Spanco Ltd

Spanco hit a new 52-week low yesterday. There were two news which affected the fall. Firstly, there was a fear psychosis which gripped the marker, where marketmen shunned and dumped shares which had huge percentage of pledged shares as there is news floating around that institutions are selling promoters pledged shares. Here, promoters hold 37.82% stake and of this, 90.24% is pledged. Secondly, the company as such is facing a tight liquidity issue. The company apparently has not paid salaries to a majority of its 15,000 workforce. Inadequate money for working capital has led to a working capital shortage leading to money not coming in from clients and this has pushed the company into more debt and defaults, a vicious cycle of tight liquidty. Spanco is a BPO which deals with mainly government, power distribution and telecommunications sector. The company is now reportedly negotiating on a debt restructuring plan which it is negotiating with banks.

Financially too, the situation is not good. For 9MFY13, the company showed a 42% (YoY) drop in net sales at Rs.1405 crore and it posted a net loss of Rs.31 crore compared to the net profit of Rs.51 crore last year. Its debt currently stands at over Rs.900 crore. The company is hopeful of getting out this situation in 4-5 months and is planning to sell equity stake to raise funds. Though the company has large orders, most of them are from the Govt and mainly from the power sector and given the state of the sector, most of these projects are delayed or under litigation. The situation as of now looks grim and unless the liquidity crisis is resolved, there is no immediate panacea in sight.