Lakshmi Mittals brothers headed for BIFR

Kolkata, Aug 29 | Updated: Aug 30 2006, 05:30am hrs
In a year when LN Mittal emerged as the largest steelmaker in the world, his younger brothers Pramod and Vinod Mittal who run the Kolkata-based Ispat Industries, have found themselves in a financial mess.

Ispat Industries Ltd has run up significant losses which have eroded more than half of its net worth following its poor performance and its decision to merge loss-making subsidiary Ispat Metallics with itself. The company is now fit to be referred to the Board for Industrial & Financial Reconstruction. The companys debt burden has also gone up steeply.

Ispat Inds losses at Rs 812.67 crore for 2005-06 would have been Rs 1,440.97 crore, or Rs 628 crore more, if some deferred tax assets based on future profitability projections made by the management were not considered.

The companys accumulated losses at the end of the financial year, without considering the impact of deferred tax assets, are more than 50% of its net worth, auditor SR Batliboi & Co has commented in its report to the members.

The merger of Ispat Metallics only added to woes of shareholders of Ispat. After adding Rs 500.31 crore of profit and loss accounts debit balance to Ispats own figures, the company is now burdened with Rs 1,098.51 crore of accumulated losses. And if the auditors qualification is considered, the figure would jump to Rs 1,726.81 crore. When asked how the company proposes to bring down the losses, chairman Pramod Mittal said on the sidelines of the Ispat Inds 21st annual general meeting here on Tuesday: Losses could be reduced by making profits in the coming years. Our first quarter results are encouraging with PBIDT up 23%.

During the 1st quarter of 2006-07, net income has gone up to Rs 1683.37 crore from Rs 1,199.76 crore for the same quarter previous year, while loss has gone up to Rs 111.49 crore from Rs 79.49 crore.

Restricted availability of natural gas together with supply disruption caused by the Bombay High fire, dragged down Ispats production of direct-reduced iron by 16%.