ET Reported that Ispat Industries has called for an extraordinary general meeting on January 18 to seek shareholder approval for reporting the company to the Board of Industrial &; Financial Reconstruction due to erosion of net worth.
As per report, the approval is sought as Ispat's net losses on June 30th 2010, totaled INR 2,134.23 crore which is more than 50% of the net worth of the company,.
The EGM will also seek shareholders' nod for INR 2,157 crore preferential issue to JSW Steel, as per the shareholders' agreement signed on December 20.
Under the Sick Industrial Companies Act, every company whose accumulated losses result in erosion of 50% or more of the company's net worth for four years, has to report this fact to the Board for Industrial and Financial Reconstruction , within 60 days from the finalization of the accounts.
In the explanatory statement, Ispat attributed the loss to worldwide economic crisis and financial turbulence that led to a sharp dip in global steel consumption during 2009. In addition to global recession the company said that “Sharp increase in prices of key raw materials including iron ore, increase in power tariff, frequent interruption in iron ore supplies and non access to captive sources of inputs impacted the company's performance.”
The loss was also compounded as Ispat had to write down raw material inventory by INR 327 crore because of fall in steel prices and also provide for foreign exchange differences of INR 322 crore due to depreciation of the rupee.
The notice for the EGM mentions the need for approval of fund infusion of INR 2,157 crore from JSW Steel through a preferential offer. The funds will be used to help Ispat Industries reduce its debt, meet capital expenditure for general corporate purposes.
Ispat's shareholding pattern will change post the proposed preferential issue. JSW Steel will own 45.53%, while the shareholding of existing promoters the ML Mittal family will come down to 21.07% from 38.68%. Financial institutions, banks, insurance companies and mutual funds will own 6.91%, NRIs and foreign companies 4.41 % while public will have 22.08% in Ispat.
(Sourced from ET)
