ADVANCED ACCOUNTING

ANALYSIS ON CAPITAL REDUCTION OF SAGAR SOYA PRODUCTS

LIMITED

SUBMITTED TO- DR. SATYA RANJAN MISHRA

SUBMITTED BY- HETAV DAVE (19A064)
SHIVI CHOLA (19B153)
 SAGAR SOYA PRODUCTS LIMITED

SAGAR SOYA PRODUCTS LIMITED (herein after mentioned as SSPL) was incorporated
under the Companies Act, 1956, on 27th September, 1982, in the name of SAGAR SOYA
PRODUCTS PRTVATE LIMITED and subsequently the name of the company was changed
to SAGAR SOYA PRODUCTS LIMITED in 1984. The Company's object is to manufacture
vegetable oils from soyabean and other oil seeds and oil cakes
by solvent extraction process. The company has its registered office in the state of
Maharashtra and is listed at the Bombay Stock Exchange.
 MAIN OBJECTS OF THE COMPANY AS PER THEIR
MEMORANDUM OF ASSOCIATION

To act and carry on the business of distribution, selling agents, manufacturer's,
representative, importers, exporters, commission agents, general brokers, and dealers in
soyabean grinding oil seeds, oil cakes crushers, seed crushers, oil extractors, food specials,
cake and oil merchants, animal feed, poultry feeds, pig feeds, compounded or mixed feeds,
concentrates, minerals, vitamins, proteins, mineral, mixture, vitamins, mixtures animal
proteins, vegetable proteins, molasses tapioca and bye products.
To manufacture produce, distribute, sell, make research, import, export and deal in article of
food, infant food products, bread, biscuits, extruded products, protein isolates, protein milk,
weaning foods, preservatives, additives, drinks, beverages, essences, extracts, concentrate,
food colors and powders of all kinds.
 SCHEME OF CAPITAL REDUCTION

This scheme provides for Reduction of Share Capital under section 66 of the Companies Act
2013 read with National Company Law Tribunal (Procedure for reduction of share capital of
company) Rules, 2016, for undertaking financial reconstruction of SSPL through reduction
of share capital whereby SSPL would write up part of the debit balance in Profit and Loss
account to the extent of Rs.5,55,91,045 i.e. by reduction of 95% on 58,51,689 Equity Shares
of Rs. 10/- each in the existing paid up Equity share capital of Rs. 5,85,16,890 of the SSPL.
 OBJECTIVE OF CAPITAL REDUCTION
To raise future resources considering the expansion programs that has been
considered for development of SSPL, would need huge amount of investment both
in terms of equity as well as debt.

Continuous Losses have substantially wiped off the value represented by the Share
Capital thus the financial statements do not reflect the correct picture of the health of
the Company. This has given rise to the need to re-adjust the relation between capital
and assets and to accurately and fairly reflect the liabilities and assets of the
Company in its books of account.

It is beneficial to the shareholders as it will increase earning per share and also
enhance shareholder’s value.
In order to reflect its assets and liabilities at their real value and maximize their
business value, the Company proposes to reduce the equity share capital of the
Company. This would further enhance shareholders value and confidence.

The reduction of Capital in the manner proposed would enable the Company to have
a rational capital structure which is commensurate with its remaining business and
assets.

The Capital Reduction will help in reducing the accumulated losses of the Company
which will subsequently improve the financial health preventing it from becoming a
sick company.
 PROPOSAL

Reduce the present Share Capital of Rs 5,85,16,980 by ninety five percent which will
amount to Rs. 5,55,91,045.
It will be reduced to equity shares of Rs. 29,25,844 divided into 58,51,869 shares of Rs. 0.5
each. Thus, each equity share of Rs. 10 will be converted into 20 equity shares of Rs. 0.5.
Settle the accumulated losses of Rs. 6,01,26,918 were to be set off against the share capital
cancelled amounting to Rs. 5,55,91,045.
A shareholder who is holding 100 equity shares of Rs. 10 each aggregating to Rs. 1000 shall
hold after reduction 5 shares of Rs. 10 each aggregating to Rs. 50.
 SHARE VALUE CHANGES
S.No. Particulars Number of Shares Paid up Value per Total Value Rs.
Share Rs.

1 Before Reduction 100 10 1000

2 After Reduction 100 0.5 50
3 After Consolidation 0.5 10 50

S.No. Particulars Number of Shares Paid up Value per Total Value Rs.
Share Rs.

1 Before Reduction 5851689 10 5,85,16,980

2 After Reduction 5851689 0.5 29,25,844
3 After Consolidation 292584 10 29,25,844
 CHANGES IN THE BALANCE SHEET OF
SSLP

There is change in the Equity Share capital as it has been reduced by 95 percent from Rs.
5,85,16,980 to Rs. 29,25,844.

