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The country’s largest wire rope manufacturer Usha Martin is planning to sell a profitable venture to reduce debt.
As on FY-17, the ₹4,375 crore turnover (consolidated) company had a net debt of ₹3,718 crore, including nearly ₹3,300 crore long term debt. The net loss stood at ₹359 crore.
According to Rajeev Jhawar, Managing Director, the company plans to sell either of its two profitable divisions – wire and wire rope or steel.
The company has appointed the Royal Bank of Canada as a merchant banker for looking at prospective buyers. This apart, other consultants like BCG, have also been appointed to chart out its future course.
Despite the net loss, the steel and wire rope making divisions are EBIDTA positive. (Wire rope finds its usage in elevators, mining, oil and off shore, cranes and so on.)
“The consultants’ report is expected in another six to eight weeks. By the end of this fiscal, the strategy for a turnaround will be in place,” he said on the sidelines of the company’s Annual General Meeting here.
The steel wire rope making division reported a turnover of ₹1,872 crore (nearly 44 per cent of the total income from operations) and a profit before tax of ₹140 crore (nearly 59 per cent of the PBT) in FY-17.
The other major contributor towards the company’s income is the steel division that reported a turnover of ₹3,021 crore and a profit before tax of ₹79 crore.
Dispute between promotersThe company had previously planned to raise capital by issuance of warrant, convertible into shares at a later date, on preferential basis to the promoters.
However, the plan came as a cropper with the NCLT order to maintain status quo on shareholding. (It is believed the non-promoter shareholding will decline if the warrants are issued.)
The NCLT order came following a dispute between promoter shareholders — Rajeev Jhawar, Managing Director, and his cousin Prashant Jhawar and family.
Prashant, it may be mentioned, was removed from the Chairman post in April, at the insistence of the lenders. One of the reasons stated for Prashant’s removal was the refusal to pledge his shares as a part of a loan covenant with the lenders.
Subsequently, Prashant moved to the tribunal seeking his re-instatement and a stay on the proposed issuance of warrants.
Promoter holding in Usha Martin stands at 50.85 per cent.
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