Hindustan Motors will seek BIFR cover as net worth erodes substantially

Hindustan Motors Ltd has informed the stock exchanges that the company would report to the Board for Industrial and Financial Reconstruction (BIFR) about substantial erosion (over 50 per cent) of its peak net worth in the past five financial years.

“The reporting is a legal requirement (Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985), which stipulates that if the erosion of net worth was more than 50 per cent, the BIFR has to be informed. We will submit our report after finalisation of 2009-10 accounts at the forthcoming AGM, which is expected to happen by July-August. It is not as if we've filed for bankruptcy.

“The company is taking several measures to turnaround its operations and decisions regarding such steps will be made public shortly,” said a company spokesperson. A company communication posted on the NSE on Monday said that the accumulated losses of the company at the end of the last financial year have resulted in erosion of more than 50 per cent of its peak net worth during the immediately preceding four financial years.

Accumulated losses

The accumulated losses stood at Rs 132.28 crore after accounting for net loss of Rs 51.10 crore during 2009-10. The current paid-up equity of the company is at Rs 161.17 crore and the reserves were placed at 3.36 crore.

Under a corporate debt restructuring, the entire shareholding of the core promoters in the company is pledged with ICICI Bank, lead bank for all the lenders as additional security for credit facilities provided to the company.

The current loan fund of the company stands at Rs 90.03 crore. The promoters hold 54.47 per cent of the paid-up equity.

Meanwhile, the company's board, at its meeting held on May 1, accepted the resignation of Mr R. Santhanam, Managing Director, with effect from May 18 and appointed Mr Manoj Jha as the Managing Director of the company with effect from May 19 for a period of five years.

Mr Santhanam had been re-appointed as the Managing Director for five years from May 24, 2009.

On Monday, the stock declined sharply to close down 7.51 per cent at Rs 23.40 on BSE.

Source: indiacar.com Source : Business Line (Online Edition) (5/3/2010)