stands at around Rs 5,000 crore.
In 2002-03, it ended the loss-making period with a nominal operating profit of Rs 3.9 crore.
Cabinet note
The Steel Ministry, the administrative Ministry of HSCL, has already circulated a Cabinet note on the proposed financial restructuring plan.
Originally set up as an infrastructure provider to the public sector steel plants, HSCL has diversified into newer areas such as roads, port, housing and realty.
In 2008, the Board for Reconstruction of Public Sector Enterprises (BRPSE) had “recommended” HSCL's first restructuring proposal and had been reviewing annually the progress of the process.
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