MIRA INFORM REPORT

Report No. :	331981
Report Date :	23.07.2015

IDENTIFICATION DETAILS

Name :	BHUWALKA STEEL INDUSTRIES ( SRI LANKA) LTD

Registered Office :	# 5- 10, East Tower, World Trade Centre, Colombo-01

Country :	Sri Lanka

Date of Incorporation :	30.06.1995

Com. Reg. No.:	PB 18

Legal Form :	Public Limited Liability Company but not listed in the Colombo Stock Exchangen

Line of Business :	Subject is Manufacturers of Steel.

No. of Employee :	300

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Status :	Moderate

Payment Behaviour :	Unknown

Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – March 31, 2015

Country Name

Previous Rating

(31.12.2014)

Current Rating

(31.03.2015)

Sri Lanka

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

SRI LANKA - ECONOMIC OVERVIEW

Sri Lanka continues to experience strong economic growth following the end of the 26-year conflict with the Liberation Tigers of Tamil Eelam. The government has been pursuing large-scale reconstruction and development projects in its efforts to spur growth in war-torn and disadvantaged areas, develop small and medium enterprises and increase agricultural productivity. The government's high debt payments and bloated civil service have contributed to historically high budget deficits, but fiscal consolidation efforts and strong GDP growth in recent years have helped bring down the government's fiscal deficit. However, low tax revenues are a major concern. The 2008-09 global financial crisis and recession exposed Sri Lanka's economic vulnerabilities and nearly caused a balance of payments crisis. Agriculture slowed due to a drought and weak global demand affected exports and trade. In early 2012, Sri Lanka floated the rupee, resulting in a sharp depreciation, and took steps to curb imports. A large trade deficit remains a concern, but strong remittances from Sri Lankan workers abroad help offset the trade deficit. Government debt of about 80% of GDP remains among the highest in emerging markets.

Source : CIA

GENERAL

Basic information at a glance

a.	Name of Subject of Inquiry	:	BHUWALKA STEEL INDUSTRIES ( SRI LANKA) LTD
b.	Legal Form & Status	:	Public Limited Liability Company but not listed in the Colombo Stock Exchange (In Operation).
c.	Managing Director	:	Mr. Sushil Kumar Bhuwalka
d.	Primary Line of Business	:	Manufacturers of Steel.
e.	Head office & Place of Business	:	# 5- 10, East Tower, World Trade Centre, Colombo-01. Tel. No: (00 94 11) 238 2466 / 238 2455 Fax No: (00 94 11) 238 2477 E-Mail: bsil@sltnet.lk Factory: Suduwella, Madampe Chilaw
f.	No. of Employees	:	Approx.300

COMPANY DETAILS

Registration and Shareholder Details

a.	Registration No	:	N (PBS) 601
b.	Date of Registration	:	30^th June 1995
c.	Re-Registration No	:	PB 18
d.	Date of Re-Registration	:	Note: new registration date is not disclosed due to file not found on at ROC
e.	Registered Office	:	# 5-10, East Tower, World Trade Center, Colombo 01
f.	Board of Directors As At 14^th January 2007	:	Sushil Kumar Bhuwalka (Indian)	Managing Director
			Kanta Bhuwalka (Mrs.) (Indian)	Director
g.	Issued Share Capital	:	Rs. 198,142,740.00
h.	No. of Shares	:	19,814,274
i.	Nominal Value of Share	:	Not applicable vide Companies Act #7 of 2007
j.	Share Holders As At 14^th January 2007	:	Share Holders		No. of Shares
			Confad Steel (Pvt) Ltd		19,814,267
			Kamal Kumar Bhuwalka		01
			Kishan Kumar Bhuwalka		01
			Palya Sreenivasaiah Seshadri		01
			Sajan Kumar Bhuwalka		01
			Sharad Dalmia		01
			Suresh Kumar		01
			Sushil Kumar Bhuwalka		01
k.	Auditors	:	BDO Burah, Hathy (#65/2, Sir Chittampalam A.Gardinar Mawatha, Colombo 02 )
l.	Company Secretaries	:	BDO Biscon (Pvt) Ltd (#65/2, Sir Chittampalam A.Gardinar Mawatha, Colombo 02 )
m.	Bankers	:	NDB

FINANCIAL DETAILS

Most recent available Financial Information

The company has declined to provide information on its finances

Note: Based on the corporate laws of Sri Lanka, legal entities which are Private Company with Limited Liability are not required to make public disclosure of their annual financials. Therefore no financials are available for this entity

CURRENT INVESTIGATION

· History.

The Subject Company BHUWALKA STEEL INDUSTRIES (SRI LANKA) LTD is a Public Limited liability Company incorporated on 30^th February 2007 under registration number N (PBS) 601 and company was registered under registration number PB 18,

Note: PB 18: New registration date is not disclosed due to file wasn’t found in ROC.

