Jindal Steel & Power – Misleading Indian investors & Bankers

Naveen Jindal has been using the coffers of JSPL to settle his personal rivalry against the Gujarat NRE group for years now, forgetting that JSPL is a public listed company with a separate legal entity and not a personal cheque book to be used at the promoter’s will, said Arun Kumar Jagatramka.

Despite knowing fully well that JSPL is barred under Section 29A of the IBC due to defaults by his companies in Australia, Africa and/or Mauritius, Naveen Jindal directed JSPL to place a bid for Gujarat NRE Coke Ltd (in liquidation) for which JSPL had to pay an amount of Rs. 1 lakh which was non-recoverable.


The Chairman, 8th April, 2019.

Securities & Exchange Board of India,


Dear Sir,

Sub: Jindal Steel & Power – Misleading Indian investors & Bankers.

Misuse of JSPL Banner & funds by its Promoter Chairman to the detriment of JSPL and all its stakeholders.

Naveen Jindal is facing charges ranging from cheating, criminal breach of trust, abetment of bribery, money laundering, criminal conspiracy and is currently out on bail while the Indian Investigative Agencies continue to pursue their cases against him personally and his company, Jindal Steel and Power.

Despite facing such serious charges, nothing seems to have changed for Naveen Jindal who still continues on the same path.

Jindal Steel and Power, the flagship company promoted by Naveen Jindal in India boasts of 94 subsidiaries and associates, both domestic and foreign as per its Annual Report of 31st March 2018.

The real life situation on Naveen Jindal promoted JSPL’s subsidiaries in Australia are being knowingly kept hidden and misreporting on their current situation is being deliberately done to put a veil over the eyes of the Indian bankers and shareholders of JSPL by Naveen Jindal and other JSPL officers.

Wollongong Coal and Wongawilli are the main subsidiaries with operations in Australia controlled and managed by Naveen Jindal’s JSPL. JSPL appoints 2 nominee directors on the board of Wollongong Coal including the Chairman who purports to report directly to Naveen Jindal on the affairs of the Australian companies. While Wollongong Coal is a listed company, Wongawilli is a wholly owned subsidiary of Wollongong Coal which operates the Wongawilli mine. These companies have the license to operate and mine Russelvale and Wongawilli mines in New South Wales, Australia.

Officers of JSPL India have repeatedly and regularly assured investors that the mines in Australia are operating well and production is expected to ramp up in the future. But in reality the bigger mine with Newly installed Longwall mining equipment, namely, Russell vale mine is on care and maintenance since 2014 due to absence of mining approvals. Its applications to restart mining at the site are in grave doubt after repeated concerns raised from Planning Assessment Commission (PAC) and NSW Department of Planning and Environment. Despite these issues, JSPL India and its officers have not informed investors and bankers the true picture about the status of the mine and its future viability which are in serious doubt in Australia with the local community heavily opposing the mine due to its many environment failures since JSPL took management control.

Wongawilli mine has been in production intermittently, first contracted to Delta SBD and then operated by Wollongong Coal itself. Delta SBD went into administration in August 2017 and in the Delta Administrator’s Report one of the key reasons for failure of the company was due to its mining contract with Wollongong Coal and false reporting of the condition of the Wongawilli mine and poor equipment. Subsequently Wollongong Coal operated the mine on its own but has been heavily criticised for its failure to pay rent on time to the NSW Resource Regulator, and non-compliance of environment practices. Prohibition notices were issued to the mine in February and March 2019 due to serious breaches of workplace safety law and finally on 19th March 2019, the NSW Resource Regulator has shut down the mine completely due to continued non-compliance and roof fall. Surprisingly, none of this has been reported by JSPL India to its shareholders and bankers who have a material interest and right to be aware of these facts. Neither has the company updated its website to inform the stakeholders of such significant events occurring in its subsidiaries in Australia which hamper the outlook of JSPL as a group due to the cross guarantees given to the company in Australia. This is a serious Breach of Duty by Naveen Jindal as Executive Chairman and all relevant officers of JSPL India.

ASIC which is the equivalent of SEBI in Australia has severely restricted JSPL’s Australian subsidiary, Wollongong Coal due to its belief that the assets are valued in excess and did not follow fair value estimates. This means that ASIC believes that the value of the mines is not what Wollongong Coal and thus JSPL ultimately believes. This means that the stakeholders in India of JSPL, mainly the shareholders and bankers are being given incorrect excessive valuations about the company’s assets in Australia and the full picture is not known to the Indian stakeholders. This is a severe suppression of facts by JSPL India and its officers knowingly. This also has a huge impact on JSPL India’s balance sheet since the value of its overseas subsidiaries cannot be relied upon.