The difference in these two values amounting to Rs. 5,55,91,045 was used to settle the
accumulates losses and thus there is a change in the Reserves and Surplus Account.
 SHAREHOLDING PATTERN BEFORE CAPITAL
REDUCTION
Particulars Number of Shares % of Holding Face Value per Paid up value per
Share share
Promoters and 6,23,550 10.66 10 10
Promoters Group
Public Shareholders 52,28,139 89.34 10 10

Total 58,51,689 100.00 10 10

SHAREHOLDING PATTERN AFTER CAPITAL REDUCTION

Particulars Number of Shares % of Holding Face Value per Paid up value per
Share share
Promoters and 28,468 9.73 10 10
Promoters Group
Public Shareholders 2,64,116 90.27 10 10

Total 2,92,584 100.00 10 10

 CHANGE IN THE BOOKS OF ACCOUNTS
S. No. Particulars As on 31.03.2017 After Reduction and
Consolidation

1 Authorised Share Capital

a) Number of shares 1,00,00,000 Equity Shares 1,00,00,000 Equity Shares
of Rs. 10 each of Rs. 10 each
b) Amount Rs. 10, 00,00,000 Rs. 10, 00,00,000

2 Issued and Subscribed Share capital

a) Number of shares 58,51,689 Equity shares of 2,92,584 Equity shares of
Rs. 10 each Rs. 10 each
b) Amount Rs. 5,85,16,890 Rs. 29,25,844

3 Paid up Share Capital

a) Number of shares 58,51,689 Equity shares of 2,92,584 Equity shares of
Rs. 10 each Rs. 10 each
b) Amount Rs. 5,85,16,890 Rs. 29,25,844

4 Accumulated Losses (Negative Balance) Rs. (6,01,26,918) Rs. (45,35,873)

 NET WORTH OF SSPL

Particulars Prior to giving effect to After giving effect to the

the proposed scheme of proposed scheme of
reduction- 31.03.2017 reduction- 01.04.2017
Paid up Share Capital A 58516890 2925840
Reserves and Surplus B (60126918) (453872)
Net Worth A+B (1610032) (1610032)

This concludes that the Net Worth of SSPL has not changed due to the Capital
Reduction of SSPL. The figures of Share Capital and Reserves have been reduced but
in such a manner that there is no affect in the Net Worth of the Company.
 IMPACT OF THE SCHEME ON CREDITORS/ BANKS/
FINANCIAL INSTITUTIONS

• The creditors of the SSLP were in no way affected by the reduction of Equity Shares as there
is no reduction in the amount payable to nay of the Creditors.

• The capital reduction will not affect the Banks or any other Financial Institution as the
reduction in no way adversely affects the ordinary operations of the company or the ability
of the company to honour its commitments or pay the debts in ordinary course of business.
 BENEFITS ARISING TO THE SHAREHOLDERS

Once the Scheme is sanctioned it would enable the

Company to share its future profits with its shareholders.
The Scheme will help the growth of the Company, which
will be in the interest of its employees, shareholders, the
national and state exchequer and the society in general.
 BENEFITS OF CAPITAL REDUCTION TO THE
COMPANY
The Scheme will enable the Company to overcome its financial
difficulties and improve its working in the future.
The Scheme will facilitate the Company to expand and
smoothen the business activities. The experience and expertise
of the promoters will bring efficiency and professionalism in the
management of the Company.
This Scheme of Reduction of share Capital would result in the
decrease in the accumulated losses of the Company and
improvement in financial health as more business activities
shall be brought into the company thereby preventing it from
becoming a sick company.

The Company has incurred heavy losses in past and has an

eroded net worth. The Scheme after full implementation will
result in making its net worth more realistic.
 LEGAL IMPACT OF CAPITAL REDUCTION OF SSPL

Impact in terms of legal proceedings

If any suit, writ petition, appeal, revision or other proceedings of whatever nature
(hereinafter called "the Proceedings") by or against the company are pending,
the same shall not abate, be discontinued or be in any way prejudicially affected
by the Reduction of capital, but the Proceedings may be continued, prosecuted
and enforced by or against the company in the same runner and to the same
extent as it would be or might have been continued, prosecuted and enforced by
or against he Company before such Reduction
 ACCOUNTING IMPACT OF CAPITAL
REDUCTION ON SSPL
ACCOUNTING TREATMENT

With effect from the Appointed date and upon the scheme becoming effective the
amount of share capital as extinguished as per clause 7 above shall be reduced
from the Equity Share Capital of the company and correspondingly from debit
balance of the Profit and Loss account of the Company.
 THANK YOU
Submitted by- Hetav Dave (19A064)
Shivi Chola (19B153)