Proxy Firm Opposes Sajjan Jindal-Led JSW Holdings’ Loans To His Wife’s Firm
Proxy advisory firm Stakeholders Empowerment Services has raised red flags over resolutions the Sajjan Jindal-promoted JSW Holdings Ltd. hopes to pass in its annual general meeting scheduled for Saturday.
The key ones among these seek to loan an additional Rs 25 crore to JSW Techno Projects Management Ltd. and ratify a Rs 75-crore loan given to the company in the previous financial year. JSW Techno Projects, 99.8 percent owned by Jindal's wife Sangita, holds 9.49 percent in JSW Steel.
JSW Holdings is a non-banking finance company and the investment arm of the JSW Group. Most of its investments are in the group's steel companies. The proxy advisory firm said that JSW Holdings is transferring benefits to the promoters at the cost of non-controlling shareholders.
...the company has not disclosed the purpose/objective of utilisation of loans by JSW Techno Projects Management Ltd. The company has failed to disclose that borrowing company is loss-making with negative net-worth.SES Report On JSW Holdings
JSW Holdings had said in its annual report that the company will seek shareholders' approval for the two transactions. It said that a new loan be extended and the earlier one be ratified “provided however that the transactions so entered into shall at all times be on arm's length basis and in the ordinary course of the company's business”.
A representative of JSW Holdings declined to respond to queries by BloombergQuint. As on March 31, public shareholding in the company stood at 38.47 percent.
“There are people who silently watch injustice. That doesn't mean that injustice becomes a norm,” said JN Gupta, co-founder and managing director of SES. “The issue is that you're giving money from a public company to a company that is owned 100 percent by the wife of Sajjan Jindal.”
SES has also advised shareholders to oppose the resolutions to pledge additional shares of JSW Steel, and to ratify the pledge of 6.5 crore shares of JSW Steel made in the previous financial year.
The fresh pledge of 6 crore shares of JSW Steel will be made as a security for loans availed by JSW Techno Projects Management, Unity Advisory Services Pvt. Ltd. and SJD Advisory Services Pvt. Ltd.. Shares were pledged in 2016-17 as a security for loans to the latter two.
SES estimates that the pledge will result in a cumulative liability of up to Rs 3,424.7 crore at JSW Steel's share price of Rs 202 as on June 10.
“In case the company defaults on repayment of financial facilities availed/proposed to be availed, the pledge of shares can be invoked by the lenders. This may result in a substantial loss for the shareholders of JSW Holdings Limited...,” the SES report said.
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