Essar, Birla companies lead top losers list

Essar, Birla companies lead top losers list
George Mathew

MUMBAI, OCT 7: Indian corporates have always proved that when it comes to dismal performance, they are not behind anyone. While infotech companies had seen their earnings skyrocketing to dizzy heights in the last fiscal, a number of companies belonging to leading business groups had churned out poor financial results with their losses making a big hole in the corporate bottom lines. Companies of big corporate houses like Essar, Aditya Birla, Jindal and Parasrampuria lead the list of companies which made the maximum losses in the corporate sector.

The top losers list is led by Essar Steel of the Ruias which made a loss of Rs 581 crore for the year ended March 2000. Mangalore Refinery and Petrochemicals, floated by the Aditya Birla group and HPCL, made a loss of Rs 299 crore. In fact, this is the only refinery which made a huge loss of this magnitude in the country.

The Aditya Birla group again figures in the losers list with the erstwhile blue chip Indian Rayon & Industries posting a loss of Rs 241 crore. Two Parasrampuria companies made a combined loss of Rs 232 crore. Parasrampuria Synthetics, which defaulted on institutional loans, alone has made a loss of Rs 188 crore. Mardia Chemicals' losses at Rs 282 crore even overtook its sales revenue of Rs 212 crore.

As a matter of fact, top 20 loss makers in the private sector have made a combined loss of Rs 2,698 crore for the year ended March 2000. ``While profit-making companies have showed a jump in growth of profits, same thing happened in the case of loss-making companies. Their losses also increased. Essar Steel, for example, made a loss of Rs 496 crore for the fiscal ended March 1999. But this loss went up to Rs 581 crore for the year ended March 2000,'' said an analyst with a foreign brokerage.

Moreover, companies of the Thapars, the Jindals, Shapoorji Pallonji Mistry's SIV Industries, CK Birla's Hindustan Motors and ACC are also in the top losers list. Jindal Vijaynagar Steel of the Jindal group suffered a loss of Rs 148 crore. JVSL started out as a 1.25-million tonne hot-roll coil project at an estimated cost of Rs 3,300 crore in 1994 but the cost of the slightly larger capacity plant later shot up to over Rs 5,200 crore.

There are ready explanations with analysts and corporate chieftains for these huge losses. Demand recession, cheaper imports, entry of global majors, fall in profit margins, high taxes and so on are reeled out by analysts for this continuing poor performance.

Shareholders are also unhappy about this state of affairs with share prices of most of these loss-making companies (like MRPL, Essar etc) quoting below the face values. Besides the erosion in shareholder value, these companies are not in a position to give any returns like dividend in view of the losses. The market capitalisation of ACC which has reported a loss of Rs 58 crore has fallen by over 50 per cent in the last one year. Essar Steel's accumulated losses of Rs 867 crore has already wiped out its equity capital of Rs 330 crore and almost 42 per cent of its networth.

If one were to include the losses of some public sector units like SAIL, the performance levels will be anything but satisfactory. There is no wonder Finance Minister Yashwant Sinha recently said the government would examine the recent industrial slowdown and take `corrective steps', if needed.