Punj Loyd is facing a serious Problem in it’s wholly owned subsidiary in United Kingdom It has seen a Cash Outflow of Sterling Pounds 28.5 Million which translates to @ Rs 250 crs on encashment of Bonds by SABIC…The Subsidiary,Simon Carves Ltd has filed a Case against SABIC
In a Growing Global Recession…UK has already admitted to going through one….such Bonds are Like Time Bombs as Clients, to get out of Contracts,may accuse of some breach ,and encash Bonds to prop up their Liquidity and take the risk of inviting lawsuits
The Share Price of Punj Loyd has reacted sharply by over 12% to Rs 116 levels (2.30 PM)
Wonder if Punj Loyd or it’s subsidiaries has issued any more such Bonds on Contracts being executed which they fear may too be called by Clients…..Specific Disclosures giving Details on Bonds should be made mandatory in the Annual Report in the Notes to Accounts for Contingents ,instead of just giving an Aggregate…This would be Crucial Data for an Investor,who can take a call to exit early if he reads in the Media or comes to know of Problems in Specific Contracts and fears that The Bond may be encashed by the Client.
Have a look at the notice it send to BSE and NSE this morning
___________________________________________________________________________
January 09, 2009
Disclosure pursuant to the Listing Agreement
Pursuant to its obligations under the Listing Agreement, the Company wishes to inform
you that its wholly-owned UK subsidiary, Simon Carves Limited (“SCL”), has commenced
adjudication proceedings against SABIC Petrochemicals UK Limited (“SABIC”). These
proceedings are ultimately aimed at seeking restitution, through the U.K. Courts, of £28.5
million (pounds sterling) in respect of an advance payment bond and a performance bond
called by SABIC following in SCL’s view, the wrongful termination by SABIC of the contract
between SABIC and SCL. Additional costs and damages will also be sought by SCL
against SABIC associated with cost overruns in the project caused by changes in scope
and design requested by SABIC and also to recover damages for losses arising as a
consequence of the termination of the contract.
SCL had contracted with Huntsman Petrochemicals (UK) Limited (subsequently acquired
by SABIC) in early 2006 to design, build and pre-commission a 400 kte per annum low
density polyethylene plant (“LDPE”) at Wilton, Teeside in the UK. This contract was
entered into between SCL and SABIC prior to the acquisition of SCL by Punj Lloyd in May
2006. After completion of the initial front-end engineering design works for the proposed
plant, the contract was converted into a lumpsum engineering procurement and
construction contract. SABIC recently terminated the contract on the basis that, inter alia,
SCL failed to undertake completion of the contractual works with due diligence. This
allegation is strongly denied by SCL on the basis that the project is significantly complete
and was on track to be fully completed in accordance with the requirements of the contract
and within the relevant scheduled completion date specified in the contract with SABIC.
SABIC has called the performance and advance payment bank guarantees issued by SCL
amounting to £28.5 million (pounds sterling).
SCL intends to defend its claims vigorously.
Thanking you,
Yours faithfully,
for
Punj Lloyd Limited
Dinesh Thairani
Company Secretary