20 business groups make Rs 3,322 cr loss

20 business groups make Rs 3,322 cr loss
GEORGE MATHEW

MUMBAI, DECEMBER 31: Believe it or not, top 20 business groups in the country have made a whopping loss of Rs 3,322 crore in the year 1998-99. This colossal loss in the last fiscal of the second millennium has come at a time when the industry -- which is trying to recover from a major slowdown -- in general has posted all-round improvement in sales and profits.

Not only this, as many as 118 business groups have made a total loss of Rs 5,280 crore for the year ended March 1999. Leading the loss makers of the century is the Essar group. Essar Steel of the group promoted by the Ruias has made a loss of Rs 496 crore. This loss was mainly due to the problems in the steel sector which was dogged by poor margins and low offtake. The group, which became the first Indian company to default on a foreign loan, is likely to continue its poor performance in the current fiscal also.

The Mardia Rasiklal group is in the second spot with its flag ship Mardia Chemicals making a huge loss of Rs 359 crore. This company hadraised fund from the public several times in the past. Indian Charge Chrome belonging to the IMFA group has made a loss of Rs 303 crore. ATV Projects, which was into an expansion and diversification spree in the early '90s has posted Rs 233 crore loss.

Some of these business groups have already turned sick and the Board for Industrial and Financial Reconstruction (BIFR) is looking into restructuring plans of their group companies. As per the BIFR Act, when the networth (equity and reserves) of a company is eroded by losses, it will have to be registered with BIFR for a revival package. Taking advantage of the loopholes in the rules, many companies have approached BIFR to avoid repayment of loans.

The case of Parasrampuria Synthetics (ranked 8th in the list) of the Parasrampurias which has made a loss of Rs 159 crore is interesting. The company approached BIFR claiming that it has turned sick. However, ICICI which has extended term loans of around Rs 125 crore to the company contested the claim andapproached the Appellate Authority of the BIFR. The company has since then defaulted on its repayments.

Many business groups which are splashed in red ink are knocking at the doors of financial institutions for reschedulement of loans. The Modern group of the Rankas which has made a loss of Rs 159 crore has approached institutions for rescheduling loans for the second time in the last two years. The Flex group - ranked in 11th in the list - has got approval for reschedulement of loans from institutions. The group led by the Chaturvedis has posted a loss of Rs 116 crore.

The Kilachand group which made a loss of Rs 161 crore is a relatively low profile group. Paam Pharmaceuticals and SOL group have made losses of Rs 149 crore and Rs 138 crore respectively. ``It's surprising the way these two companies accumulated such huge losses. The pharma sector is actually doing well. There can be mismanagement,'' said an analyst.

Other leading groups which made huge losses include Escorts (Rs 82 crore), Jain Pipe (Rs81 crore), Goldstar group (Rs 78 crore), SM Dyechem (Rs 73 crore), Lalbhais (Rs 52 crore), Pennar group (Rs 65 crore), HC Kothari (Rs 62 crore), MN Mehta (Rs 46 crore), Torrent group (Rs 46 crore) and Sterling Holiday (Rs 46 crore). While reasons for some of the losses can be genuine recessionary problems, there are several cases of mismanagement. Share prices of these companies are also quoted at low levels - mostly below the face value of Rs 10. There is no reason for investors to be happy about this situation.

TOP 20 LOSS-MAKERS
(in Rs crore)

COMPANY LOSS

-----------------------------

1) Essar -457

2) Mardia group -359

3) IMFA group -303

4) ATV Group -233

5) HS Singhania -166

6) Kilachand group -161

7) Modern group -159

8) Parasrampuria -159

9) Paam Pharma -149

10) SOL group -138

11) Flex group -129

12) Remi group -116

13)Core Laboratories -112

14) Shapoorji Pallonji -108

15) CK Birla -107

16) Lloyds Steel group -101

17) MR Chhabria - 98

18) Garware group - 97

19) Gaur Hari Singhania - 87

20) Arvind Mafatlal -83