Essar Steel overdues zoom 180%

The figure is set to go up in the current year as loans and long-term advances aggregating Rs 396.44 crore are due for repayment within one year.

‘Due to the sluggish market conditions in the steel industry, high rates of interest, short tenure of loans etc, the company was unable to repay significant portion of loans from financial institutions/ banks, floating rate notes, long-term advances from customer etc, as per the repayment schedule,’ the company has explained. Essar’s total loan liabilities amounted to Rs 4,859.59 crore as on September 30, 2002

The auditors of the company have also found several holes in its balance sheet for the year ended September 2002. Incidentally, the company’s net worth (equity plus reserves) has been eroded and it has become a sick company under the Sick Industrial Companies Act, 1985. This follows a Rs 1,199 crore loss of the year 2002 and Rs 345 crore loss in 2001.

When contacted, a company official said: “we have nothing more to say than what is explained in the balance sheet.”

‘Based on the CFRP (comprehensive financial restructuring plan), the company has made provision for interest on all rupee term loans (RTLs) and non-convertible debentures (NCDs) at the revised rate of interest and has not made provision for differential interest aggregating to Rs 175.72 crore (including Rs 67.60 crores for the year ended March 31, 2001),’ the company’s auditor Lovelock & Lewis said.

Further, the company has not made provision for interest on interest, overdue interest, penal interest, liquidated damages, etc, on overdue loans, claimed the financial institutions/banks. ‘The aggregate amount of such interest on interest, etc. has not been ascertained. We are informed that the CFRP is pending with the CDR (Corporate Debt Restructuring Group),’ the auditor said.

According to the auditors, the company has not made provision in respect of certain overdue debts and loans and advances, including interest, aggregating to Rs 337.38 crore. The impact of such non-provision on the loss for the period and net assets position as at the period end is presently not ascertainable.

Essar explained that sundry debtors and loans include Rs 31.90 crore and Rs 37.05 crore respectively, due from a company in which the management of the company has active participation. The company has accounted for deferred tax credit of Rs 710.91 crore for the period.

“In our opinion, the realisation of such deferred tax credit is dependent on the ultimate outcome of the CFRP which, as informed to us, is pending with the CDR,” auditor pointed out.

These factors have apparently helped the company to reduce the loss for the fiscal 2001-02. ‘Had the observations made by us….. have been considered, the loss for the period would have been Rs 1,392.95 crore (as against the reported figure of Rs 1,199.37 crore), long-term advances from customer would have been Rs 1,113.37 crore (as against the reported figure of Rs 888.90 crore), loans and advances would have been Rs 726.37 crore (as against the reported figure of Rs 899.76 crore) and profit and loss account (debit balance) would have been Rs 2,691.95 crore (as against the reported figure of Rs 2,294.09 crore),’ it said.

The revamp package (CFRP) has already been cleared by the restructuring panel of FIs. ‘The CFRP would have the effect of improving the net worth of the company through conversion of unsecured loans from promoters and certain other debts into equity and buy-back of certain unsecured loans at a discount,’ Essar explained.