Therefore, Directors’ and shareholders’ details are also as at 14.01.2007

The subject company is a subsidiary company of CONFAB STEEL (PVT) LTD.

Location.

The Subject Company is located at the client # 5- 10, East Tower, World Trade Centre, and Colombo-01.

· Operational Details.

General

The subject company primary line of business is Manufacturers and Distributors of Steel locally. They also stated that they are importers of small quantities of chemicals for the building industry and is distributed to hardware merchants.

Products

All types of steel used for the building constructions.

Country

Sri Lanka

Employees

Approx.300

Directors Details

01)

Name	Kanta Bhuwalka (Mrs.)
ID Number	A0277875
Nationality	Indian

02)

Name	Sushil kumar Bhuwalka
ID Number	F0033759
Nationality	Indian

· General Comments

When the Subject Company was contacted they were very reluctant in providing the information given in this report, however they were reluctant to provide financial and any other background information that would have been useful to enhance this report.

· Trade references

The subject company did not provide any trade reference referrals

Media Reports on the Company

The following media reports are appended below for reference.

(1)

INDIAN WORKER’S DEATH EXPOSES JOB RACKET IN SRI LANKA

May 12, 2012 | Filed under: Colombo Telegraph,From Foreign Media | Posted by: COLOMBO_TELEGRAPH

BY R. K. RADHAKRISHNAN/The Hindu –

The death of an Indian worker at a private steel plant in Sri Lanka on Tuesday has exposed the callous manner in which workers are brought to the island-nation, and trapped in factories from which there is no escape.

A 29-year-old Odisha worker, Manas Kumar Mallick, of Jajpur’s Barapada village, who was working as an assistant fitter at Confab Steel Private Limited in Muddaragama in Gampaha district, was electrocuted in an accident classified as industrial.

The semi-skilled worker was brought to Sri Lanka in December last year. Confab Steel, a company set up by an Indian, employs 153 persons, of which 101 are Indian.

A sister concern of the company, Bhuwalka Steel Industries, which commenced operations much earlier — in 1999 — employs 300 persons, of which 200 are Indian.

Concessions

Both are Board of Investment companies, which means they enjoy certain concessions.

The modus operandi of bringing in a worker from India runs thus: get agents to recruit people from impoverished places, get a tourist visa for the worker, make him sign a contract in English — a language he doesn’t understand — and herd him into a vehicle once he reaches Colombo. How an impoverished worker gets past the radar of immigration with a tourist visa is a question that authorities in India will have to answer.

The rest of the procedure seems to have been incredibly easy: convert the visa into an employment visa with help from the Sri Lankan authorities, house him in a camp next to the work place, and pay him a fraction of what was promised. The condition of housing, too, is pathetic, and doesn’t meet any standards under labour laws of either country.

Mallick’s contract, which was seen by The Hindu, is a revelation: it wasn’t written on stamp paper; a plain white paper was used. The contract expressly says the company isn’t responsible for any losses suffered by the worker in the plant. There is a vague sentence which says the insurance will take care of any accident. No worker seemed to know which was the insurance company, what premium was paid or how much the compensation was.

After the Indian High Commission in Colombo intervened in the issue — workers had preferred a complaint with it — it was revealed that the compensation through insurance was LKR 3 lakh (2.5 LKR = 1 INR). High Commission officials told the owner of the company, an Indian, in no uncertain terms, that this wasn’t acceptable. The workers demanded a compensation of INR 15 lakh, and a final settlement was made at INR 5 lakh. The company has also assured the Indian High Commission that it would send the body home at its own cost, and also provide return air-tickets to Mallick’s two brothers, who are also employed in that company.

Under watch

Enquiries reveal that the company was under watch for at least the past 5 years. Even then, it has been able to bring in people with impunity, and with no fear of law, either in India or in Sri Lanka. In fact, the company has been placed in the ‘prior approval’ category by the Protector General of Emigrants here, and also in India.

(2)

Friday, July 17, 2015

Sunday Leader

INDIAN STEEL COMPANY BRAZENLY EXPLOITS INDIAN IMMIGRANT LABOUR

By Camelia Nathaniel

A BOI-sponsored, Bangalore-based Indian company, Bhuwalka Steel Industries Ltd., located in Suduwella, Madampe in Chilaw, has reportedly been exploiting expatriate Indian workers with impunity for a long time. In the latest episode, which hogged the headlines in India, if not in Sri Lanka, the workers’ families back in India, had to write to the Indian Prime Minister Narendra Modi to get relief. The families wanted the Prime Minister to get the workers out of the clutches of the company and have them repatriated to India.

Modi acted with alacrity after the matter was raised in the Indian parliament. The Minister of External Affairs, Sushma Swaraj, immediately called up the Indian High Commissioner in Colombo, Y. K. Sinha, and asked him to do the needful. And sure enough, within days, all the 75 workers were released and sent back to India.

