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Hinduja Foundries’ “deterioration in financial profile” has led to a “substantial erosion” of the company’s net worth, says the rating agency, ICRA.
As at the end of 2010-11, Hinduja Foundries’ net worth was Rs 408.52 crore. Due to several factors, including sluggish demand for its castings, wage arrears settlement and provision for doubtful receivables, the company has been making losses in the last few quarters.
It has extended its financial year 2011-12 up to September 2012. In the 15-month period ended June 2012, Hinduja Foundries made a net loss of Rs 152 crore. In the quarter ended June alone, the company made a net loss of Rs 93 crore.
Expenditure on account of provision for “certain receivables not likely to be realised” was Rs 20 crore, while the wage arrears settlement was Rs 20.37 crore.
“Hinduja Foundries’ debt level has also increased with the availment of additional short-term borrowings to fund the loss,” says ICRA.
Interest costs for the 15-month period was Rs 90.53 crore, compared with Rs 34 crore in the previous 12-month period.
ICRA has taken note of the withdrawal of the Rs 125-crore rights issue that the company had earlier proposed. Hinduja Foundries now intends to raise Rs 300 crore through an issue of preference shares to the promoters, “the company’s liquidity position and debt indicators are expected to remain stretched in the near to medium term,” the rating agency says.
Alternative site in AP
Hinduja Foundries had acquired land in Andhra Pradesh (in the Medak district, which lies in the Telangana region) with the intention of putting up a foundry project there. The State Government had said it would register the land in favour Hinduja Foundries provided the company completes the project before March 31, 2012.
“The company has applied for grant of extension for another two years,” Hinduja Foundries said in a note to its April-June quarter results, though without naming Andhra Pradesh. The company has spent Rs 16.58 crore on “project related activities.”
It also said the State Government has offered an alternative site and Hinduja Foundries is “evaluating this suggestion”.
On the BSE today, the Hinduja Foundries share closed at Rs 53.75.
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