ARCIL takes over assets of six firms

The newly constituted Asset Reconstruction Company of India Ltd (ARCIL) has taken over assets of six companies at a discount of 40 per cent.

However, transfer of the remaining five of the total 11 initially identified for takeover, have hit a roadblock because of astronomical registration charges and absence of any cap on the total stamp duty in states such as West Bengal and Chhattisgarh.

The remaining five companies are from these two states. Total principal exposure of these 11 companies identified was Rs 4,000 crore. The sum involved in these six companies taken over was around Rs 2,000 crore.

According to sources, ARCIL has taken over the assets of these companies at Rs 800 crore and has issued securities to the respective banks instead of cash.

Assets of companies which have already been transferred were Core Healthcare, Birla VXL, Precision Fastner, Goldstar Alloys & Steel, Rajendra Steel and Modern Denim.

Companies which were yet to be transferred include Uniworth Ltd, Sri Rama Multitech, Kalyanpur Cement, Asian Peroxide and Precision Fastner.

Sources close to the development said the West Bengal government has already reduced the stamp duty on transfer to ARCIL to 0.1 per cent, but it had not provided any cap on the total amount of stamp duty to be paid. This resulted in a very high duty figure, rendering transfer of sick companies to ARCIL unprofitable.

"The registration charges in the state was also very high, to the tune of 3 per cent making transfer virtually impossible," said an official from ARCIL.

The same situation prevailed in the neighboring state of Chhattisgarh. States such as Maharashtra, Gujarat and Karnataka had reduced duties by 0.1 per cent and placed a cap of Rs 1 lakh on cost of such transfers.

The registration charges in these states were also only Rs 500. All the six companies transferred to Arcil were from these four states.

"We are negotiating with the government for a reduction in registration charges a levying a cap on the maximum stamp duty payable by ARCIL to respective governments," the source said.

Reduction in stamp duty will result in successful transfer to Arcil which in turn will try and revive these companies. Many of the units were in running condition, like the Calcutta-based Uniworth.

"Turning these companies profitable will mean greater revenue earning by the government on a regular basis which it is likely to forgo just one time by doing away with the transfer charges," explained executives from ARCIL.