In an unprecedented move, a group of shareholders having 21 per cent share in the company, has called for the EGM on April 27. Resolutions for the EGM call for removing the entire board, including the chairman and managing director Nitin Kasliwal.
"The company is in the process of moving the Bombay High Court to obtain a stay on the proposed meeting," said a company spokesperson.
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Retail shareholders own 91.5 per cent of the company while less than four per cent holding is still with the promoters.
The company has failed to repay over Rs 4,500 crore to a set of 13 lenders, including State Bank of India and ICICI Bank. The banks have classified the loan as non-performing assets after the corporate debt restructuring process did not yield desired results. Banks have also withdrawn their nominee from the company's board.
"It is clear that promoters have no intention of reviving the company. That is why we want to set up a new board which can explore the opportunity of bringing a strategic investor," said Patel.
The company filed its latest annual report two years ago, for 2012-13.
Its latest annual general meeting (AGM) was held about 24 months ago.
Its performance has sharply deteriorated as it posted losses of Rs 670 crore for the 15 month ending 30 June 2014 (stand alone, based on quarterly results). The company promised to publish financial statements for the 18 month-period ended 30 September 2014. But nothing came of it.
Auditors have also raised alarm with qualifying the last audit report for lack of confirmations of receivables, inadequacies regarding the physical verifications of inventory and fixed assets, and internal controls that are not commensurate with the size and complexity of the business. Receivables aggregated 60 per cent of 12-month revenues ended 31 March 2014 (stand alone, based on quarterly results), which shows that most sales are not backed by actual receipt of cash. There are mismatches in closing inventory with the opening inventory levels of the immediately following year.
"Motives aside, their ability to bring improvement in the business is unclear. No one, and certainly not the bankers, will like to see the company being led out of the frying pan, and into the fire," said a proxy advisory firm Institutional Investor Advisory Services in its note on Thursday.
"IiAS believes that for a solution to work for the long term, the company needs institutional hand holding."
The banks could either appoint a management that will pull the company out of its performance woes, or have the company sold. Alternatively, they must enforce personal guarantees and file for winding up and bring closure.