Gujarat denies financial stress despite $76.6m loss

The statement, prepared for the Indian financial year ending March 31, 2013, clarifies the extent of Gujarat's recent financial woes, which have culminated in the company's shares being suspended from trading since June.

By comparison, Gujarat posted a $9.77 million profit in the 2011-12 Indian financial year.

In the annual report, the company's board of directors attributed the loss to an $83.79 million write-down in the value of Gujarat's mines and other assets.

The company also revealed it had $487.88 million worth of debts to pay within the next year.

Despite these figures, Gujarat NRE Coking Coal chairman Arun Jagatramka told the Mercury yesterday that his company was not in financial trouble.

"The current liabilities [debts] shown in the annual report refers primarily to bank debts which are not yet due for payment but has been shown as a current liability to comply with certain accounting standards," he said in a statement.

"The loss of $76.6 million is due to a 'write-down' in a number of assets held by the company, due to the current lower commodity prices for coking coal.

"As the market becomes more buoyant we expect this position to change."

Mr Jagatramka said his company had made a cash profit of $20.8 million before the write-down.

He also indicated that Gujarat's financial fortunes had changed in the five months since March 31.

In early August the company announced that Indian steel giant Jindal Steel and Power would invest $66 million of new capital to increase its share in the company.

Mr Jagatramka also said the company had secured a loan of $82.6 million and was in negotiations with lenders to inject $217 million into the company.

"With Jindal Steel and Power committing more financial support to the company and the initial signs of growth in the value of coking coal, we are positive that the company has a future within the Illawarra," Mr Jagatramka said.

The chairman's confidence in his company's future contrasted with statements made by the annual report's auditors on August 15.

In their assessment of the annual report, Grant Thornton Chartered Accountants said they were unable to pass judgment on Gujarat's financial position due to the absence of evidence showing how the company could repay its debts.

The auditors said they did not have enough information before them to remove "significant doubts" about Gujarat's ability to continue operating for 12 months from August 15.

"The directors have not provided an update of their assessment of [Gujarat NRE's] ability to pay their debts as and when they fall due," the auditors said. "The consolidated entity has reported a loss before income tax of $112,182,825 (including an impairment charge of $83,792,190) for the year ended March 31, 2013 and a working capital deficiency of $407,998,443.

"At the year end, [Gujarat NRE] is in breach of loan covenants, has significant creditors in arrears and has been unable to provide evidence to support the full amount of the replacement loan facility which is required to pay existing facilities."

UBS global commodity analyst Daniel Morgan labelled the auditor's statements "concerning" and said they showed the company was under financial stress.

Meantime, the auditors also raised concerns over Gujarat's method for determining its new mining asset value.

The company initially appointed an independent valuer, Geos Mining, which estimates its mines and mining lease were worth $810 million.

However Gujarat's board of directors said this value was "not appropriate" and chose to undertake their own asset valuation based on a higher long-term coking coal price and other factors.

The board valued the company's mining assets at $995 million.