After years of reporting losses, the Chennai-based erstwhile fertiliser major, Spic has admitted to shareholders that it is sick, its net worth has been eroded significantly, and is a fit case for the Board for Industrial and Financial Reconstruction.

In a notice to shareholders for a general meeting, the management of SPIC has said, On account of accumulated losses, there has been a significant reduction in the net worth of the company, which stands at Rs 10.93 crore (Rs 109.3 million) as of March 31, 2003, compared with the peak net worth of Rs 653 crore (Rs 6.53 billion) in 1999-2000, mainly on account of a write off of Rs 222.01 crore (Rs 2.22 billion) during the financial year 2002-03.

As per Section 23 of the Sick Industrial Companies (special provisions) Act, 1985, if the accumulated losses of an industrial company have resulted in erosion of fifty per cent or more of its peak networth during the immediately preceding four financial years, such a company is required to i) to report the fact of erosion to the Board for Industrial and Financial Reconstruction; and ii) to hold a general meeting of its shareholders for considering such erosion.

The reasons for the sad state that the company finds itself are not far to seek. Its Rs 400 crore (Rs 4 billion) plus investment in Spic Petrochemicals have derailed the financial health of the company considerably.

Auditor qualifications, to the extent of Rs 1179.34 crore (Rs 11.74 billion), had peppered the results of SPIC for the year ended March 31, 2003.

Spic has reported a 74 per cent higher loss during the financial year 2002-03. Net loss jumped to Rs 375.69 crore (Rs 3.76 billion) from Rs 215.51 crore (Rs 2.15 billion) for the year.

The auditors' had in their notes pointed out that the company's investment in Spic Petro, to the tune of Rs 448 crore (Rs 4.48 billion), may not be recoverable.

Additionally the auditors' had also pointed out that the retention of subsidy to the tune of Rs 369.55 crore (Rs 3.69 billion), an unrealised claim by the company may not fructify.

The auditors' had also pointed out that advances, loans against equity, guarantees, interest and other recoverables worth Rs 244.16 crore (Rs 2.44 billion) in other promoted companies may also not be recoverable.

The auditors had also pointed out that despite pending implementation of the corporate debt restructuring proposal, the company has provided interest on its loans based on the terms and rates specified in the CDR proposal resulting in a lower interest charge to the tune of Rs 41.10 crore (Rs 411 million) in the profit and loss account.

Spic's turnover declined by 4 per cent during the period to touch Rs 1,654.57 crore (Rs 16.55 billion) as against Rs 1,721.98 crore (Rs 17.22 billion) for the same period last year.

The company though has reported a 117 per cent jump in operating income, which touched Rs 67.69 crore (Rs 676.9 million) for the financial year.

The company has in its general notice to shareholders pointed out that the implementation of the corporate debt restructuring package would ensure that interest payments would come down and improve the financial health of the sick company.

The company has already hived off its interests in shipping, LPG division, heavy chemicals division, and its stake in the seeds co-venture, the notice to the shareholders said.