Material developments since the last balance sheet date
The financial year of the Company has been extended to 30th September, 2009(18 months) and the
same has been approved by The Registrar of Companies, Maharashtra vide its order under Section
210 (4) of the Companies Act, 1956 dated June 9, 2009.
(a). The Shareholders of the company have approved sale/transfer of Steel Business of the Company
on slump sale basis to Essar Steels Limited by passing a Special Resolution at the Extra-Ordinary
General Meeting of the Shareholders of the Company held on September 7, 2009.
(b). The Company has entered into a Business Transfer Agreement (BTA) with Essar Steels Limited
(Acquirer) pursuant to which Fixed Assets, certain current assets & liabilities, entire Term Loan/Working
Capital facilities relating to the Steel Business of the Company will be transferred to them with effect
(c). Net Purchase Consideration payable by Acquirer = Value of fixed assets including Capital Work in
progress and auxiliary equipments valued as Rs.601 Crores
+/- ([Certain Current Assets–Current
–Term Loan/Working Capital outstanding) . The valuation of Certain Current Assets and
Liabilities is being carried out by independent auditors M/s Ernst & Young.
So if you take the above assets and liabilities as at March 2009 and the consideration formula,the max SPS can receive is Rs 172 crs…..but I suspect there will be a downward adjustment to current assets and the consideration may just barely come to Rs 100 crs….E& Y is doing this valuation
So a restated SPS Balance sheet will show equity of Rs 82 .80 crs and adjusted reserves of @ Rs 25 crs to give a networth of Rs 100 crs matched by the Rs 100 crs received for sale of steel business…so book value will be Rs 12 !
What will SPS do with the Rs 100 crs ?…Ajmeras have had serious Corporate Governance and Credibility Issues…the Board is Senior Citizen stuff…they will probably lend it out to ARIIL !…even if they earn net 10% on it the EPS barely crosses Rs 1 as profits would Rs 10 crs
The Share Price of SPS currently at Rs 27 has to recede towards single digits
Do Not be seduced by SPS on it’s recent relisting last week !…Yesterday it moved back from Rs 22 to Rs 27 on high volumes….Steer clear of SPS