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Pratibha Industries facing turbulent times

Mumbai : Mumbai-based construction & engineering company Pratibha Industries, the flagship of the Pratibha Group, is going through turbulent times. Even as the company is bagging a few orders in the water infrastructure space, insolvency proceedings against it have been initiated by a leading lender.

State-run Bank of Baroda, a leading financial creditor to Pratibha Industries, has initiated insolvency process under IBC Code (Insolvency and Bankruptcy Code, 2016) against it and has filed petition with National Company Law Tribunal (NCLT), Mumbai.

The announcement by the company to this effect came just weeks after it announced that it has bagged two overseas orders with an aggregate value of Rs 67.87 crore.

Pratibha Industries, in a joint venture with Ceylex Engineering, had secured orders worth around Rs 32.31 crore for construction of Mulankavil water supply scheme, water supply and sanitation improvement project at Sri Lanka.

The second order secured by the company is for laying of DI/PVC pipes, fittings, specials for transmission and construction of 1500 cum capacity water tower in Naiwala area, Sri Lanka. This project is worth Rs 35.56 crore.

The company's order book seems to be getting thinner and its shares have been hitting new 52-week lows on the stock exchanges. The stock price has come down to almost Rs 2 and is moving fast towards being a penny stock, said a broker tracking infrastructure stocks.

In recent weeks, there have been mostly sellers in the company's shares and trading volumes have dried up, data from the two leading stock exchanges - NSE and BSE - points out.

The company's net worth too has eroded completely.

Pratibha Industries has posted consolidated revenue of Rs 1241.40 crore for the financial year ended March 31, 2018 as against Rs 1730 crore in the previous financial year, a drop of over 28 per cent. The company incurred loss of Rs 2138.62 crore for 2017-18 as against net loss of Rs 837.13 during 2016-17.

The company has not declared any financial results since announcing the 2017-18 figures. It had recently received an extension of three months - upto December 31, 2018, for calling and holding next annual general meeting of the company for the financial year ended March 31, 2018. The meeting was earlier due to be held on or before September 30, 2018.

"The holding company has accumulated losses and its net worth is fully eroded. It has incurred net loss during the current year as well as previous years and it’s current liabilities exceeded its current assets as at the balance sheet date. It is unable to repay

its debts, statutory obligations and pay salaries apart from other obligations/commitments", the company said in a statement.

"Its scheme of strategic debt restructuring has failed as the lenders have not accepted its proposal. All these indicate a material uncertainty that may cast significant doubt upon the holding company’s ability to continue as a going concern", the statement added.

While the company's management states it is optimistic about finding resolution and believes it will be able to continue its business, the auditors have noted that "the lenders have rejected proposal given under the scheme of SDR and the schme has also

failed. Since the negativity in networth is substantial amount, it will be very difficult to recover the losses in near future".

On the issue of insolvency proceedings, it has emerged that the company has been unable to service the huge interest cost.

"The holding company has not provided for interest on various loans from banks to the extent of Rs 220.42 crore. To that extent interest expense, interest liability and loss for the year ended March 31, 2018 are understated. The management of the holding company is of the view that since the status of all loans has become NPA, interest will be waived off by the banks and hence no provision is required", the company's statement on impact of audit qualifications on standalone and consolidated financial statement for year ended March 31, 2018, states.

The statement quotes the auditors as saying that many clients of the holding company have encashed bank guarantee on account of various reasons. "Balance of Rs 353.67 crore is shown as recoverable as asset in balance sheet and no provision against the same has been made. To that extent loss and reserves are understated and assets are overstated. Management of holding company is of the opinion that these amounts will be recovered in due course from respective parties and there is no need for any provision".

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