The investigation by ASIC is ongoing regarding the valuation of the mines and sanctions have been put on Wollongong Coal and its shares have been suspended since December last year since ASIC believes that correct valuation is necessary to determine whether a company is solvent or not.

A quick glance at the financials of JSPL subsidiary in Australia show doubts as to its solvency. With loss of 73 million AUD and current liabilities of 831 million AUD and a negative Net Worth of 80 million AUD, the question of going concern is very serious. Wollongong Coal maintains its going concern claim based on guarantees given by Naveen Jindal controlled companies, JSPL Mauritius and JSPL Australia. Both these companies are wholly owned subsidiaries of JSPL India which means that the shareholders of JSPL India and its bankers are fully unaware of the precarious situation of the unexpected debt which can occur anytime relating to these guarantees. Naveen Jindal and officers of JSPL India by hiding these key facts about the current situation of the mines in Australia and their impact on JSPL India from the Bankers and the Indian shareholders is knowingly breaching the rules of SEBI disclosures in India.

Since 2016, Wollongong Coal, JSPL’s subsidiary in Australia is being probed by the NSW Resource Regulator to determine if it is a “fit and proper person” to hold a mining license in New South Wales, Australia. The Department of Industry and Investment in New South Wales Australia has confirmed that this was the first “fit and proper” investigation. The determination of such an investigation can be that the Minister of Industry and Investment “cancel titles if he or she is of the opinion they are not of good repute, good character, financially sound and technically competent”. Such a serious and material fact has also not been disclosed in any of its annual reports since then nor has been reported to stakeholders of JSPL in any manner.

Another worrying factor is that Wollongong Coal is requesting Debt Restructuring facilities to the tune of US$561 million with the assistance of the JSPL group (which includes Naveen Jindal) amid all these issues and ongoing investigations from its bankers. Majority of its bankers are Indian Public Sector Banks like State Bank of India and its foreign subsidiaries, Punjab National Bank and its foreign subsidiaries, Bank of Baroda, EXIM Bank and also include private Indian bankers like AXIS Bank. How much haircut are these banks taking on this account? Why is no question being raised on such foreign debt restructuring using Indian taxpayer money in these times of IBC? Why are Indian bankers taking a hit and putting taxpayer’s money in a vulnerable account? It seems that the bankers themselves are unaware of the criticality of the situation of the mines and key facts have been supressed by Naveen Jindal and his officers from bankers during discussions. An investigation into the suppression of true facts and key events by Naveen Jindal and officers of JSPL India need to be undertaken to ensure that bankers are not hoodwinked into sinking good money after bad based on absence of true facts.

When Indian Banks are struggling with large amount of NPAs in the system and trying to combat them, it is very important to identify stress and window dressing at an early stage and take corrective steps and recover their money while it could still be recovered instead of allowing it to turn bad due to such delay in decision making at the Bankers’ level.

As on 31st March 2018 (taken from Balance Sheet of JSPL), loans of 910.62 Crores plus Interest are secured by pledge of 1,090,313,872 equity shares of Wollongong Coal. Parent Company has given a shortfall undertaking to fund and also Guarantee of Parent Company to be provided subject to RBI approval. Interestingly, Wollongong Coal shares have been suspended since December 2018 amid charges of overstating the value of its mines and ongoing ASIC investigation into its affairs. This might have triggered an Event of Default and JSPL might need immediate cash infusion of 910.62 crores plus Interest to meet this liability.

Additionally, loans aggregating 6291 Crores plus Interest are secured by floating charges over assets of Wollongong Coal and Wongawilli Coal. In view of the doubts raised by ASIC regarding over inflated value of the mining assets of Wollongong Coal and Wongawilli, as well as the ongoing investigation, these loans must also be in Default/ Breach of Financial Covenants and JSPL might need immediate cash infusion of 6291 Crores plus Interest to meet this liability.

