The listed civil construction company, ARSS Infrastructure plans to shut down some of its unprofitable project sites which have caused huge losses to the company in 2011-12.
ARSS Infrastructure has reported a loss of Rs 29.61 crore in the year ending March 31, 2012 as against Rs 112.16 crore profit in the previous comparable period. ARSS blamed unprofitable construction projects, which have suffered from time overrun leading to payment of heavy penalties, for dragging down of revenues and profit.
“(Since the last quarter) the company is continuing its policy of foreclosing certain non-remunerating sites, which resulted in some reduction of revenue and increased the loss because of penalties and other related costs of the closure,” ARSS said in its financial report for 2011-12.
The company officials declined to comment about foreclosure plans.
Besides, higher interest rates, idle staff salary and transportation cost have been cited as other major reasons for sharp decline in profit in 2011-12. The company was unable to pay its debts in the period and its loan has been declared as Non-Performing Assets (NPA) by lenders.
In a separate development, the state government recently announced to re-tender a Rs 1,439 crore World Bank funded road project, awarded to ARSS and its partners in 2008, due to non-progress in the construction.
“We have sent a show cause notice to ARSS , but that has been stayed by the High Court. As soon as the stay order gets vacated, we will terminate the contract with ARSS and invite fresh tender for the project,” said a senior official overseeing World Bank projects in Odisha.
The World Bank has sanctioned Rs 1,000 crore for the project while the state government would contribute Rs 439 crore as its share.
The project involves building roads from Berahmpur to JK Pur via Taptapani (192 km), Bhawanipatna to Khariar (68 km) and Chandbali to Anandpur via Bhadrak (95 km).
Out of these road links, tenders were floated for Berhampur-Taptapani, Bhawanipatna-Khariar and Chandbali-Bhadrak stretches in the first phase. While ARSS and Backbone were awarded the work for the first road link, the company had bagged the contract for the second and third project in association with Patel Engineering and Somdutt Builders respectively.
On Wednesday, ARSS shares on the National Stock Exchange (NSE) ended at Rs 73.35 per share, down by 0.7 per cent. In the past one month period, the stock has shed more than 35 per cent.