The corporate debt restructuring (CDR) cell is likely to admit the request of Kolkata-based Shree Ganesh Jewellery House (SGJHL) to recast its R3,400-crore debt, sources told FE. The company had reported a net loss of R1,214.68 crore in FY14 on revenues of R11,492.14 crore. Given the significant operating losses, the firm was unable to meet obligations to financers. In December last year, SGJHL approached State Bank of India, the lead banker, with a debt restructuring proposal.
?In the matter of restructuring of the existing debts of the company under CDR mechanism, Shree Ganesh Jewellery House has informed BSE that SBI, the lead bank of the consortium, has submitted the flash report of the company, along with other documents, with the CDR cell for admittance before the Corporate Debt Restructuring Empowered Group (CDR EG),? the company said in a BSE notification on December 30 last year.
?The forensic audit could not conclusively say that fraud had taken place. So, the lenders have decided to admit the case,? said a senior banker at a public sector bank that is also part of the consortium. Led by SBI, the consortium of lenders to the firm includes 23 banks, including Axis Bank, Bank of Baroda and Bank of India.
At the end of FY14, the company’s gross debt stood at R3,279 crore, up from R997 crore in FY13, while the net debt was R3,036 crore in FY14, according to Bloomberg data. It suffered loses of $180.8 million (R1,087 crore) when an agreement to purchase bullion through its wholly-owned subsidiary in UAE was cancelled in October 2013 after RBI made changes to its gold import policy.
Another setback came in the form of a $62.35-million (R375-crore) loss when it could not recover money from its customers in Hong Kong for diamonds sold in FY13, and had to return the diamonds to the seller.
According to its website, the company is promoted by chairman Nillesh Parrekh and MD Umesh Parekh who have a 18.36% and 21.87% stake, respectively. The company manufactures and exports gold, diamond jewellery, gemstone-studded jewellery and light-weight Italian jewellery to countries like the US, West Asia, Europe, Hong Kong, Singapore and Sri Lanka. Meanwhile, in November last year, Care had suspended the ratings assigned to bank facilities and instruments of the company.
According to bankers, the case, though referred in December, was not yet admitted because of an ongoing forensic audit to determine whether any fraud had taken place in the company.
Corporate debt restructuring is a mechanism that works on the principle of approvals by super-majority of 75% creditors (by value), which makes it binding on the remaining 25% to agree to the majority decision and covers only multiple banking accounts and consortium accounts with exposure of R10 crore and above.