Uttam Galva Steel Ltd (UGSL), one of the largest manufacturers of cold rolled (CR) steel and galvanized steel in western India, has referred itself to BIFR (Board for Financial and Industrial Reconstruction) and is now registered under section 15(1) of Sick Industrial Companies Act as ‘Sick’ unit.
This move came from the company’s board after its accumulated losses for year 2015-16 exceeded its total net worth.
As reported, company’s total net worth eroded from INR 1,930.03 crore in 2014-15 to INR 432.42 crore in 2015-16. Whereas, company’s accumulated losses for 2015-16 stood at INR 1,555.43 crore. Referring itself to BIFR will protect the company from the lenders who will not be able to initiate any legal proceedings against the company.
In Mar’16, lenders of the company have asked USGL’s promoters to find new investors within a month who can bring in fresh equity before going for debt restructuring.
The company planned to go for debt restructuring which included rescheduling of its loans for a longer period and moratorium of interest payments. However, this proposal was rejected by its lenders as it failed to find new investors.
UGSL’s business model is such that it imported HRC from overseas market and further processed it to manufacture CRC and galvanized steel. Thus, its operations were hardly hit after Indian government imposed 20% safeguard duty on HRC imports in Sep’15 and announced MIP on steel imports in Feb’16.
UGSL is jointly owned by Miglani Family and Arcelor Mittal. In 2010, ArcelorMittal picked up a 34.4% stake in Uttam Galva Steels. Currently it holds 29.05% in Uttam Galva Steels after a share issue in 2012-13. The Miglani family holds about 31.8% of UGSL.
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