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S. Kumars: Banks Need To Lead

Published on Thu, Apr 16,2015 | 19:00, Updated at Thu, Apr 16 at 19:00Source : 

IIAS says - S. Kumars Nationwide Limited (SKumars) is a leaderless company. The lenders have withdrawn their board nominees and institutional shareholders have exited the stock, leaving retail shareholders to hold the baby. The promoter has no skin in the game, but continues to call the shots.

In an unprecedented move, a group of shareholders holding 21% of SKumars has called for an extra-ordinary general meeting (EGM) to be held on April 27, 2015. At the EGM, the resolutions call for removing the entire board, including the promoter, and installing a new board.  

That S. Kumars’ board needs an overhaul is obvious, but this will not pull SKumars out of the quagmire, and neither will the agitations of an amorphous group of retail shareholders.  

Bankers – and data is hard to come by – have lent over Rs. 45 bn to the consolidated entity. Given their exposure, IiAS believes that SKumars’ lenders need to step in and take control and provide direction to the company. The banks could either appoint a management that will pull the company out of its performance woes, or have the company sold. Alternatively, they must enforce personal guarantees and file for winding up to bring closure. Stepping is an option than to writing-off loans and then waiting passively for the government to inject more capital.

The banking sector must take responsibility for its lending actions and demonstrate that it can right the wrongs – and SKumars is just the case to start.

The IIAS  report ‘S. Kumars Nationwide Limited: Banks need to lead’ is attached here…

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Attachments : IE_SKumars_BanksNeedToLead_16Apr2015.pdf

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