Posco India hit with INR 656 crore impairment loss on Odisha exit
DNA reported that South Korean steelmaker Posco has taken INR 658.79 crore (109,248 million Korean won) impairment loss, or permanent reduction, in the value of securities of Posco-India Pvt Ltd. In a notice to shareholders on the 50th ordinary general meeting to be held on March 9, Pohang-headquartered Posco said, "During year ended December 31, 2017, the company conducted the impairment test on securities of Posco M-Tech, Posco Family Strategy Fund, Suncheon Eco Trans Co Ltd and Posco-India Pvt Ltd due to signs of impairment such as continuous business loss. As a result of the impairment test, the company has recognised W2,793 million, W12,816 million, W47,600 million and W109,248 million of impairment losses on its securities due to its carrying amount that significantly exceeded its recoverable amount."
In 2016, Posco ascribed a book value of 184,815 million won to securities of Posco-India Pvt Ltd. By 2017-end, the book value was slashed to 75,567 million won. One South Korean won equals 0.060 Indian rupee. Hence, the 109,248 million won impairment loss translates into INR 656.78 crore.
Impairment takes place when a firm sells or abandons a fixed asset which is no longer beneficial as the book value of the asset falls below the amount that can be recovered by selling it. Impairment normally occurs when there is a sudden and large decline in the fair value of an asset below its carrying amount, or the amount recorded on a company's balance-sheet.
In March last year, Posco-India had requested the Odisha government to take back its 2,700-acre land provided at Paradip in Jagatsingpur district for setting up a 12-million-tonne steel project. Consequently, the state government sent a letter toPosco-India informing the land allotted to it has been cancelled. The 2005 project was billed as India's biggest foreign direct investment at that time, but it faced several delays due to a regulatory maze and protests.
In 2005, Posco-India was incorporated to promote investment in steel, considering the high growth potential and rise of steel demand in India. In 2011, its role was expanded to act as the regional headquarter, and in 2015, its nature and role have been further extended to represent Posco group affiliates in India.
Source : DNA