Infrastructure development and engineering company SPML Infra is bullish on improving its turnover and profitability going ahead, after it has signed an agreement with an 11-member consortium of banks and financial institutions in order to implement the Scheme for Sustainable Structuring of Stressed Assets (S4A) to recast debt of Rs 1,117 crore. The Joint Lenders’ Forum (JLF), led by state-run Canara Bank, decided to take up the company’s loan account for consideration under the S4A in March this year as the company was facing a liquidity crunch. “It was decided by the JLF that this scheme will be the best for us, because whenever there is a cash flow mismatch, S4A is a much better debt restructuring scheme, as it helps the company in terms of deferred and reduced debt service obligations,” SPML Infra chairman Subhash Sethi told FE in an interview. The company was in discussions with its bankers over the last few months to finalise the S4A. The documentation relating to the implementation of the scheme was signed on Wednesday evening.
As a result, the company, which is a major infrastructure developer on the EPC (engineering, procurement and construction) basis, will have a cash flow benefit of approximately Rs 70 crore per year for a period of five years. On Thursday, the company’s scrip rose by a whopping 20% to end at Rs 160.50 on the BSE. Pursuant to the implementation of the scheme, of the total debt of Rs 1,117 crore, a sum of Rs 545.85 crore will be converted into optionally convertible debentures (OCDs) with a tenure of 10 years (2027), carrying a coupon at 0.01% with a yield-to-maturity (YTM) of 8.15%.
“In the first five years only, the said coupon of 0.01% will have to be paid on Rs 545.85 crore and the payment of the effective YTM for the said first five years will commence from the 6th year till the 10th year,” Sethi said, adding that for the balance Rs 571.15-crore debt, the company will have to pay a normal 12.56% rate of interest. The repayment of such OCDs shall be in 20 quarterly installments starting from quarter ending December, 2022 and ending on the quarter ending September, 2027. “Due to the deferred and reduced debt service obligation, the company will have a cash flow benefit, which will increase its working capital. This will increase our sales and profitability. We are quite bullish on our sales increase in the next two to three years. Also a lot of investment is coming in the infrastructure sector, especially in water and power,” Sethi said.
The last fiscal was a challenging year for the company as it faced a liquidity crunch, SPML Infra said in its latest annual report. “The cash flow mismatch occurred as a lot of money got stuck with the government departments,” Sethi said and added that protracted arbitration was also increasing the cash flow mismatch problem. In FY17, the company’s aggregate sales increased 14.49% year-on-year to Rs 1,611.10 crore, while it reported a 9.95% year-on-year growth in its net profit.