According to Indian media reports, the High Commission bought their air tickets as they were seen as poor Indians in distress in a foreign country. The mission was even ready to issue passports to them if their original passports could not be secured from the management, which had confiscated them.

Syed Akbaruddin, the spokesman of the Indian External Affairs ministry, disputed the popular notion that the company was ‘detaining’ the workers. He said that the workers and the management were locked in a labour dispute.

According to local sources, the dispute was over non-payment of salaries on time, bad working conditions, unreasonable performance targets, hours of work, and non-availability of leave. A member of one of the workers’ families told New Delhi TV that with the outdated machines given to the workers, it was impossible to meet production targets. On top of all the problems, was the impounding of the workers’ passports by the management so that they could not leave the island.

Long-standing problem

The 75 workers who were party to the recent dispute have left the island. But the workers’ problem at Bhuwalka Steel Industries in Sri Lanka remains unsolved. Apparently, there is no pressure from any quarter (whether it is the Indian government or the Sri Lankan government) on the company, to improve its labour management practices, which by all accounts, are outmoded and exploitative.

Reportedly, the Bhuwalka companies in Sri Lanka had had serious issues with the expatriate Indian workers.

The Indian media reported that two years ago, the Indian High Commission had to intervene to secure the release of 20 workers and get them repatriated to India. Then too, the management had confiscated the workers’ passports and refused to give them back when the workers wanted to leave.

It is learnt that many Indian companies in Sri Lanka confiscate the passports of their expat workers to keep them on the leash, though this is clearly illegal, according to BOI and Immigration Department officials. However, sources in the BOI and the Immigration Department said that it would be difficult to intervene in the absence of a complaint. No one from the Bhuwalka company has complained to the BOI so far, said a well-placed source in the BOI. The BOI has the means to intervene but it has to have a complaint, even a third party complaint, to launch action, the source said. A BOI Inspector had visited the company on December 5 but no one had lodged a complaint.

Unorganized

The workers are reportedly from the backward North Indian states of Bihar and Uttar Pradesh, who are clueless about their rights. They are not organized to put effective pressure on the management. “When in trouble they want to quit rather than stay put and fight for their rights,” a source said.

There is also a suspicion that labour may have been brought in violation of rules regarding the grant of work visas. BOI officials say that Sri Lanka allows the import of only skilled labour and maintain that Bhuwalka has documents to show that it has got down only skilled labour. But there is every possibility of many of them being actually unskilled, given the fact that it is difficult to get Sri Lankans to work in the harsh conditions of a steel mill.

Death of an Indian worker

On May 11, 2012, the Indian daily The Hindu reported the death of an Indian worker at the Confab Steel Company, a Bhuwalka firm located at Muddargama in Gampaha district. The death by electrocution was reported as an industrial accident. A dispute about payment of accident insurance arose, which had to be resolved through the intervention of Indian officials, the paper said.

The Hindu report further said that the company had brought workers from India in a ‘callous’ manner. It said that the workers, chosen from impoverished families, were promised good salaries but were actually paid only a fraction of the agreed amount. The contract was written on plain paper, not stamped paper. While Bhuwalka Steel has 300 workers, out of whom 200 are from India, Confab Steel has 153, out of whom 101 are Indian.

Sale of substandard steel

On June 19, 2011, www.asiantribune.com put out a story that on June 16, Consumer Protection Authority officials had seized from Bhuwalka Steel Industries 110 tonnes of sub-standard steel bars. The company had not complied with Sri Lanka Standard 375 said a case filed at the Chilaw Magistrate’s court. Sale of such steel would harm the island’s construction industry which was just about recovering from a 30-year war, the complaint said.

The website www.asiantrubune.com further recalled that in 2006, A. Gaffar, Chairman of the Steel Industries Association, had told newsmen that the Sri Lankan steel industry was facing constant fluctuation of selling and raw material prices because of a particular Indian steel plant located at Madampe in Chilaw (Bhuwalka Steel).

“The company is now selling their finished product at an unbelievably low price of Rs. 48,000 per metric ton, whereas our cost of production itself is above this level,” Gaffar charged. The website said that Confab Steel, located at Vayangoda, also sold its products cheap even as raw material costs were high. Several steel makers in Sri Lanka had to close because of this unfair trade practice, the website said. According to BOI, the Bhuwalka Group is currently facing two court cases.

Protest over worker’s death

Credit Recommendations

Since no financial information has been forthcoming from the company, it is not possible to comment on the merits or otherwise of the company.

No computerised data bases exist to make checks whether the partners or the company has any legal action or lawsuit initiated against any of them but informal (but not in-depth) checks do not indicate any such cases in the public knowledge.

INFORMATION DENIED BY

Name :	Mr. Rajendra
Designation :	Finance Head
Contact No.:	009411-2382466

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.63.53
UK Pound	1	Rs.99.19
Euro	1	Rs.69.60

INFORMATION DETAILS

Information Gathered by :	PPT

Analysis Done by :	RAS

Report Prepared by :	ASH

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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