Y K Modi Flagship Rossell Posts First-Ever Net Loss
Y K Modi flagship Rossell Industries has posted its first-ever net loss of Rs 1.17 crore despite the extension of its accounting period to 18 months. High incidence of interest rates seem to be the primary cause behind a sliding performance of the tea major.
Sources said the interest costs per kg of tea for Rossell is much higher compared to the average interest costs for the industry as a whole which have resulted in losses exceeding Rs 1 crore.
Advances of over Rs 25 crore were given to various companies on a long term basis. This includes around Rs 18 crore in subsidiary companies alone.
Returns on loans from subsidiary companies have been extremely low, corporate sources said. The interest cost per kg of the company is almost Rs 6.32 compared to an industry estimate of less than a Re 1.
The advances made against equity participation includes Rs 12.61 crore to subsidiaries.
Meanwhile, the recently formed Modi Korea Telecommunications Ltd, one of its subsidiaries, has posted a loss of over Rs 2 crore. Basically into radio paging services, the company had to bear intensive price cutting in the wake of increased competition. Moreover, the company faced a setback on account of large crop loss which aggravated on poor realisations in tea prices.
The company has privately placed non-convertible debentures of Rs 23 crore with the Industrial Development Bank of India (IDBI) and Industrial Reconstruction Bank of India (IRBI), with IDBI being the debenture trustee. NCDs of Rs 10 crore have been subscribed by the Industrial Finance Corporation of India (IFCI).
It may be noted that the banks had expressed concern over the company's investment of the bank's funds in businesses other than tea.
The consortium had indicated that the future performance of the company was related to the activities of other group firms since a substantial amount had been invested outside Rossell Industries. Moreover it was believed that there were investments in outside businesses by raising funds by issuing NCDs, although the company maintained that amounts raised through NCDs were strictly spent on development expenditure.
The company, which posted a loss of Rs 1.17 crore in 1995-96, had reported a profit of Rs 5 crore in 1994-95. This is a drastic fall compared to the Rs 51 crore profit in the previous year. For the first time, the company will skip a dividend.The erstwhile Jokai, once a sterling blue-chip, had changed hands several times. The company had split under an agreement to transfer three Assam gardens of Rossell Industries into a new corporate outfit called Rossell Tea Ltd. H M Gupta formed Rossell Tea with three gardens including Dikom, Nokhroy and Borah.