Working Capital facilities of 3256.63 Crore as mentioned in Page 196 of the 31st March 2018 Balance Sheet of JSPL do not specify the name of the company. To the extent if these relate to Wollongong Coal or Wongawilli Coal, the same would be subject to similar Events of Default and Breach of Financial Covenants in the current circumstances where Wollongong Coal is facing multiple investigations by Australian agencies and the Guarantees given by JSPL Mauritius and JSPL Australia which are 100% Wholly Owned Subsidiaries of JSPL India could be invoked in such Events of Default. This would result in an immediate need of cash liquidity in JSPL.

To summarise, Naveen Jindal controlled Australian subsidiaries: –

Being investigated by the NSW Department of Industry and Investigation to determine if it is a “fit and proper person” to hold a mining license. The first company to be thus investigated by the Department in 2016.
Failed to Pay Mining Rent and Levies on time on numerous occasions in 2017 due to which had to submit a Strict Enforceable Undertaking to the NSW Resource Regulator in June 2018.
Equity Shares suspended since December 2018 due to queries raised by ASIC regarding fair value estimate of the mines.
Industrial Action taken by the Contractual workers of Wongawilli mine in January 2019 due to which the Company had to offer a better Pay Agreement.
Investigation by ASIC into the reliability over the valuations given by the Company in its Annual Report.
Notice to Cease Mining at Wongawilli Colliery due to significant safety issues and series of roof falls in March 2019.
Investigation by the Department of Planning and Environment, Resource Regulator’s Major Investigation Unit under the Work Health and Safety Act 2011.
Issued a Notice by the Department in relation to its financial capacity to comply with its obligations under the Mining Act.

Any or all of the above can lead to cancellation of the mining leases held by Wollongong Coal and Wongawilli Coal. Any cancellation of such mining leases would create a Major Breach of Default as well as shortfall in security value to the Indian Bankers and JSPL might also face Cross Default issues in all its facilities. Such major investigations and key events are all being carefully hidden and suppressed by Naveen Jindal and officers of JSPL.

On Page 196 of JSPL’s 31st March 2018 Balance Sheet, it is noted that “There is no continuing default in repayment of interest and principal in Parent Company as at 31st March, 2018”. Interestingly, it is silent about frequent intermediate defaults if any during the year by the Parent Company as well as any frequent and/or continuing default by any of its 94 associates and subsidiaries. Such defaults would undoubtedly affect its external credit rating as well as infringes on the rights of investors and other stakeholders who rely on the Annual Report for proper information about the financial position of JSPL.

Another interesting entry in the 31st March 2018 Balance Sheet of JSPL is the additional levy of 1274.46 Crores paid by JSPL apparently “under protest” even though it was ordered by the Supreme Court, the Highest Court of Law in India, and which JSPL and its officers believe is good and recoverable. Note 57 reads out the reason for such judgement by JSPL and its officers. No action or case seems to have been brought by JSPL in any efforts to recover this amount nor has anything changed since 2015, which means that for 3 years now there is an amount of Rs. 1274.46 crore being shown as recoverable by JSPL thereby inflating the assets in the Balance Sheet. The auditors have drawn attention on Page 103 and given their qualified opinion with regard to the net carrying value of fixed assets/investment made in mining assets not been considered by JSPL and also about management’s view regarding the additional levy paid amounting to 1274.46 Crore which has been shown as good and recoverable by Naveen Jindal as Executive Chairman and other officers of JSPL.

Audit is done to keep a check on management and for the benefit of stakeholders including shareholders and lenders but shockingly the auditors of JSPL India have not done audit on any of its subsidiaries but instead have relied on management provided financial statements, only some of which have been audited.

Audit has also not been done by JSPL India on 56 of its subsidiaries but their value has been added to the balance sheet without proper audits and checks on their authenticity. This is a serious breach of auditing and accounting standards and officers responsible for the same should be held accountable.

Naveen Jindal has been using the coffers of JSPL to settle his personal rivalry against the Gujarat NRE group for years now, forgetting that JSPL is a public listed company with a separate legal entity and not a personal cheque book to be used at the promoter’s will.

Despite knowing fully well that JSPL is barred under Section 29A of the IBC due to defaults by his companies in Australia, Africa and/or Mauritius, Naveen Jindal directed JSPL to place a bid for Gujarat NRE Coke Ltd (in liquidation) for which JSPL had to pay an amount of Rs. 1 lakh which was non-recoverable. When JSPL could not succeed in its bid due to being barred, Naveen Jindal directed a Mauritius based company, Trans Global Minerals and Metals Corp. Ltd headed by a single employee director, Hemant Mittal to bid for GNCL. Being a Mauritius based company with a capital of about 1 lac US Dollars and having profits of more than 70 million US Dollars, only Enforcement Directorate could find out the true source of its funding and its linkage if any to Naveen Jindal. The nexus between Naveen Jindal and Hemant Mittal would be well known to officers of Enforcement Directorate who have already filed a charge sheet of money laundering against him.

