E&Y revalues Zenith Infotech assets at much lower figure

In an ongoing dispute over Zenith Infotech defaulting on its foreign currency convertible bonds (FCCBs), consulting firm Ernst & Young has revalued the company at Rs 151 crore to Rs 211 crore.

The current valuation of Zenith’s cloud business is much lower than the Rs 598 crore by E&Y at the pursuance of the high court here, based on data provided from the company. The court had asked the company to be valued in the first instance as the bondholders were disputing the valuation. “The current valuation has also taken into account the performance of the last two quarters. Because of the case and the negative publicity the company has received, it has impacted the business. Due to this, we have also lost a few clients and in some cases, clients have not ramped up. But since we are a product firm, we have continued to invest in R&D. Hence, the valuations have been realigned,” said a representative from Zenith.

The company had been doing Rs 60 crore of business per quarter and saw its revenue fall to Rs 33 crore last quarter.

Zenith has been locked in a court battle with its bondholders, including hedge fund QVT Advisors, and other shareholders, as it had defaulted on the repayment of its FCCBs. The bondholders filed a winding-up petition. Zenith had issued $33 million of FCCBs in 2006, due on September 21, 2011. The company admitted to defaulting on this payment. The conversion rate of these FCCBs was Rs 310. In 2007, the company had again raised $50 million via FCCBs that mature in August 2012, with a conversion rate of Rs 522. The court is to hear an ‘attachment before the judgment’ petition on July 18 and the winding-up case on July 27.