Ankit Metal & Power: Blaming it on poor market conditions

The lenders have invoked SDR after the company's debts mounted to an unsustainable level of Rs 1,201 cr by March 2015

As the board of directors at Ankit Metal & Power (AMPL) meets later this week to take stock of the company’s unaudited financial results for the quarter and the nine months ended December 31, 2015, there is hardly anything to cheer.

The company had incurred a gross loss of Rs 81.64 crore and operating loss of Rs 18.64 crore in the first six months of this financial year. Given its performance and the market condition during the period to be taken up for consideration by the board, the trend is likely to continue.

The board will be meeting under the threat of the management of the company being taken over by its lenders, who invoked the strategic debt restructuring (SDR) rule after the firm’s debts mounted to an unsustainable level of Rs 1,201 crore by March 2015, twice the turnover (Rs 689 crore) reported by the company in FY15. AMPL incurred a loss of Rs 193 crore in 2014-15, about 250 per cent higher than the previous financial year. As a result, the company’s net worth dipped to Rs 309 crore. This, coupled with outstanding dues, has pushed the liabilities to Rs 1,510 crore as of March 2015.

The company’s management attributed this dismal performance to a depressed market for its products and lower capacity utilisation of plant, impacting the net realisation and margin. “Slower growth in several key sectors of the economy has resulted in weaker domestic demand. A mining crisis and rising inflation in the country resulted in increase in the cost of raw materials and other overheads, which could not be passed on to consumers,” read the company’s annual report for FY15.

AMPL, promoted by Suresh Kumar Patni in 2002, has sponge iron, ferro alloys, pelletisation and captive power plants in Bankura district of West Bengal.

“The areas in which AMPL is operating are going through a rough patch. This will have a bearing when the lenders try to sell the assets to a strategic investor after taking over the management control of the company under SDR by converting their debts into equity,” says Rajib Sahoo, an industry analyst and partner of SRB Associates.

He, however, pointed out that unlike Rohit Ferro-Tech — another group company under SDR with some facilities having been closed — AMPL has running plants. An upturn in the steel market can revive the fortunes of the company, Sahoo added.

Can the bankers wait till a turnaround in the market condition to sell the assets and partly recover their loans? According to SDR norms, the bankers can convert portions of their debt to equity to acquire majority stake in the companies within six months of the reference date and then offload the stakes in favour of a strategic partner within 18 months.

“The lenders cannot hold on to assets for long unless they seek to extend these deadlines. It will also be difficult for them to find a suitable buyer in this depressed market for metal-based industries.

In this context, they will have to go for selling the assets at a discount,” said Giriraj Daga, portfolio manager, SKS Capital & Research.

Shares of AMPL traded at Rs 2.15 apiece on the National Stock Exchange on Monday.

Its market capitalisation, as on February 1, is Rs 26.25 crore.