Production house Pyramid Saimira‘s petition to the Madras High Court has been denied. The company wanted the court to direct the Income Tax department to release attachments to the tune of Rs 245 crores to its bank accounts. The court refused to lift the attachments, adjudging that it was up to the I-T Department, and has directed the two parties to find a solution, Economic Times reports. 

Op Losses, Box Office Failures & Now Tax Cuts

Pyramid faced a tax bill of Rs 26.57 crores that was due on March 31st. The I-T department had attached Rs 165 crores of investment, Rs 50 crores of normal trade receivables and Rs 30 crores of theatre receivables to this, wounding the company on the back of operational losses and  a slew of box office failures. The Rajnikant starring Kuselan caused losses of Rs 40.32 crore. The group operates in theatre, film and television content production, distribution hospitality, food and beverage, animation and gaming and cine advertising sectors.

Staying Afloat: Salaries Withheld; Divesting Subsidiaries; Diluting Stakes

The company is down on its knees – it reported a net loss of Rs 74.74 crore in the quarter ended December 2008. Pyramid is circling the drain, with 300 employees on its rolls who have not received their salaries for the past three months. According to MoneyControl, the company owes close to Rs 1.5 crore in salaries and additionally requires a working capital of Rs 60 crore to continue its operations. Pyramid recently authorized the strategic sales of its subsidiaries to help raise money and its core promoters have diluted their stakes from 25% to 17.9% to raise liquidity. Other promoters include corporate bodies with 25 percent; FIIs/FIs hold around 12 percent; CitiGroup Global Markets, Bennett Coleman & CO, Mavi Investments with 3.41 percent, 1.77 percent and 1.81 percent respectively; Punjab National Bank with 3.54 percent. We’d written earlier about Read our post on Pyramid closing 33 screens and dropping plans for acquisitions. Rising inflation, poor spending and content failure have reduced the number of screens Pyramid operates down from 802 in June 2008 to 252. The company has unleased 194 screens during the third quarter, shifted 151 screens from a fixed hire model to an on demand content supply and another 148 screens to a profit sharing model.

Solvency Threat

Now, Pyramid has informed the BSE that the court had authorised the attachments to be restricted to Rs 26 crores and the two would mutually agree as to the exact items to be attached for this Rs 26 crores out of the Rs 246 crores already attached. It has filed its revised tax returns and expects a refund of Rs 2 crores, which the court has directed the I-T Dept to consider on merit. With this amount, the company may be able to pay its employees, but will it be able to continue operations with such a large liquidity shortfall? With the entire economy facing a cash crunch, Pyramid faces solvency unless it acts fast.

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