Hirco Plc : Half Yearly Report

Half Yearly Report - London Stock Exchange

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Regulatory Story

Go to market news sectionCompany Hirco plc

TIDM HRCO

Headline Half Yearly Report

Released 07:00 27-Jun-2013

Number 9488H07

RNS Number : 9488H Hirco plc

27 June 2013

Hirco PLC

Interim results for the period ended 31 March 2013

Hirco PLC ("Hirco" or "the Company"), a closed end investment company that specialises in Indian real estate projects for development, today announces its interim results for the period ended 31 March 2013.

The Interim Results will shortly be available on the Company's website in accordance with Rule 26 of the AIM Rules for Companies at:http://www.hircoplc.co.im/rule_26.html.

For further information please contact:

IOMA Fund & Investment Management Limited Tel: [phone]

Philip Scales

N+1 Singer

James Maxwell/Nick Donovan [phone]

Chairman's statement

Dear Fellow Shareholders,

The results for the half year ended 31st March 2013 show a small decline in our reported net assets to £196.2m (30th September 2012: £197.8m).

This reduction, is as you might expect the net of a number of offsetting factors. The Indian Rupee, which has been volatile over the period, at 31st March 2013 had appreciated against Sterling from GBP/INR 85.47 at 30th September to GBP/INR 82.64. The effect of this change has largely offset the estimated deterioration in the net asset position of the project companies, as based on the unaudited information packs provided by Hirco Developments Private Limited (HDPL).

The underlying trend, however, remains disappointing with a further deterioration in the Indian economic outlook and the general lack of business confidence in Government policy and actions, and again the preference dividend accruing for the half year, which amounted to £37.2m, has been fully provided against.

In my letter to the consolidated financial statements for the financial year ended 30th September 2012, I set out the scale of the projects and that completion of both the Chennai and Panvel projects remains at least a decade away. Our advisers, CBRE, have carried out further site visits, and although confirming their valuation at 30th September 2012, stating that market conditions have broadly remained similar to their previous assessment, did report that progress on the developments appeared somewhat subdued with only moderate progress over the last 6 months.

Whilst the information flow on the projects remains unsatisfactory and we have no real clarity over who is really in control of the projects, what does seem clear is that completion of these projects will need substantial further investment of both equity and longer term debt.

Given these issues of transparency and reporting, and the evident urgent need for further capital investment, we have continued to put in a lot of effort into trying to negotiate an exit from these investments, whilst pursuing all legal remedies open to us. However, the parties with whom we are negotiating appear to have their own agendas and seemingly irreconcilable differences, so the outcome of these discussions is hard to predict.

I set out in detail in my last statement the proceedings we had initiated in February against two former Company directors, Niranjan Hiranandani, the Company's former Chairman and Priya Hiranandani-Vandrevala, the Company's former CEO, in the English High Court and in the Isle of Man courts. The timing of this decision was to protect shareholders' interests in light of the relevant statute of limitation.

This was not a decision taken lightly, and although it would be imprudent ever to ignore the risk inherent in all litigation, and the cost of it, the board firmly believes this is the best course of action in the current circumstances.

The English proceedings against Niranjan Hiranandani and Priya Hiranandani-Vandrevala were issued in the High Court on 6th February 2013. The High Court claim seeks damages of almost £220 million. Both defendants have indicated their intention to contest the proceedings and also to contest the jurisdiction of the English High Court. The same proceedings against those two former directors were also issued in the Isle of Man courts to protect the Company from the possible expiry of limitation periods. These proceedings have now been served in the Isle of Man courts.

The Board would wish to emphasise to all shareholders that the possible outcome of any litigation, should proceedings commence, or the possible amount of any negotiated settlement, may differ materially from both the amount claimed in damages of £220 million, and the net asset value of £196.2m. In anticipation of these claims, Priya Hiranandani-Vandrevala commenced her own proceedings in the Isle of Man that she ought fairly to be excused for any breaches of duty of which she is found to be liable.

Besides the High Court proceedings, the Company's Mauritius subsidiary is also involved in a related arbitration with Mr Hiranandani and his wife Kamal. These proceedings were commenced on 6th February 2013 by the Hiranandani's. Separately the Company and its Mauritius subsidiary have brought separate arbitration proceedings against the Burke Companies and their shareholder, BCL, to assert rights over the control of the Company's investments and information flow we are contractually entitled to. The proceedings against the Burke Companies and BCL were initiated on 5th March 2013.

The confidential nature of arbitration proceedings prevents us from disclosing further details as to the substance of these actions.

We continue to press all these claims with vigour and with the intention if possible of achieving a negotiated exit from the projects that shareholders will find acceptable. We will continue to update shareholders on any developments that we are able to.

The attention of shareholders is drawn to the paragraph referring to Disclaimer of opinion, in KPMG's Review Report   on page 4 The accounts should be reviewed critically in that light, especially in connection with evaluating the Company's net asset value. The Company's principal tangible asset remains the preference shares it owns in Mauritius holding companies. These preference shares are illiquid and have no trading market. They represent contractual rights rather than equity in property. Accordingly, there is a great uncertainty as to their value both because of their structure and illiquidity. This uncertainty has been magnified by the Company's inability to obtain consistent information regarding the Company's underlying investments in India. Shareholders should keep these facts in mind when reviewing these financial statements.

David Burton

27th June 2013