Hindustan Motors decides to go to BIFR

Hindustan Motors Ltd said today it would report itself to the Board for Industrial and Financial Reconstruction (BIFR), as its net worth had eroded by more than 50 per cent during the past four financial years. This is likely to happen around the middle of this calendar year.

“The company will report to the Board for Industrial and Financial Reconstruction about such erosion of net worth as envisaged under Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985, forthwith upon finalization of audited accounts of the company at its annual general meeting,” the company said in a notification to the National Stock Exchange (NSE).

HM, which manufactures the iconic Ambassador car, said its board of directors had also accepted the resignation of managing director R Santhanam, to be replaced by Manoj Jha for a period of five years with effect from May 19.

“Unlike a situation where a company's net worth is fully eroded and it approaches BIFR for re-structuring, in our case we only have to report to BIFR, as the net worth has eroded more than 50 per cent. We will take the necessary steps and are working on a detailed package,” a company official said.

The approach to BIFR was likely towards the middle of this calender year after a meeting of the shareholders, he said. The company posted a net loss of Rs 31.8 crore on net sales of Rs 164.5 crore in the quarter ended March 31. In the same period last year, net loss was Rs 25.3 crore on net sales of Rs 129.4 crore.