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Journalism of Courage
MUMBAI, JAN 6: Buoyed with the "success" in forcing the Chowgules-led management to opt out of Narmada Cement, financial institutions have decided to press for a change in management at the beleaguered Rajinder Steel Ltd of the DS Batra group. The institutions hold 29 per cent stake in the company while the promoters’ stake is pegged at 38 per cent.
The term lending institutions are also preparing to make presentations before the high-level parliamentary committee on Thursday in Mumbai on the state of affairs in the steel industry. The committee, comprising 30-odd members, is currently visiting some of the steel units to which institutions have not given fresh financial assistance.
An institutional source said on condition of anonymity: "The promoters of Rajinder have left the country… They are believed to be in the US. We have informed the finance ministry about the development."
The institutions have some time back decided against funding fresh loans to the company which had approached them to fundcost overruns of its Rs 950 crore, 0.5 million tonne, hot-rolled coil project at Raipur, Madhya Pradesh.
The original project cost was pegged at over Rs 300 crore. "The question of pumping in additional funds does not arise at this stage. We do not want to sink in fresh funds. After prolonged deliberations, we have decided to press for a management change," sources said.
Among the institutions, Unit Trust of India holds the maximum stake, followed by LIC, GIC and IBDI and some commercial banks. ICICI and IFCI, the two institutional lenders, do not have any stake in Rajinder Steel. The decision of financial institutions to press for a change in management comes in the wake of filing of a wind-up petition by over a dozen creditors of Rajinder Steel at the Allahabad High Court. The court has directed the promoters to clear all dues within a month.
Going by the unaudited results, Rajinder Steel has posted a net loss of Rs 280.57 crore on a turnover of Rs 224.14 crore for the year ended June 1998. Its equityis pegged at Rs 50.18 crore.
Financial institutions have decided to take a hardline on "erring" corporates at the instance of the finance ministry, sources said. The ministry wants the institutions to keep a strict vigil on the corporates where they (the institutions) have a substantial stake. The objective is to boost the investors’ confidence and pep up the sagging capital market.
If the management is indeed changed at Rajinder Steel, it will be a landmark for corporate governance in the country. The point to be considered is whether Rajinder Steel’s problems are due to its management. If so, a change of guard would be beneficial.
In Rajinder Steel’s case, the HR products that could be made by the company are different from the HR products of Tisco and SAIL. Hence, there is no question of segmental overcapacity. The product realisations would not be as lucrative as that projected in the original report made at the time when steel prices were at high, and similarly the liabilities of the company wouldreduce the price that the FIs can get, but the fact remains that the assets of the company can be put to lucrative uses.
