Citizen firms eye BCL stake in Pula Steel
Onalenna Kelebeile | Thursday August 11, 2016 14:57
Speaking in an interview, Pula Steel chief executive officer, Ranvir Kumar Verma said his cash-strapped company has already applied for funding from an international financier.
“We have already written a letter of intent to BCL and as one of the requirements for that funding is a letter of approval from BCL as the major shareholder,” he said.
He explained that the letter of intent was written on August 3, noting that BCL Mine has promised to respond by this week.
He said they have also asked the mine to release the working capital that it has not paid to Pula Steel for a long time.
Verma said the decision to buy out BCL stake came about after they realised that BCL has lost confidence in the steel project. He added that any chief executive officer cannot do magic to save Pula Steel when there is no funding and added that all that they need is working capital.
He said Pula Steel has been running without working capital for the past eight months with creditors on its shoulders.
He further said BCL only paid the initial P89 million working capital but the money was consumed by devaluation, delays and cost overruns before the plant could even start operating.
Verma also said that when Pula Steel’s output scope was increased from the initial 80 tonnes to 240 tonnes a day, promoters had invested their part according to the required ratio and BCL now has to put in its share.
On the decision by the board of directors to advertise his position, Verma said he does not have a problem because BCL as a major shareholder has the right to appoint one. However, his concern is that if removed now the international financier may withdraw funding because the financiers want him to be in control of the company. He said once removed from the position he will remain as a technical advisor as he is still a shareholder.
He explained that he is in fact the one who came up with the proposal to be replaced to the board in February, but this was ignored.
“BCL came up with the proposal to recruit the new CEO only after the administrative closure of the plant. We believe it is not the right time because it will have many repercussions on the creditors and stakeholders at large,” he added.
Verma noted that he came up with the proposal because he wanted a local face that can easily access assistance from all necessary departments.
On why he took the position in the first place, he said he had an agreement with BCL under which he had to operate the plant and start production.
He explained that initially he held 80% stake in the company while 20% was held by Wealth Generations, but when CEDA joined into the equity they got 35% stake, 13% to Wealth Generations while the Vermas held 52%.
“When BCL joined in they put up a condition that they want a major stake and was granted 50.5%. CEDA on the other hand could not dilute below 26% hence Vermas were forced to dilute more for the benefit of the company,” he said.
He also denied that they were paid P20 million by BCL for the concept saying the money was paid to the original shareholders, including Vermas.
BCL marketing and public relations manager James Molosankwe referred all enquiries to Pula Steel management and board.
Board chairman, David Keitshokile on the other hand said he knew nothing about a letter of intent to buy BCL stake.
Wealth Generations and Vermas shareholders are Mpho Balopi and Brian Mosenene respectively.