United Spirits net worth halves, to seek ‘sick’ tag

New Delhi: Diageo-owned United Spirits is seeking approval from its shareholders to report sick to BIFR as its accumulated losses as on March 31, touched 86 per cent of peak net worth during the past four fiscal years.

As per the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), if the accumulated losses of a company, at the end of any financial year, have resulted in erosion of 50 per cent or more of its peak net worth during the preceding four financial years, such firm is required to report to the Board for Industrial and Financial Reconstruction (BIFR).

In a notice to the shareholders for an EGM on January 22, United Spirits said, as per the audited annual accounts for the fiscal ended March 31, “the accumulated losses of the company as at March 31, 2015 is 86 per cent of its peak net worth during the four financial years preceding the financial year ended March 31, 2015”.

“Accordingly, this extraordinary general meeting (EGM) is being convened to consider and approve the enclosed report of the board of directors on such erosion and its causes, and the measures being taken as per the relevant provisions of SICA, and also to approve the reporting of such erosion to BIFR in terms of Section 23 of SICA,” it added.

The company said its accumulated losses as on March 31, 2015, stood at Rs 5,045.45 crore, which is greater than 50 per cent of the peak net worth in the immediately preceding four financial years at Rs 5,849.62 crore.

The two main reasons for the losses are “diminution in the value of long-term investments in subsidiaries and loans and advances to subsidiaries due to low capacity utilisation and diminution in the value of investments and advances in overseas subsidiaries, loss on sale of shares in subsidiaries, provision for doubtful debts, advances and deposits.