S Kumars to file a plea against shareholders' EGM

Last week a clutch of shareholders led by Mumbai-based stockholder Bharat Patel had called for an extraordinary general meeting (EGM) seeking removal of S Kumars’ Chairman and MD Nitin Kasliwal over mismanagement of the company. In response, S Kumars Nationwide Limited (SKNL), owner of the S Kumars has decided to move court seeking stay on the EGM.

A group of shareholders holding 21 percent share in the company called for the EGM on April 27 seeking removal of the entire board, including Kasliwal. While retail shareholders own 91.5 percent in S Kumars, less than four percent holding is with the promoters. Under the continuous debt pressure, the company has not been able to repay over Rs 4,500 crores 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 Banks have also withdrawn their nominee from the company's board.

Proxy advisory firm Institutional Investor Advisory Services (IiAS) has now recommended that SKNL lenders should intervene to provide guidance and direction to the company. The firm has asked banks to either appoint a management that will pull the company out of its performance woes, or have it sold. Alternatively, they must enforce personal guarantees and file for winding-up.

S Kumars suffered during a recessionary phase that hit the textile industry, that led to oversupply of goods pushing up inventories. The company's working capital rose significantly, resulting in higher debt burden. The company's borrowing was at Rs 3,400 crores during the year ended March 31, 2013.