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Corporate - Restructuring


BIFR directs trifurcation of Ferro Alloys Corpn — Results for fourth quarter postponed

C.R. Sukumar

Hyderabad , April 29

THE Board for Industrial and Financial Reconstruction (BIFR) has approved a rehabilitation scheme for the ailing Ferro Alloys Corporation Ltd (FACOR), which could help its early revival.

According to FACOR sources, BIFR at its hearing held on April 2 had approved the revival scheme providing for trifurcation of the three divisions of the company — ferro alloys, chrome ore & steel products — into three separate legal entities.

Sources told Business Line that the BIFR has also cleared packages pertaining to negotiated settlement of dues of financial institutions and debenture holders as well as for debt and capital restructuring.

As per the scheme, trifurcation of the three divisions of the company into independent entities is to take place on the appointed date — April 1, 2003. It will be effective from the date of approval of BIFR to the revival scheme and other requisite approvals and permissions for the implementation of the scheme.

"Since appointed date for implementation of the scheme is April 1, 2003, assets and liabilities of the company relatable to different divisions will get transferred to respective demerged companies in addition to restructuring of debts and reorganisation of the share capital. And as per provisions of the sanctioned scheme, all transactions carried out from the appointed date in relation to respective division of the company will be considered to have been carried out by respective demerged companies. For this purpose, incorporation of new companies and other related work is under process for early finalisation," a Senior FACOR official said.

Following many unfavourable factors, the company suffered a sharp fall in turnover at Rs 114.53 crore during 2002-03 from Rs 201.24 crore in the previous year. It suffered a net loss of Rs 32.35 crore compared to a net loss of Rs 58.83 crore during 2001-02. After adding the brought forward losses of Rs 322.39 crore, the company's accumulated losses amounted to Rs 354.74 crore on an equity base of Rs 20.34 crore and reserves and surplus of Rs 33.46 crore as at the end of March 2003. The debt burden amounted to Rs 294.89 crore.

The FACOR management is now of the view that since the appointed date for the revival scheme is April 1, 2003, the publication of unaudited financial results for the quarter and year ended March 31, 2004 along with reporting of segment revenue, results and capital employed for the period would not give a realistic picture and might rather give a distorted picture.

"With a view to avoid confusion and giving of distorted picture, we are not publishing the results for the quarter and year ended March 31, 2004. We are taking necessary steps to comply with the requirement so as to make the revival scheme effective, after which necessary accounting entries will be suitably passed in the books of respective companies and results relating to concerned companies will be published in due course," the FACOR official said.

More Stories on : Restructuring | Regulatory Bodies & Rulings | Steel

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