Corporate Report     

Published: Dec 15, 2022
Updated: Dec 15, 2022

Jyoti Structures

Putting behind insolvency saga Back from bankruptcy brink

Battered and bruised by a mounting debt burden and facing virtual liquidation, Mumbaiheadquartered Jyoti Structures, which is engaged in the manufacture of transmission line towers, sub-station structures and railway electrification structures, is back on the path of revival and growth. In fact, one can say that the phoenix has risen from the ashes. The company was handed over to the National Company Law Tribunal by the Reserve Bank of India for the insolvency procedure so as to pay off creditors who had loaned over Rs 7,000 crore which the company was not able to repay.

A group of investors came forward to invest in the ailing company. The resolution plan submitted by them was approved by the committee of creditors. Unfortunately one smaller creditor opposed the approval on technical grounds. This led to liquidation order initially by NCLT. Finally the plan was approved by NCLAT and then NCLT. Thus the company was saved from liquidation. Going forward, the company is Promoterless, Board controlled and professionally managed. A board of majority independent directors is led by an enlightened and highly efficient professional, Dr. Rajendra Prasad Singh, a former (and longest-serving) Chairman and Managing Director of Power Grid Corporation of India, a Government of India PSU holding a Maha Navratna status. The board has appointed professionals to manage the day-to-day affairs of the company.

Jyoti Structures started its new innings on November 9, 2021, when control of the company was transferred by the erstwhile Resolution Professional appointed by NCLT to the newly constituted board of directors headed by Chairman Mr. Singh. The board then assigned the responsibility to Mr. Abdul Hameed Khan, Chief Executive Officer (CEO), for day-to-day management of the affairs of the company.

During the fiscal year ended March 31, 2022, the company grossed revenues of Rs 5.44 crore as compared to only Rs 15 lakh in the previous year, and incurred an operating loss of Rs 36 crore (reduced from Rs. 254 crore incurred in the previous year). And the loss at net level came down sharply from Rs 1,759 crore in fiscal 2021 to Rs 42 crore. Before the RBI asked lender banks to take over the company, its revenues during fiscal year 2013 were Rs 3,013 crore on which the company had earned an operating profit of Rs 324 crore and net profit of Rs 38 crore.

SHARE CAPITAL UP

After being released by NCLT, prospects for Jyoti Structures have improved considerably. New investors have pumped in around Rs. 170 crore through new equity shares of the face value of Rs 2 at a premium of Rs 2. As this will take care of the working capital, the company is now in a position to bid for new contracts.

Meanwhile, the company has already secured contracts worth around Rs 800 crore, including a Rs 237-crore contract from Sterlite Power Transmission for turnkey supply and construction of 400 kv lines in Karnataka (the projects are to be commissioned in a phased manner by December 2023 and July 2024), and a Rs 382-crore contract from Adani Transmission for turnkey design, supply and construction of a 765 kv double circuit transmission line from Khavda to Bhuj in Gujarat. The contract is to be executed in about 17 months by August 2023.

The company has two manufacturing facilities located at Nashik in Maharashtra and a third in Raipur in Chhattisgarh. At present, only one Nashik factory is functional but subsequently, after the new contracts are received, the Raipur facility too will reopen.

According to the management, the prospects for the transmission line tower segment are highly promising as in the current decade (2020-2029) the Indian electricity sector is likely to witness major demand growth. The Government of India is preparing a ‘rent a roof’ policy for supporting its target of generating 40 GW of power through solar rooftop projects by December 2022. It also plans to set up 21 new nuclear power reactors with a total installed capacity of 16,700 MW by 2031.

At the same time, the Central Electricity Authority (CEA) estimates India’s power requirement to grow to 817 GW by 2030. The government wants to establish a renewable energy capacity of 500 GW by 2030.

With a view to improving financial liquidity and working capital of the company, pursuant to the approved resolution plan, the authorized share capital of the company has been increased from Rs 85 crore to Rs 180 crore. Accordingly, 42.50 crore shares of Rs 2 each have been allotted to new investors at a premium of Rs 2, aggregating Rs 170 crore. With these allotments, individual shareholders have emerged as the largest shareholder entity accounting for a 60 per cent equity stake in the company.

The only negative aspect to this growth story is that the issue of new shares will go against the interests of old shareholders who had paid a premium of Rs 5 per share at the time of the issue and a premium of Rs 25 per share of the face value of Rs 10 on the rights issue in fiscal 2000.

But certainly, the company is back from the brink of bankruptcy and viewed in the context of bright outlook for the transmission line tower sector, prospects for the company are encouraging.