Jindal Stainless in trouble,promoter declines capital infusion
Aug 25 2013 , New Delhi
Promoter group company Jindal Overseas Holdings (JOHL), authorised to infuse Rs 100.27 crore equity by March, 2014, has now declined to do so and has asked the company to look for alternatives.
"Due to prevailing depressed global economic scenario, JOHL has now expressed its difficulty in subscribing to the said Rs 100 crore and also asked the company to look for alternative source of capital infusion," Jindal Stainless has said in a recent regulatory filing.
JOHL has 13.57 per cent stake as on June 30 this year and is the largest stakeholder amongst the promoter group companies of Jindal Stainless.
Following JOHL's refusal, the company Board met on last Thursday to discuss a way out and asked a sub-committee to find alternatives so that CDR conditions can be met.
The Ratan Jindal-led company has over Rs 9,000 crore debt and has been under the CDR programme since January, 2010. In September last year, its debt repayment schedule was reworked by the CDR cell due to further deterioration in its financial conditions and strained balance sheet.
As per the reworked CDR scheme, the company promoters were supposed to infuse Rs 200 crore by March, 2014, while lenders were given the rights to convert their loans into securities.
Accordingly, JOHL was designated by promoters to meet the obligations of reworked CDR and was supposed to subscribe 2.71 crore shares at the rate of Rs 74 per share in two equal tranches through preferential route. This amounted to Rs 200.54 crore capital infusion in the company.
In March, JOHL met the requirements of first tranche and was alloted 1,35,50,000 shares in March this year, thereby bringing in Rs 100.27 as promoter contribution to the company.
However, its refusal to meet the obligation for the second tranche has put the company in a spot as not only its debt has been restructured once but even the payment schedules have been rescheduled and additional conditions have been imposed on it by the CDR cell.
The company, the largest domestic stainless steel producer, has been making losses for last few years. This has led to almost two-and-a-half times rise in its finance costs to Rs 1,043 crore in last two years.
One of the major reasons for losses of the company is huge loans taken to construct a new 8 lakh tonne per annum plant in Odisha's Jajpur. While the plant has started production and has shown positive EBITDA in the last quarter, the continuous slump in global steel demand has played spoilsport for the company, leading to strained financial health.