A prospective ‘strategic investor’ in the debt-ridden ABG Cement has indicated its willingness to acquire a stake in the firm, provided the loan account is upgraded from a non-performing asset (NPA) to a standard account. Following this condition put forth by the investor, who has agreed to to infuse Rs 525 crore, lenders are planning to seek a special dispensation from the Reserve Bank of India (RBI) to upgrade the cement company’s Rs 2,521 crore loan account from NPA to standard.
As per documents accessed by FE, the ‘strategic investor’ ,who could not immediately be identified by FE, also wants existing loans be refinanced such that the tenure is extended for 15 years. The investor is also looking for additional working capital finance. ABG Cement is part of the ABG Group, the flagship company of which is another debt-ridden company, ABG Shipyard.
The consortium of lenders led by Punjab National Bank has proposed a R2,633-crore restructuring package for the cement maker comprising funded interest term loans (FITL) of R71 crore and non-fund based (NFB) limits (letter of credit and bank guarantee) of R86 crore. No loan moratoriums have, however, been proposed.
ABG Cement reported a net loss of R105.10 crore for the period between October 1, 2013, and March 31, 2014, incurring finance costs of R66 crore. The company also recorded a net loss of R238.15 crore in the year to September 30, 2013, paying finance costs of R124 crore.
Gross sales and other income for the period October 1, 2013, to March 31, 2014, were Rs 369.97 crore against Rs 912.22 crore for the year ended September 30, 2013.
Documents accessed by FE show that engineering consulting firm Holtec has valued the project cost at Rs 3,771 crore, including Rs 380 crore of additional capital expenditure. Till September last year, the project cost incurred stood at Rs 3,391 crore. Bankers held a joint lenders’ meeting earlier this month to discuss the proposal to bring in a strategic investor and restructure the loan. A banker told FE the company’s plans had run into trouble and that there had been a cost escalation and a delay in the implementation.
“The company could not get supporting infrastructure and, moreover, land acquisition issues and a delay in obtaining environmental clearances also impacted the project,” the official said, adding that operational and finance charges rose, affecting the viability of the project.
According to the ABG Cement website, the company has set up a 6 million tonnes per annum (mtpa) cement plant in Gujarat. ABG Cement exports products to West Asia, Africa, Bangladesh and other countries. Documents accessed by FE indicate that the company has a 3.3 mtpa capacity clinker unit in Kutch and a 5.8 mtpa blended cement grinding unit at Surat. It also has captive power plants at both sites. ABG Cement also owns a captive limestone mine holding reserves to the tune of 188 mt that is likely to last at least 32 years.
The bankers have proposed that the proceeds from the equity infusion be used to revive operations including priority capex and working capital requirements. Additionally, the company intends to make advance payments of interest and repayment to the extent of Rs 200 crore to its lenders. The investor has committed Rs 26 crore each to restart the clinker plant and to recommission the grinding unit at Surat.