The net worth of Fertilisers and Chemicals Travancore (FACT) was declared as "completely eroded" by its auditor on Tuesday, resulting in a 15 per cent slump in its share price.
The public sector unit (PSU), which is almost on its death bed, was not always in such bad shape. In fact, it was in profit till 1997.
The company on Tuesday reported a 10-fold losses at Rs 49.77 crore during the October-December quarter, compared to a loss of Rs 4.41 crore posted during the corresponding period of the last fiscal. It had a revenue of Rs 591.35 crore during the quarter under review against Rs 583.20 crore in the same quarter last year.
In the quarterly earnings report, the FACT auditor also said that it has doubts about the sustainability of the fertiliser company as a going concern.
Established in 1943 by C.P. Ramaswamy Aiyar, the then Diwan of Travancore, FACT was taken over by the Kerala government in 1960 and the Union government became a controlling stakeholder in 1962 with 98 per cent share.
Observers say the PSU went into a crisis in 1998 and has not revived since due to multiple factors.
Mismanagement, debt and liabilities arising out of the commissioning of an ammonia plant in 1997 were some of the reasons the once profit-making PSU started making losses.
Mismanagement of the company and lack of capable people at top positions have hurt its performance, people in the know said.
In fact, it took two years for the government to appoint a full-time Chairman at FACT after Jaiveer Srivastava was removed from the post in November 2016. A week back, on January 22, the Centre announced the appointment of Kishore Rungta as the new CMD.
Another major reason for the losses were the liabilites which arose out of the Rs 1,000-crore loan taken to set up an ammonia plant in 1997.
Further, production in the plant suffered initially due to local protests over concerns of leakage. Although the Supreme Court eventually allowed the continuation of ammonia production, plant utilisation has not been to its fullest capacity.
The high cost of liquified natural gas (LNG) has also added to the financial stress of the fertiliser company.
In 2002, FACT came out with a voluntary retirement scheme which was accepted by 428 employees. The same year, the government also invited Expressions of Interest (EoI) for divesting its stake in the central PSU.
In the past, the government also provided financial support but the company could never make a turnaround.
The Centre in 2014 announced an extension of a Rs 1,000-crore loan to the PSU and also agreed to relax the terms of loan repayment.
Following the quarterly results and the auditor's claim that FACT's net worth is totally eroded, shares of the company on Tuesday slumped over 15 per cent.
Around 12.45 p.m, the company's stock price on the National Stock Exchange slumped around 15.28 per cent to touch the intra-day low of Rs 34.10.
"The company incurred a net loss of Rs 4,977 lakh during the quarter ended December 31, 2018 and the net worth of the company has been fully eroded," the auditor said.
--IANS
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