Ford India's networth has sharply declined in the financial year ending March 31, 2011 making it a "potentially sick" firm under the Sick Industrial Companies Act 1985. This has forced the company to file a report with BIFR as per the statutory requirements. This is the not the first time the company has seen its accumulated losses at 50% more of its total networth, reports CNBC-TV18's Ronojoy Banerjee.
At the end of FY11, its accumulated losses stood at Rs 1,200 crore. Now, this is 50% more than the total networth of the company. So, it essentially means that the company’s networth at the end of March 31, 2011 had declined by 50%. It essentially means is that under the Sick Industrial Companies Act, Ford India has now become a potentially sick firm. As a result of which to meet the statutory requirements the company has also had to report this development to the BIFR.
Sources say the company convened a special board meeting between November and December and this issue was extensively discussed. Apart from that, the board also prepared a report on this development and also submitted the same to the BIFR.
When CNBC-TV18 contacted the spokesperson, in a very long response to a detailed questionnaire from CNBC-TV18, the spokesperson said that this is on account of the depreciation on the kind of investments the company has made in the last two years.
There two significant announcements the company has made. One is its plant in Gujarat where the company is going to invest USD 1 billion. Apart from that, the company has also announced a significant investment for expanding its engine facility in Chennai. But the company maintained that the viability as such is not a question and they are meeting all their financial obligations. So, we need to wait and watch how this entire issue pans out and what response BIFR sends.