Lenders to the debt-ridden Binani Cement have restructured loans of Rs 3,000 crore, throwing in an additional term loan of Rs 300 crore, a public sector banker familiar with the development told FE, reports Pallavi Ail in Mumbai. The joint lenders’ forum (JLF) has also sanctioned a working capital limit of R192 crore for the Braj Binani Group-promoted company. Central Bank of India leads the 18-bank term loan and the 14-bank working capital consortium. The company had requested banks to restructure its loans which was agreed to by the JLF. Binani Cement has four cement manufacturing plants, of which two production facilities are located outside India, with a global manufacturing capacity of 11.25 million tonnes per annum (mtpa). The Indian plants are located in Sirohi and Sikar districts of Rajasthan. In FY14, the company produced 49.94 lakh mt, lower than the 56.56 lakh mt in FY13 while the sales dropped 9.6% year-on-year to 51.37 lakh mt. Binani Cement’s FY14 revenues fell 14% y-o-y to R1,962 crore, resulting in a loss of R197 crore compared with a profit of R120 crore in FY13.
The company attributed the fall in sales partly to poor demand in the wake of limited infrastructure and real estate activity. “For (Binani Cement), the situation further worsened when it had to stop the dispatches of cement for almost last two months towards the end of the year (FY14) due to coercive actions initiated by the Rajasthan VAT authorities in connection with the recovery of past dues which were earlier in disputes. These actions crippled the business operations of the company,” the company said in its FY14 annual report. Emails sent to the company seeking clarification on the restructuring and the status of stake sale remained unanswered.
In FY13, the company’s parent — BSE-listed Binani Industries — decided to divest 40% of its stake in Binani Cement with the objective of “improving the cash flow position of (Binani Industries), reducing the interest cost significantly by retiring some of its debts”.
Binani Industries added that although it initiated necessary steps, the divestment did not materialise due to “poor investment sentiments and political uncertainties that prevailed in the country”. The cement sector continues to remain under pressure with analysts predicting that Q1FY16 will not fare any better.
Credit ratings firm Icra said in a report dated May 2015 that the cement industry has seen slowdown in addition of new capacities due to supply glut faced in recent times. For instance, between FY11-FY15, the industry added 92 mtpa cement capacities against 122 mtpa in the preceding 4-year period FY07-FY11. However, the slowdown in demand resulted in the decline in capacity utilisation from 77% in FY12 to 72% in FY14 despite the slowdown in fresh capacity addition.
Icra added that it expects while cement demand to grow at a moderate pace in the second half of FY15, the improvement would be in line with recovery in infrastructure, investment cycle and the overall economy.
“The presence of a stable pro-growth government at the centre has improved the sentiment, but the results of policy initiatives taken by the new government will take time to materialise. The profitability and debt protection metrics are likely to improve in FY16 but will continue to remain subdued,” Icra said.