Tension mounts in Usha Martin as board removes chairman

Independent non-executive director Ghyanendra Nath Bajpai will replace Jhawar

The board of directors of Kolkata-based Usha Martin Ltd removed Prashant Jhawar as the company’s non-executive chairman on Tuesday and replaced him with Ghyanendra Nath Bajpai, one of the independent non-executive directors. Jhawar will, however, continue to stay on the company’s board as a director.

Usha Martin is a leading manufacturer of wire ropes and speciality steel in India.

In a filing to the BSE, the company said it had formalised the appointment of Bajpai as Jhawar’s replacement. No reason was given for the decision, though. Jhawar, however, questioned his removal. 

“No cogent reasons or rationale have been provided for my removal. Further, this board meeting itself was convened and held without compliance with applicable corporate governance and secretarial standards. Therefore, B K Jhawar (Prashant’s father and company’s chairman emeritus) and myself abstained from attending this improperly convened board meeting,” he said in a press release. 

Debanjan Mandal, partner, Fox & Mandal, the solicitor firm representing Usha Martin, said Tuesday’s meeting was convened on a short notice on the written requisition of State Bank of India’s nominee director. “The resolution was unanimously passed, and the existing chairman was removed,” Mandal said.

While Jhawar said motivations behind the board’s support for the resolution were unclear, company sources said the SBI, the lead lender, was unhappy about the company’s debt and concerns over servicing of loans were mounting. Its indebtedness at the end of the 2015-16 stood at Rs 3,762.31 crore, according to the company's last annual report. The company's revenues in 2015-16 stood at Rs 3447.47 crore and net loss at Rs 404. 43 crore.

Sources said differences between the two promoter groups - Prashant Jhawar and Rajeev Jhawar - had cropped up over the sale of a business division. Rajeev is the managing director of the company and the son of Brij Jhawar, who is also on the board. While Brij did not attend the board meeting, Rajeev abstained from voting on the resolution for removal of Prashant.

Prashant, however, said that given the financial stress on the company, he had tried to place certain conditions prior to invocation of further borrowings by the management which did not go down well with the management. Besides, he accused the board of flouting compliance issues.

Prashant holds 0.70 per cent shares of the company in his individual capacity. However, other companies like Peterhouse Investments, Kenwyn Overseas, Usha Martin Ventures, Jhawar Venture Management and others, where he has a directorship, hold more than a 30 per cent stake in the company.

The company’s scrip on the BSE closed at Rs 21.10 a piece, down by 4.52 per cent, after the decision was made public.