Naveen Jindal has also harmed the recovery prospects of JSPL for his personal bias. JSPL is an operational creditor of GNCL with around Rs. 30-32 crores worth of dues. In the Scheme of Arrangement under Section 230 of the Company Act, 2013 JSPL would have been able to recover around Rs. 8 crore worth of equity from GNCL with potential future upside. But instead on the whims of Naveen Jindal, JSPL has intervened in the process for revival u/s 230 and pushed for liquidation of GNCL where being an operational creditor of just 0.5% there is no chance of any potential recovery by JSPL after distribution to financial creditors. Thus, Naveen Jindal has caused JSPL to loose recovery from GNCL and harmed the interests of all stakeholders of JSPL besides causing loss to more than 2 lac public shareholders of GNCL. Instead of potential recovery from a debtor, JSPL has had to spend huge amounts of money in frivolous litigation due to the wrongful command of its promoter, Naveen Jindal.

It is high time that the true picture of the financial position of JSPL and its subsidiaries which are being hidden by Naveen Jindal come to the forefront so that Bankers can take commercial decisions and not be fooled by misreporting.

A thorough investigation into the affairs of Jindal Steel and Power and its subsidiaries, Jindal Steel and Power (Mauritius), Jindal Steel and Power (Australia), Wollongong Coal and Wongawilli Coal needs to be done by the Indian lenders so that the true picture can appear.

Only after a strict vigilance action and future viability prospects of JSPL and its subsidiaries should Bankers move forward with any further restructuring so as to ensure that good money does not follow bad money.

In the age of Insolvency Code, 2016 where all defaulters are painted with the same brush, Naveen Jindal and his Australian subsidiaries should not be given exceptions and undue advantages without fully knowing the full truth and revealing the true picture of the ground situation in Australia despite Naveen Jindal’s careful attempts to hide the same from all Indian stakeholders of JSPL.

Jai Hind!

Arun Kumar Jagatramka


Extract taken from Jindal Steel and Power Ltd. Q3 FY-19 Earnings Conference Call Hosted by Prabhudas Lilladher Pvt. Ltd. Feb 4, 2019 at 12:00 pm

BHAVIN CHHEDA – ENAM HOLDINGS Sure. The second question is if you can update us on the Australian coal operations because that has not performed in line with our expectations for last 12-18 months and I think in this quarter you had a shutdown also. So if you can give us some kind of a volume run rate at coal and also an update on the fixed costs that are there at Australian operations, and when would that break even or start contributing to the overall numbers.

MANAGEMENT – JSPL Great question. That is one area, which is in tremendous focus from our management team perspective. Several things have happened in the last 1 year. One, we have started making visits almost every month. We have had huge operational improvement in plants there with which I see that in the next 2 quarters we should be able to clock 70,000 tonnes a month pretty easily on which we are currently struggling at around 30-35 thousand tonnes a month..The reliability of our belts which take the coal from 15-16 kms inside the mines to the surface, the downtime in that used to be about 45% which has been brought close to about 12%.. So 70000 is what we are actually seeing in the next 2 quarters which will we will further ramp up to 100000 and our plants and everything is absolutely in place so we have a very high confidence on that. There are a couple of other levers that we have on Australia front. One is the land that we have over there is a very prime land with ocean view and a golf course next to it. So we are in discussion with people on how to unlock value on that front. The second area that we have is the restructuring that we are actually doing on the debt side.

Ground Reality in Australia as on Feb 4, 2019.

Quarterly Report October – December 2018 filed on 31st January 2019;
Production tonnage of 86,648 reduced from 114,334 tonnes from September 2018 quarter.

Russelvale Mine still on Care and Maintenance. No future possible date or clear visibility of any production.
ASIC raises concerns regarding fair value estimate of mining assets and initiates investigation.
Shares of JSPL subsidiary in Australia, Wollongong Coal are suspended until further notice.
Production was affected due to Industrial Action during January 2019 by mine workers.