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Electrosteel Steels Ltd has said that it has become a ‘potentially sick company’ at the end of 2014-15 and needs to inform the development to the Board for Industrial and Financial Reconstruction (BIFR).
The company will hold an EGM on September 11 at Ranchi to consider the issue. It said that its accumulated losses at the end of 2014-15 stood at Rs 1,356.33 crore against its peak net worth of Rs 2,226.67 crore in the immediately preceding four financial years.
Since the erosion is more than 50 per cent of the peak networth as defined by the Sick Industrial Companies (Special Provisions) Act, it is required to discuss the issue with the shareholders and report to BIFR.
In a report to the shareholders, the management said, “On the basis of the audited accounts for the financial year ended 31st March, 2015, the accumulated losses up to that date stands at Rs 1,356.33 crore, thereby eroding the peak networth of the company by more than 50 per cent. The company, therefore, has to report this fact to BIFR.”
Delays owing to extraneous reasons such as changes in visa policy for the deployment of Chinese contractors or delay in obtaining working capital funds from the banks had caused extraordinary cost escalation for the company’s steel making project at Bokaro in Jharkhand, the company pointed out.
The company has a debt burden of over Rs 9,600 crore. The lenders’ forum has also initiated move to convert a portion of the debt into equity and introduce change in management control.
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