EID Parry prepares recast plan to cut debt-equity ratio

Our Corporate Bureau

Chennai, Sept 17: EID Parry (India) Ltd, the Murugappa group flagship company, has prepared a financial restructuring package that would help the company pare its debt-equity ratio drastically, besides cutting operational cost. The other highlights of the financial rejig are a moratorium on fresh capital expenditure and swapping high cost debt with low cost one.

Top officials of the company told The Financial Express that the management has readied an action plan to trim the company’s debt burden in coming years.

“We will be reducing our total debt to equity ratio, including working capital, to 1:1 in the current fiscal and further down to 0.7:1 level by the next fiscal,” sources said. Currently, the company’s debt to equity ratio stood at 1.24:1, which is higher than the accepted industry level of 1:1. Sources said the company has decided to freeze all capital expenditure for the coming year so that the cash generated could be channelised to reduce part of the outstanding loans, and, therefore, the interest outgo.

He said EID Parry is also in talks with its major creditors to replace high cost debt with low cost loans.

“Some of the high cost loans will be prepaid by paying a premium on the outstanding amount. We are at present talking to ICICI, IDBI and the State Bank of India in this regard,” sources said. Besides this, the company has also put a blanket ban on any fresh borrowing from the market, they added.

Sources said, as part of its cost reduction exercise, the company would also bring down its sugar stock level from the current level of nine months, or 1.25 lakh tonne to five-and-a-half months in the current year.